What's the Framework for Building an Enterprise-Level Company?

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What's The Framework For Building An Enterprise-Level Company?

This is all about prioritization, which comes down to a function called product management, looking at what's being asked, and questioning, "Do these set of features represent a need in the bigger market? Is this something unique to customer A or something I can find customer B, C, or D for and use customer A as a good case study?" It also comes down to the psychological relationship you have with your first few customers. If you turn into a dev shop unwittingly, the leverage is lost. They have a lot of pricing power over you, and it's scary. Do you agree with that?

I think about that a lot. I completely agree with you. It's hard, especially when you are early stage. You need them to use your product to build more products and can give you the case study so you can get more customers. It's constantly balanced. This idea of, “We are customer-driven. They are helping us build our product but we are not a consulting company.” That's not what we are doing.

If you don't have a startup here and you are thinking about it, it's very beautiful to think, "I've got this major large customer that wants to work with me. I can build a prototype for them," you will be tearing your hair out and wishing you never started the company if you figure out and realize later, "I'm so dependent on them. They could crush my business overnight. I am building features for them. I am an underpaid consulting firm."

What's the beauty of building software companies? The beauty is you write one piece of code, and you can deploy it to potentially hundreds of thousands of customers. If you are not doing that, then why start a software company? That's the whole point.

The other thing is to say no and learn to manage expectations, under-promise over-deliver. That's important. If you are entering a crowded market, a good way to enter the crowded market is to build around a few key customers, identify a niche that's not being served, and carefully go after a segment that's being unaddressed or isn't being addressed well. Get those key customers. Be careful. Don't go head to head for the flagship accounts. Otherwise, your competitors will crush you. They will price you out. They will do anything they can to retain the crown jewels.

What you want to do is go after the segment of customers that your competitors are like, "That wasn't a valuable customer. It was small for us." As they focus and retrench to the core of the market, you are capturing the mid-tail and downstream. Before you know it, as those mid-customers become large customers, they are your customers. I'm sure you will agree with this. The beautiful thing about having an enterprise customer is there's a lot more revenue to unlock. Once you are in and got that relationship, you can launch new products and features. You can easily test it out with them. You can get customer feedback.

The beauty of having so few large customers is that you develop a tighter relationship with them. There are opportunities for you to be a preferred vendor where you launch other products, and it's much easier to get in. In some ways, the more enterprise customers you have, that's strategic value. That's sometimes why acquisitions happen. The customer base that you have as a startup that you've built with these key customers, those relationships are very valuable to a potential acquirer. It's something not to forget if you are an entrepreneur.

I completely agree. Especially in the B2B and enterprise space, the classic problem is like, "Why go after 10 clients when I can just get 1 who will pay me 10 times what they will pay me?" That's the classic problem. Especially when you are trying to hit quotas, that's what oftentimes people try to do. One of the core values of our company is to build for the long-term. What that means is not only to build a product for the long-term but make long-term decisions when you are building a product. Don't make short-term ones.

That also means in terms of how we think about customers. We don't think of them as hitting quotas. We look at these customers wherever they are on their journey. I will argue that there are some small customers who are further along in their data journey than the large guys. Wherever they are in their journey, if we can capture and grow with them as they go through this journey, then we will be their solution of choice. This has happened to us. Someone has left a company. That was a customer of ours. They went to the new company and said, "We should just use TermSheet. I'm familiar with it."

That's a massive driver. That happens probably 1 year to 3 years out. A lot of people change jobs and tend to work in the same industry. Those people with who you maintain a relationship with becoming your evangelist. To that point, one thing I see a lot of startups in the B2B and enterprise sales side miss or get wrong is the importance of having the right ratio of account management or customer service to clients.

When you are budgeting is very easy to budget for sales and engineers, you've bitten off more than you can chew. You are now spending time servicing these accounts in this often a ratio that's used in industries depending on your product. You have one account manager per X number of accounts. All a function of the product and revenue we make from the clients.

That's part of the good problem too. As you are building your company, don't forget the things that got you there. Your accessibility to clients and willingness to hear their feedback is just as important to the 100th client as they were to the first. They want the same thing, so you have to build your business understanding that. You can't forget like, "The 100th guy, we don't have to worry about him. He's just a 100th guy."

First-time entrepreneurs want to optimize for scale too early. They're trying to systematize things already.

I found this quite difficult to balance when I was CEO of my startup and had over 100,000 customers. Some of these customers are bringing $10 to $50 million in revenue, so you can appreciate how important they are. One day, we couldn't even get $100,000, and suddenly, you've got a customer that is bringing in that much revenue for your company. It's fun. I highly recommend that in the early stage, you need to do everything. To go out, go for the big guns and get the big sales and focus on the big accounts, there is something to be said as a CEO or even as an executive.

Sitting down with your key clients every now and then, having quarterly meetings, chatting to them, and trying to understand what it is you're trying to do, "What are your problems? Let me put myself in your shoes. What are you trying to do? What are your strategic priorities?" Map back, "How does my product help you do that?" Learning from key accounts what's working and isn't working is sometimes more important than going in and giving a presentation and winning another sale.

People bring in the CEO as the closer sometimes when there's a key account. That's fun, and you need to do that. You bring in a lot of revenue. With your sales team, you can help them that way but you have to spend time with the whole segments of accounts and constantly try to pattern, match, and understand, "I had this from this customer. Let me take a note of that and bring that back to my product team. Let me also see. Does that feedback come up in other places too?"

Before you know it, you are back to the startup phase. You are getting new ideas. You are seeing new trends happening. That's how you would be someone who is like you, starting out in the basement somewhere. Those are the people you are afraid of when you are growing up. They get to say, "I'm not worried about the major competitors. I'm worried about someone like me who's sitting in a basement somewhere and building their startup. They are the ones to be afraid of." It's true. That turned out to be the case.

Can you elaborate on that more?

It's not your competitors that you see nowadays that are dangerous for you. You even hinted at this. Some of the smaller customers can be more demanding. They have to be more demanding. They don't have that market cap. They don't have that big infrastructure. When a rocket ship takes off, everyone gets credit for it, even though there's dead weight on the bus. In the same way, you've got to watch out for that tiny little startup that is on your market, looking at what you are doing. They are out there gobbling up some of the market shares. That's the case for you as a Founder when you are building your company.

You got to remember that you are not competing with a startup. Even though you haven't made it to the big leagues, you are competing with that founder. Imagine that someone is hungry as you. There's a saying, "The wolf at the bottom of the hill is always hungry." I know you've never heard that before but this is a childhood joke I had with a friend of mine. The wolf at the bottom of the hill is hungrier than the wolf at the top. It will do anything to claim that hill. It's got more hustle and hunger.

Once you've made it and got millions of dollars of revenue, you've never made it. Anything can happen. When you are going to your customers, keep pretending you are that little baby startup and try to get signals from the market because that other founder over there is trying to get access to that market. You've already got access to that market. Start thinking about, "What's the next product we are going to build in a year? What does my roadmap look like in 6 months, 12 months, and 18 months out?"

It's because I was so in touch with my key customers I have an advantage versus another startup that would finally get access to one customer. I'm already aware of that startup, which helps our corporate development pipeline. Also, I'm getting way more feedback than that entrepreneur is. As a CEO, as your company scales, you have got to put yourself into that mindset of, "What's the next iteration of this startup going to be? I've got better access than any founder on the planet because I already had these customers."

That’s an amazing way to think about it. I think about customers, customer success, and value but I have never thought about it in the sense of a market that you already have access to that someone else is trying to get access to that. That's interesting. I appreciate you sharing that.

You also have superior access and ability to take that feedback. Think how hard it was for you to get a call or an introduction to a legitimate client to be taken seriously. Even when you got through, you probably weren't even talking to the decision-maker. You weren't even talking to the end-user or customer, “Once you've grown a startup and got some paying accounts, they are an asset for you.” Keep being a startup. Never lose sight of that. That's why Bill Gates and others were always worried about not the major competitors but that small hustler who's trying to go after that market. They are the dangerous ones.

Think about key decision-makers. That's something you run into when you are doing B2B as well. You might be talking to someone because you know them, you have a relationship with them or how that might be. They may get you in the door but oftentimes, the sale may not work because you were talking to the wrong person.

When you're talking to people, listen to what they're saying. If you hear it enough, you’ll get to figure out if the path you’re considering going down is what they need.

That other person who is that key decision-maker might be doing their own thing. They might be running the same process on their own. It's important to leverage those relationships to get in but as quickly as possible, try to get to the key decision-maker. You hear it but we live it because they are the ones that are ultimately going to decide whether this pilot, whatever it is, is going to succeed or fail.

It's prioritization, knowing who you are talking to, making sure you have a solid sales approach, having good follow-up activities, and building a relationship. Eventually, you will score that sale. You have to work at it. There were accounts I worked on for years and years. I finally got them big and became big accounts. Sometimes, you need case studies and marketing enablement. You need to work from many angles. Sometimes, if it's a big company, you need to work with ten different people in the company.

You got also have to be worried about another thing. Turnover can hurt you too. The decision-maker you were talking to is being replaced. Often, why is it the politics of a big company? The new person comes in and wants to change everything. That might mean you too. That might mean getting rid of the vendor. You got to build a sticky solution so that your product delivers beyond the decision-maker and the power being there.

I asked you this question, and I'm interested in what your answer would be. There's this approach of selling to large enterprises of enterprise-wide deployments. I would be interested to see if you saw us at Vungle. For this company to adopt your platform, it has to be deployed across the entire organization, as opposed to this virus model where you can get one group that has less pressure to make that decision but get one group, have them adopt it, and can become evangelists throughout the organization. Oftentimes, especially in real estate, different geographic groups or asset class groups are their own profit center. They have the ability to make these decisions on their own. How did you think about that when you were selling to these large companies? Was it organization-wide?

It's rarely. Even now, it's still not the case. Portfolio-wide deployments and rollouts are hard to get. Most companies are risk-averse to trying new solutions in one rollout that is carefully staged and managed. It is easier to go and get one group within the company to be your evangelist and use that group to champion you internally. That's the safest approach. I'm not saying you can't get those big portfolio-wide deployments. You want to get LPCs entire real estate portfolio. It comes down to how the company is structured. Very rarely are our conglomerates structured so centrally.

Disney used to have a strategic planning unit that would have a say in everything that rolled out operationally. When Bob Iger, the previous CEO of Disney, came in, they dissolved that group and gave power to each leader. On this theme, over the last decade, we have seen a shift in marketing and technology budgets. It used to be in the hands of the CFO. It's now more in the hands of the divisional leaders, the CTO, and the CMO. The CTO and CMO nowadays are controlling more and more of the spend. The CFO has a lot less power there. The CMO has a lot of power in making technology decisions. Even the sales team now has decisions.

The role of the IT function internally is diminishing. It's becoming somewhat redundant. IT is now being relegated to overall infrastructure, security, onboarding employees, setting them up, and things like that. If that's happening, you've got to realize that each department might have its own budget. Sometimes it's annoying. You might already have a contract with the company. It's like you are starting from scratch. The right and left hands sometimes don't even talk to each other.

Let me bring this to real estate as an example. I will give you one example. There are so many configurations. In multifamily, you are talking to a fund like Blue Field. You might think it's so easy for us to deploy a technology solution throughout all of our portfolios. Heck no. We have different third-party managers. We have Greystar managing a bunch of properties. We have AMC. We have other vendors. We have smaller property management firms. Even in that property management firm, you've got different regional managers.

For me to deploy a hardware solution or a tenant communication platform or whatever it might be, in one part of the portfolio within the property manager, it's a lot of work to have it work in 3 properties and then roll that out to 5 or 6. It does tend to be like a virus but it doesn't spread as viral as a virus does. Sometimes you might secure that one that is going well if, for some reason, it doesn't spread. You've got to be a chess player when you are in an enterprise game. You are the one that brought it up. You've got to know who the decision-maker is. You've got to research. You are playing a chess game here.

You don't have this luxury all the time but you want to choose who your key contacts are going to be. As a CEO, this is more for founders and CEOs here, be very strategic with which level you build the relationship. I used to have my sales team. We had hundreds of salespeople and hundreds of millions in revenue, so I noticed a different scale but this did start to happen in the early days when I would only try to come in. I'm not trying to sound arrogant here. Don't get me wrong. It's what your job is as a CEO. You have to come in and be used to a certain way.

My sales team wouldn't let me take meetings sometimes with lower-level sales people on the other side. Especially in Asia, it was very important that rank was respected. I also found when I came into heavy as a CEO. There are junior salespeople from the other side, and they wouldn't say a word. They would just say, "The product's great. You wouldn't get the truth.” What I found worked well was a configuration where the sales team would bring me into the boss of their contact.

The sales team can't go higher than the director level. Now, they arrange a meeting jointly where our sales team and contact at the client would get me a meeting with the SVP. The SVP is willing to take that meeting. That's very important. You establish a relationship with that SVP. Don't get stuck at the lower level. Let your sales team manage that lower level. You've now got the relationships, so if anything happens, the SVP is going to call you.

Whenever you're adding more features, you're adding more complexity to the product.

It happened to me many times, getting a text message like, "We are unhappy with your products. We are probably going to switch you out." I'm like, "Give me a chance here. Let me see what's happening." Sometimes the SVP would give me a notice before they would even give notice to the lower-level people. This is the world of enterprise. This is the world of B2B, something that people don't appreciate. Once you go in, there's a whole politics. In the usual role of a CEO, executive or founder, there are some customers you want to have contact with at the lowest level because they are going to give you true feedback.

There are other accounts where you have to get a CEO-to-CEO relationship going. Sometimes, it's a two-hour meeting, and you are going out to eat and doing all the fun stuff, the people envy the CEOs are doing. You are golfing, wining, and dining. At the very end, if it comes up, "How's business?" "It's going great. There was this one issue.” “No worries. It was sorted out. Your people talked to my people." That's what it used to be like as you scale a company. It's a fun thing but it's deliberate. In enterprise, you have to do it like that.

I completely agree. Not that we are out yet wining and dining but hopefully one day.

You need to start doing that. Here's the thing you need to remember. It's not about your revenues. Founders have a lot of respect for founders. CEOs have a lot of respect for other CEOs. It's normal and okay. It's appropriate for you to ask for a meeting with the CEO of the enterprise company. Set your sights high. If not the CEO, the divisional leader. Come in and get respect. This is all about the dynamics too. You don't want to be a slave. You don't want to be a dev shop in one of the earlier segments here. Go in and establish yourself as an equal, and it will move mountains for your company. You got to play that.

I love that. Like we said, in some respects, starting a B2B company has a lot of advantages. You can have a well-defined problem, can work in a niche, and know who your customers are. When you start going into things like this, you now must maintain those clients. You have to ensure you are talking to the right people. On the front end, it's easier but on the backend, you have to deliver on that promise. Whereas oftentimes, people think about the consumer. It's hard upfront to get enough people but if you can do it, and that one product hits, then it's like, "I can build this one product and keep going." My point is it never stops.

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About Zain Jaffer

Zain Jaffer is an accomplished executive, investor, and entrepreneur. He started his first company at the age of 14 and later moved to the US as an immigrant to found Vungle, after securing $25M from tech giants including Google & AOL in 2011. Vungle recently sold for $780m.

His achievements have garnered international recognition and acclaim; he is the recipient of prestigious awards such as “Forbes 30 Under 30”, “Inc. Magazine’s 35 Under 35,” and the “SF Business Times Tech & Innovation Award.” He is regularly featured in major business & tech publications such as The Wall Street Journal, VentureBeat, and TechCrunch.