Quick notes from an Andreesen Horowitz podcast with Jyoti Bansal (@jyotibansalsf), Peter Levine, Satish Talluri (@satishtalluri), and Sonal Chokshi (@smc90).
One of the toughest challenges for founders — and especially technical founders who are used to focusing so much on product features over sales — is striking “product-market fit”. The concept can be defined many ways, but the simple definition shared in this episode is: it’s when you understand the business value of your product.
And that comes down to users, which is where the concept of “product-market-sales fit” comes in, observes Jyoti Bansal, founding CEO of AppDynamics (which was acquired by Cisco for $3.7B the night before it was to IPO). Bansal shares this and other key milestones and frameworks for company building in conversation with a16z general partner Peter Levine; enterprise deal team partner Satish Talluri (who was a director of product and growth operations there); and Sonal Chokshi.
The importance of sales motion
- sales / product fit is key for scaling
- GTM model important, be deliberate not random
- “Sandwich strategy” devs and execs
- Services – around 15% of rev. Focus on large enterprise as a driver of renewals not as profit center
- Product/services blend should drive product adoption
How does Sales motion affect roadmap priorities?
- Revenue Now (current business)
- Internal improvements around adoption
- Revenue Later (new products, strategy)
App dynamics used a 66/33 framework to prioritize, 66 on current business, 33 on future business for engineering resource allocations.
New product launches
- Changing product and sales motion at the same time is extremely disruptive.
- Sales learning curve needs to be considered when launching new products. Need to start over especially if it’s a new market.
- Lesson learned – when app dynamics built second product, sales failed at it. Problem is that you sell differently a new product or a mature/MQ caliber product.
- Reorganized as a “startup in a startup” structure. There’s a sales incentive problem too since new product is way harder to sell and sales won’t sell it to make their numbers.
- This is really expensive to do. How to manage? First 25 customers phase, then 25-100, then 100+. For phase 1, deployed PM as primary seller like a founder. Use top PM, Architect, Sales Engineering team to get early wins and build blueprint ~ 8 months. Then do internal sales to show sales that this product makes more money.
- Sometimes companies launch too many products. Important to stay focused, don’t let things get mainstream until you are ready.
- Don’t give your sales force too many immature products to sell before it distracts them from focus.
Pricing and packaging
- Pricing – what is the business value?
- Can your sales people describe it simply? “Half a sentence pricing” is the right level of complexity.
- Pricing should be measurable – “how many do I need to buy” or “how many am I using” both presale and post sale
- Keep it simple, don’t get creative with pricing
- Enterprises need certainty and fixed budget, not variable.
- Sales led pricing process based on ” how much is this going to save”
- Leave a business case in the sales process, aka Business Value Assessment.
- Play back business case to internal champion
- If your product is superior, then don’t go down in price. Don’t be afraid to charge higher than competition, but you have to be clear about articulating value.