Transcript of Enterprise Sales | Startup School
Y Combinator
0:01[Music]0:09my name is Pete Kuman I'm a group0:11partner at YC and a YC Alum I was0:14co-founder and CTO of optimis Le in the0:16winter 2010 batch in this talk I'm going0:19to walk step by step through the process0:21of closing your first Enterprise0:23customers I'm going to do that by0:24focusing on successive steps in the0:26sales funnel prospecting Outreach0:30qualification pricing closing and0:33implementation I'll do my best to0:35include lots of tactical advice and0:37counterintuitive lessons I picked up0:39while I was learning how to sell at0:41optimiz Le I'm going to focus on0:43Enterprise sales for software startups0:46but this talk should still be broadly0:47useful to any founder getting started0:49with sales regardless of the size of0:51your customers or what you're selling0:53why am I giving this talk well first I0:56know there's demand for this sales is0:58the number one concern during the the1:00batch for most of the founders that I1:01work with at YC second I know from1:05experience that sales is a learnable1:07skill my co-founder Dan and I both had1:10technical backgrounds we knew how to1:12build a product but we didn't know how1:14to get people to use it we figured it1:16out through trial and error and that's1:19the first big lesson I want to impart1:21today if you're the founder of an early1:24stage startup and you're building a1:26product that you're hoping other1:27businesses will buy you are capable of1:30selling it that's the good news the bad1:32news is that you're probably the only1:35person capable of selling your product1:37that is if you aren't able to sell your1:39product yourself at first chances are1:41you're not going to be able to hire1:43somebody else to do it for you now if1:45you're anything like we were you're1:47probably thinking there are lots of1:49talented salespeople out there wouldn't1:51it be faster to hire one of them than1:53try to do it ourselves after all that's1:55what youd probably do with any other1:56role like designers or lawyers or1:59accountants the problem is that sales2:01before you find product Market fit is2:03very different from sales after you find2:06product Market fit sales pre pmf is2:08fundamentally entrepreneurial it2:10requires vision and credibility with2:13customers and lots of experimentation2:15and a tight feedback loop with the2:17people building the product this is a2:19role for Founders so does that mean if2:21you're a team of technical Founders2:23building a product you should go find a2:25business co-founder to do sales well you2:28probably don't need a business2:29co-founder to sell either I've worked2:32with many technical Founders who turned2:33out to be great at selling in some cases2:36very much to their surprise so why is2:39that well if you're a technical founder2:41building a product you have several2:43advantages that will give you a big leg2:45up in selling first you're an expert2:48both in the problem you're solving and2:50the product you're building and second2:52you have conviction you sincerely2:55believe that your product will solve2:57your customer's problem expertise and3:00conviction are surprisingly important in3:02sales this is especially surprising to3:04people who mistakenly think that selling3:07is a dark art full of psychological3:09tricks sales isn't about tricking people3:12it's fundamentally about helping people3:14solve their problems and Engineers are3:17great at doing that anyway now that I've3:20hopefully convinced you that you're3:21capable of selling your product let's3:23talk about how to do that like I said3:25we're going to go through the step in a3:27typical sales funnel together let's3:29start with prospecting prospecting means3:31finding potential customers the output3:35of this step is a list of companies you3:37think might need your product and the3:39specific humans at those companies you3:41think might buy it there are lots of3:43tools you can use for prospecting but3:45before you start you need a hypothesis a3:48sales hypothesis goes something like3:50this customer X has problem Y and our3:54product will help them solve it a good3:56hypothesis makes prospecting Easy by3:58clarifying who you should be talking to4:01for example at optimizely our initial4:04hypothesis was something like this4:06marketers at small and medium Tech media4:10and e-commerce companies want to run AB4:12tests on their websites but they can't4:15because off-the-shelf experimentation4:17tools require users to write code4:19optimizely will enable them to run AB4:22tests without writing code and once you4:24have a clear hypothesis like that you4:26can get to work on prospecting start by4:29identif identifying companies that are4:30likely to suffer from the problem you're4:33solving one way to do this is to buy4:35industry lists of all of the companies4:37in a given sector and then use some4:39filtering criteria to qualify those4:42companies and narrow your target list4:44for example at optimizely we used a tool4:47called builtwith to figure out whether4:50prospects were using analytics tools and4:52JavaScript Frameworks because those were4:54signals that a company was relatively4:56sophisticated and cared about their4:58website once you have list of companies5:00you'll need to find the right humans at5:03those companies and their contact5:04information there are tools that make5:06this easier this video was recorded5:09during the winter 24 batch and many5:11Founders in the current batch are using5:12Apollo and Linkedin sales navigator for5:15that now that you have a list of leads5:17that is specific humans that are likely5:19to buy at the companies you're selling5:21to you'll need to get their attention5:23this step is called Outreach the goal of5:26Outreach is usually to schedule a5:28meeting with your prospect most Founders5:30think of cold Outreach as the primary5:32mechanism for doing this but the easiest5:35way to get a meeting with a prospect is5:36to get them to reach out to you even if5:38you're planning on using a sales Le5:40approach you should still do everything5:42you can to generate inbound demand5:45launch early and often create technical5:48content like videos and blog posts that5:51prospects can find while searching for a5:53solution to their problem build5:54self-served demos that people can share5:57find online forums where your customers5:59hang out and establish yourself as an6:01expert by answering questions there's no6:04one way to do this but the better you6:06get at grabbing your customers attention6:08and getting them to reach out to you the6:10more efficient your sales process will6:12be on that note if your customers all6:15hang out and Industry conferences you6:17should be there too find a way to get a6:19list of attendees ahead of time and set6:21up lots of meetings in advance once6:23you've identified a specific Prospect6:25you want to talk to start by trying to6:27find a warm introduction if you can look6:30on LinkedIn for shared connections and6:32ask for an intro sending cold emails is6:35usually the least efficient way of6:36getting prospects attention but it can6:38still be effective if you approach it6:40the right way start by writing each6:42email by hand make your emails short and6:45to the point and make the ask clear you6:48should also make it clear why you're6:50reaching out to each recipient6:51specifically humans have built-in spam6:54filters and if your email looks like it6:56was sent to thousands of people it's6:58going to get deleted on this last Point7:00there's a handy rule of thumb to keep in7:02mind for cold emails only send emails7:04that you yourself would be excited to7:06read if you wouldn't be excited to get7:08the email you're about to send your7:10prospect probably won't either before we7:13move on I want to spend some time7:15talking about a particular anti-pattern7:17I see with a lot of YC Founders many7:19Founders start by talking to anyone who7:22will take their call and the problem7:23with this approach is that it selects7:25for the people who are easiest to talk7:27to not the people who will be be great7:30customers so if you're not disciplined7:31about it you'll end up wasting all your7:33time chasing bad customers that are easy7:36to talk to I see YC Founders make this7:38mistake all the time and I get it when7:41you're starting a company it's hard to7:42get people to pay attention to you cold7:45emailing is a demoralizing grind so it's7:48tempting to go after the people who will7:50talk to you even if they won't ever buy7:52your product and the reason this mistake7:54is so dangerous is because talking to7:56bad customers gives you the illusion7:59that you're making progress when you're8:00not you'll get lotss of great product8:02feedback from people who think they're8:04doing you a favor but because you're not8:06actually talking to someone who needs8:07your product this kind of feedback is8:09useless at best and counterproductive at8:12worst in practice I see Founders make8:14this mistake in two ways first by trying8:18to sell enterprise software to startups8:21now if your product solves a problem8:23that companies only have when they get8:25big like for example an HR information8:28system then trying to sell it to8:29startups is a waste of time but Founders8:32still do it all the time because other8:34startups are much easier to talk to than8:36busy big company Executives and the8:39second is trying to go bottom up with a8:42product that needs to be adopted top8:45down and that's a little jargony so let8:47me illustrate it with an example imagine8:49you're building productivity software8:51like notion your product can be adopted8:54bottom up meaning that individual8:55employees or teams can start using it8:58independently without having to8:59coordinate with anyone else inside the9:01company and in this case talking to9:04individual contributors or their direct9:06managers is totally fine but what if9:08you're building building software for9:10large hospitals in order for a hospital9:12to start using your product you're going9:14to need a lot of different teams to9:16coordinate with each other so you might9:18need the CIO to sign off on your9:20security and compliance and you need9:22their software team to integrate your9:25product with their in-house systems you9:27need the doctors to enter billing codes9:29at after each appointment and you need9:31their Ops Team to manage Collections and9:33so on and so on and in this case talking9:35to an individual doctor won't be useful9:37you need to talk to a senior leader like9:39a CFO or a CIO to do a deal now there's9:43a meme that YC says you should sell to9:46companies who will buy quickly even if9:48they aren't good customers this is a9:51misconception you should try to find9:53companies that will buy quickly but you9:55shouldn't spend time trying to sell to9:57companies that don't actually need your9:58product or won't be good customers you10:01need to find people who have the problem10:03you're solving and the budget and10:05decision-making authority to buy your10:07product we'll spend more time on this10:09point later let's get back to our sales10:10funnel so you've managed to get your10:13prospect on the phone your job on the10:14first call is not to sell your product10:18that comes later in the first call we're10:20just trying to do two things first we're10:23trying to qualify our Prospect by10:26figuring out whether they have the10:27problem we're trying to solve and the10:29budget and decision-making authority to10:31buy the product and second we're trying10:34to schedule a follow-up call for a10:36product demo now many Founders face10:38plant in the first call by diving10:40straight into their pitch these Founders10:42are making one of the biggest founder10:44sales mistakes not asking enough10:46questions and they make this mistake10:48because they misunderstand how sales10:51work they think of the company they're10:53trying to sell to as a big monolithic10:56entity and they think of the sales10:57process as adversar10:59where it's their job to come up with a11:01perfect pitch that will break down their11:03targets defenses but outside of some11:05used car dealerships that's not how11:08sales works in the real world in the11:10real world you're almost always selling11:12to an individual human not a big11:15monolithic entity and that's good news11:17because humans are easier to understand11:19than organizations and that turns out to11:21be really important in the real world11:24sales is not adversarial it's about11:26deeply understanding a customer's11:28problem and help helping them solve it11:30and great salespeople spend most of11:32their time listening because that's the11:35best way to understand someone's problem11:37they ask all sorts of questions what11:39made you decide to take this call tell11:41me about this problem how long have you11:43had it how bad is it who else does it11:46affect how do you quantify the impact11:49why haven't you solved it already what's11:51your budget for solving it how does your11:54organization buy software who makes the11:57buying decision who else will need to11:59weigh in on this decision now sometimes12:02when you ask questions like these you12:04discover that your prospect doesn't12:05actually have the problem you're trying12:07to solve or they have it but they don't12:10care enough about it to buy a solution12:12or they don't have any budget or any12:13number of other reasons that they won't12:16actually be a good customer for you and12:18if you do that that's great you just12:20saved yourself and your prospect a lot12:22of time and you can focus your energy on12:25other prospects that are more likely to12:26buy now if on the other hand it turns12:29out that your prospect does have a12:31problem you can solve you're in luck12:33you've earned the opportunity to show12:35them how your product works the next12:37step is a demo most Founders think of a12:40demo as a chance to finally show off12:42their product in my experience thinking12:45about it this way is a Surefire way to12:47deliver a bad demo that's because your12:50job in a demo is not to show off your12:53product it's to convince your audience12:55that you can help them solve their12:57problem and one helpful trick I've12:59learned is to think of your demo as the13:01script for a great movie a great script13:03always starts with a recap of who the13:06main character is that's your user and13:09the problem she's trying to solve this13:11is your chance to demonstrate how well13:13you were listening during your first13:14call if your audience believes you13:17understand their company and their13:18problems they're going to take you13:20seriously when you talk about how to13:21solve them when you're ready to show the13:23product resist the urge to take your13:25audience on a feature tour where you13:28walk from screen to screen showing them13:30everything your product can do instead13:33tell a story that shows exactly how your13:35main character solves her problem and13:37this is the point great demos actually13:40feel like good stories they have a flow13:43where each step leads to the next and13:45every feature you show has a clear13:47reason for being there they usually have13:50one or more magic moments where you13:52surprise your audience with how easy or13:54delightful something is and great demos13:57are also personalized for the audience13:59this is where you get to use all of the14:01information you collected during that14:03first call tailor the demo to their14:06company use their logo their website14:09their customers uh the names of the14:11people on their team the more you can do14:13to help them visualize exactly how your14:15product would work in their company the14:17better I'll give you an example from the14:19early days of optimizely when Dan and I14:22started building we booked demos with14:24all of our competitors and every single14:27one of them used a website to show what14:30it was like to use their products to run14:33AB tests and we thought this was really14:35lame so we spent weeks building a14:37feature that made it easy to demo our14:39product right on our customers websites14:42instead of a dummy website and I knew it14:44was worth it when I saw marketer eyes14:46light up when they watched us change14:48things on their landing page that would14:50have taken them months to do on their14:51own so if you do a good job your14:54prospects and their team will come out14:56of this meeting convinced that you can14:58solve their problem and if that's the15:00case it's time to talk about pricing I15:02get a lot of questions from Founders15:04asking how to price their products and15:06the truth is there isn't a simple15:08formula for doing this so if there isn't15:11a formula how do you pick a number well15:13fortunately you can ask questions15:15earlier in the process that will make15:17your job easier here like how much is15:19this problem costing your company how15:22many people are responsible for15:23maintaining your in-house solution15:25what's your budget for solving this15:27problem how much are you spending on my15:29competitor and it's okay to wait to15:32share your pricing until you've had a15:33chance to ask these questions in fact if15:36your product requires lots of work or15:39customization to implement you probably15:41shouldn't quote a price until you15:43understand exactly what your customer15:44needs in any case even if you asked all15:48of these questions upfront the reality15:50is that pricing involves a lot of15:51guessing in the beginning and the advice15:53that I give to startups is to think of15:55each pricing conversation you have as an15:58opportunity to run an experiment in16:00which you test a price point and then16:02learn from your prospect's reaction to16:04it in the early days of optimizely we16:06had published self-serve pricing for16:08customers who just wanted to swipe a16:10credit card for a basic version of our16:11product and an Enterprise plan that16:14required you to go through sales we16:16didn't publish pricing for the16:17Enterprise plan which gave us the16:19flexibility to try a different price16:21each time the pricing mistake that16:23Founders make most often is charging too16:26little for their product or even making16:28it free in exchange for product feedback16:30Founders do this because they're worried16:32about charging too much they think16:34they're going to scare customers away16:36one of the most surprising things I16:38learned was that when a customer really16:40wants your product it's hard to scare16:42them away by quoting a price that's too16:44high for example I remember my16:46co-founder Dan coming out of a sales16:48call and telling me that he'd worked up16:49the nerve to quote the prospect $10,00016:52a month for our software and the16:54prospect ended up talking us down to16:562,000 a month and then buying our16:58initial quote was 5x what they were17:00willing to pay and they still bought in17:02fact higher prices can help you figure17:04out whether customers actually need your17:06product the cison brothers famously17:09charged more for stripe in the beginning17:11than their competition did the fact that17:13they were able to sell their product17:15anyway was compelling evidence that they17:17were on to something and it helped them17:19focus on the customers who were most17:21desperate for a solution high prices17:23make customers more serious this brings17:26me to another important point about17:27pricing remember that the most important17:30conversations about pricing will happen17:32without you in the room your prospect17:34will need to convince others in the17:36organization that your product is worth17:38the price you're asking you can make17:39their job easier by giving them slides17:42or a PDF one pager that explains how17:44your pricing works it's usually a good17:46idea to include an overview of your17:48product and the benefits of using it in17:50case your prospect needs to talk to17:52people who aren't familiar with it in17:54any case don't spend too much time17:56thinking about pricing in the beginning17:58pick number ideally one that makes you a18:00little uncomfortable and pay attention18:02to how your prospect reacts it's okay to18:05let them negotiate you down remember in18:08your first few sales you're optimizing18:10for learning not unit economics now that18:13you've agreed on a price it's time to18:15close the deal closing is not a single18:18conversation it's a bunch of things that18:20need to happen from the moment your18:22customer decides they want your product18:24to the moment they actually buy it big18:26companies especially ones in highly18:28regulated Industries have formal18:30procurement processes that usually18:32include stuff like security and privacy18:34reviews legal reviews and signoff from18:37compliance teams it's less formal in18:39smaller companies but you should expect18:41at a minimum to go through a redlining18:43process with their legal team the18:44biggest mistake that I see Founders make18:46at this stage is getting surprised and18:49discovering that what they thought was a18:50done deal is in fact not done at all and18:53may take weeks or months of additional18:55back and forth or fall through18:57completely now the way to avoid getting18:59surprised is once again to ask a lot of19:02questions asking your prospect upfront19:05how they buy software and who needs to19:07sign off will give you a clear picture19:09of the hurdles you're going to have to19:11overcome in order to get a signature you19:13should do everything you can at this19:15stage to move through the procurement19:17process quickly ask explicitly if there19:21are steps like filling out a security19:22questionnaire that you can get started19:24on early and execute in parallel and19:26keep your legal documents as simple as19:28possible I recommend starting with the19:30open- source templates published by YC19:32company common paper keep timelines and19:34scope of work out of the legal contract19:36if you can and put them in an order form19:38or a shared project tracking document19:40instead and most importantly remember19:42that your prospect who at this point has19:44become your Champion is your biggest19:47Ally you should be in constant19:49communication with them and when you19:51need help getting something unstuck you19:53should ask them first remember they19:56can't solve their problem until you get19:58through procurement so they're heavily20:00incentivized to help you make it happen20:02now that you have a signature20:04congratulations it's time for your20:06customer to actually start using your20:08product this is the implementation and20:10it's the last step we're going to talk20:11about today and I'm going to lead with20:13this the single biggest mistake that20:16Founders make is thinking that20:18implementation is the customer's job we20:21made this mistake more than once at20:23optimizely in fact we closed six figure20:26deals with customers that were excited20:28about our product and then we discovered20:30a year later when it was time for them20:32to renew that they hadn't run a single20:34AB test with optimizely and this was20:36confusing at first why would a customer20:38who is willing to pay so much for a20:40product fail to use it at all in this20:43case the approximate cause is that the20:45marketing team who bought our software20:47couldn't convince the software20:48engineering team to help them install it20:50on their website the real cause though20:53is we didn't do our jobs we thought our20:55customer was buying a product so we sold20:57them one and left the rest up to them in21:00reality our customers were buying a21:03solution to a problem and all of the21:05work required to get from product to21:08solution was our responsibility we21:11learned to start asking marketing21:13leaders about the work required to21:15implement optimizely very early in the21:17sales process we started building21:20detailed implementation plans with21:22marketing and Engineering leaders well21:24before a contract got signed and in fact21:27if we weren't able to do that we21:29wouldn't sign a contract at all and the21:31trick we learned was to treat the21:33customer implementation the same way21:35that we would a high priority project21:37inside of our own company by project21:39managing it so we put together a shared21:41road map we made sure that every task21:44headed owner we set up regular check-in21:46meetings to hold everyone on our side21:48and theirs accountable for getting it21:50done your sales funnel only really ends21:53when your customer is using your product21:55habitually and when you get to that21:56point congratulations hopefully you have21:59a customer for life all right we've22:02covered a lot today from prospecting to22:05doing your first call delivering a great22:07demo pricing closing and finally22:10managing the implementation of course22:13there's so much more to learn about22:14sales and the best Founders devour22:17everything they can on the topic if you22:19want to go deeper I recommend Peter22:21kazi's book founding sales it's a22:24fantastic resource and it's free online22:27but like most most of the hard things22:29about building a company the best way to22:31learn is by going out and doing the22:32thing so if you only remember one thing22:34it should be this just get started22:37you'll make mistakes but with enough22:39attempts you'll figure it out and22:40selling will start to feel natural22:42pretty soon you'll discover that you've22:44acquired a new superpower you'll find22:46it's useful not only in getting22:48customers and revenue but in fundraising22:50and hiring too and soon enough you'll be22:53the one giving advice like this to new22:55Founders thanks for watching22:58[Music]23:02n23:06[Music]
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