On the Importance of Repeatable Sales
And why you shouldn't get carried away by early product/market fit
I was laid off from Modern Treasury at the end of 2022. It wasn’t how I imagined I would finish my time at the company after joining as employee #16 in 2020, but sometimes you just have to play the cards you’re dealt. Regardless, I’m really grateful for the opportunity to join as the first PMM and help build the marketing function from scratch. I worked with some incredible people and made lifelong friends in the process.
During my time there, I learned a lot about company building. As I’ve reflected on the last two years, I thought it worthwhile to write down some of my takeaways on early stage GTM, which for the most part revolve around one key idea — the importance of repeatable sales.
Real product/market fit needs a repeatable sales motion
If you started a B2B software company during 2018 and 2019, finding your first 10 or 15 customers was relatively easy compared to other periods in startup history. Especially if you raised from top tier firms and well-connected angels, and had a good network between you and your co-founders, you could get to around $1m in ARR selling to other startups. If you got lucky with timing and had the right connections, you could even sign a pre-IPO or public company. It was never so easy in the sense that deals would just fall into your lap — you still needed to work really hard on demonstrating value and building trust, but if you had the right product it was certainly possible.
A lot of startups looked at these two signals — traction with other startups and contracts with one or two large companies, and concluded they had product/market fit. They were able to raise their series B and C in quick succession, often 10x-ing their valuations without any increase in revenue or bookings. Flush with cash (usually $100M+ in the bank for the hottest companies), these startups scaled aggressively in 2022 using this early product/market fit as their guide. Headcounts ballooned and burn multiples soared. But as layoffs and down rounds become a frequent fixture in 2023, we’re about to see just how shaky this type of early product/market fit really is.
When funding used to be harder to come by, B2B software companies couldn’t always raise a series B or C based on early product/market fit alone. They also needed to demonstrate a repeatable sales motion. But during 2020 and 2021, it was easy to convince investors that early product/market fit amounted to a repeatable sales motion. FOMO and capital deployment goals compelled them to lower the bar and write large checks into these companies at inflated multiples. Early product/market fit can often be a red herring, but neither founders nor investors were incentivized to look at it critically.
It can be very hard for your startup to recover from scaling aggressively before a repeatable sales motion because the nature of your sales motion determines which investments you need to prioritize to scale the company.
Repeatable motions exist on a spectrum from product-led to sales-led
If you look at any successful public SaaS company, sales and marketing (S&M) is most likely their largest operating expense. In some ways, this is an iron law of the enterprise software business model, staying true over multiple generations of companies, from Oracle to Snowflake. There are always exceptions (like Datadog and Atlassian), but the most likely outcome for any B2B software startup, if they’re successful, is to become a sales and marketing machine.
Working backwards using this logic explains why a repeatable sales motion is so critical. The B2B software business model only works if the value captured from the market is significantly greater than the costs of building and selling the product. Building is obviously an R&D expense, but the cost of selling can be borne by both R&D and S&M. What people call product-led growth (PLG) today is essentially a way to build a more efficient sales motion via a self-serve product. This requires additional ‘growth’-type investments like automated onboarding, usage limits, demos, documentation, and more.
In some cases, it’s quite obvious at the early product-market fit stage what type of sales motion is most likely to work for your product. Products that can be used with minimal integration or configuration are more likely to do well with a low-touch, product-led motion. In contrast, products that don’t work out of the box and need solutions engineering, implementation, extensive testing etc. will require a high-touch, sales-led motion. The nature of your target market can also be instructive. If you’re building vertical software for example, you can have a well-defined target market at inception, allowing you to build a sales motion optimized to serve this audience.
In other cases, especially those involving software infrastructure or API-first products, it can be a lot harder. Most founders look to the success of Twilio, Stripe, Datadog, Postman and other developer products and assume that because they have an API-first product, they must pursue a product-led sales motion. It’s not surprising they find this so seductive if you look at the psychology and background of most founders. They’re usually engineers and product people that tend to be averse to sales.
But just because your product is an API doesn’t mean it’s well-suited to a product-led motion. Having an easy to use, well-documented API and self-serve experience is a necessary condition, but it’s not sufficient. Two product aspects matter here:
Is the developer both the buyer and user of your product?
How much technical assistance does it take to start using it in production?
There’s definitely some nuance to explore here that is better suited for a separate article, but in general if the developer is both the buyer and the user, and the amount of technical assistance required to get started is minimal, there’s a good chance a PLG motion can work. But in my experience, most companies underestimate the pre-sales and post-sales effort to make customers successful with their API products.
Scaling before a repeatable sales motion is costly
A high-touch, sales-led motion means building a sales team is your top investment area as you scale, and sales teams are expensive (this is the default for most software). A low-touch, product-led motion on the other hand requires fewer sales reps but more investment in R&D, like staffing a ‘growth’ product and engineering team.
What you need to invest in S&M will obviously impact how much you can continue to invest in R&D. A high-touch, sales-led motion naturally limits capital available to new product initiatives in favor of doubling down on existing ones. It can also provide marginal returns on initiatives like self-serve onboarding. You also need enough headroom in R&D budgets to support closing feature gaps and building one-off asks needed to close new business.
Scaling aggressively without knowing the relative importance of sales-led and product-led motions is a recipe for failure. Not only does it distract you from the crucial task of finding a repeatable sales motion for your product, it also guarantees that you will invest in the wrong business functions. You’ll end up hiring people with the wrong skillsets and build teams and processes that your business doesn’t need. A year in, your burn rate will have gone through the roof without moving the needle on revenue.
Understanding sales effort is key to identifying a repeatable sales motion
Much like finding early product/market fit, finding a repeatable sales cycle involves a lot of experimentation. Since every product is different, there’s no playbook for it and like other crucial aspects of company building, it’s a difficult and nuanced art. It’s also a process of understanding the near-term constraints created by the market, the nature of your product, the competition, and your balance sheet (this a16z post on “market annealing” is a must-read on this topic).
Once you have identified early product/market fit, pay close attention to the sales effort required to convert a qualified prospect into a paying and, just as importantly, regular user of the product. This can help identify where your repeatable sales motion could ultimately lie on the product-led vs sales-led spectrum. To better understand sales effort, it is helpful to break it down into the these stages and ask the following questions (this is a non-exhaustive list):
Testing
Can anyone sign up and start playing around with your product or do they need to schedule a demo?
If they can sign up, is it possible for them to use the product in a way that resembles real, day-to-day use?
If there are limitations, are they product or documentation limitations?
Do you have complete control over removing these limitations?
If they need to schedule a demo, does it need to be customized to their use case to be effective?
Prototyping
If your product is an API, how much solutions engineering is needed for the integration to meet customer requirements?
How much do you need to help with solutions engineering?
Are there similar patterns or use cases across customers?
If there isn’t an API, does the product need to be configured to meet customer requirements?
How much do you need to help with configuration?
Implementation
What is the effort involved in switching over from their previous vendor?
Are training and onboarding sessions necessary for the customer’s staff to use the product?
Is a third-party involved in the customer going live with your product? For example, at Modern Treasury, the customer’s bank needs to approve go live with Payments and at Twilio, telecom carrier approval was required for certain SMS and Voice products.
Does the customer need to add additional systems within their tech stack to be able to integrate with your API?
At the early product/market fit stage, your sales effort is likely going to involve a lot of manual, high-touch steps to close a customer. As you work with more customers, you’ll need to think about which steps can be automated by the product and those that will require a sales team. For example, if the nature of your product means you can’t provide a complete self-serve sign-up experience, your demo and website content become even more important in educating prospects. Or if third party approvals are required for the customer to go live, you should assume a longer average sales cycle and plan sales hiring and pipeline coverage accordingly.
While there’s a lot more to explore on this topic of repeatable sales, I’ve realized that monitoring sales effort to understand the relative importance of product-led and sales-led motions for your company is a critical first step. Developing a realistic perspective on sales effort helps prioritize GTM functions with the highest likelihood of driving revenue as you scale, instead of building teams your business doesn’t need.
