Learning to Say No and Four Other Secrets of a Successful Customer-Centric Startup
Last summer, FireEye Chief Information Security Officer Craig Rosen was bracing himself for yet another pitch from a security startup about how their next-generation, machine-learning, big data, insert-buzz-word-here solution would be a silver bullet for his security woes—the creepiness of shadow IT!—when his ears perked up.
The presenting company, Adallom, acknowledged that shadow IT wasn’t actually a problem and instead framed the challenges of managing shared responsibility between IT and sellers of sanctioned SaaS applications. Craig quickly realized he wasn’t interacting with an average security startup, so he decided to make things a little more interesting. He pulled out a stopwatch and dared the team before him to deploy their product within 10 minutes. To his amazement, the Adallom team finished their deployment and showed him value in eight minutes flat.
One of the most reliable ways to succeed as an enterprise startup is by delivering an impressive and world-class experience to your customers. Simply building the best technology, or even putting together the best sales and marketing machine, is no longer enough to stand out, particularly in a crowded marketplace of vendors. The companies that do succeed—like Adallom, which was just acquired by Microsoft—always put the customer first and tend to focus on five customer-centric themes.
Care About People, Not Logos
“We’re not a security vendor; we’re a security partner.” I hear this pitch from startups all the time. A partnership, however, is not just marketing lingo you use to close a deal. It’s a reputation that is earned through honest effort and integrity; companies should always underpromise and overdeliver. Unfortunately, a large number of security companies fail to appreciate the power of that promise. In one particularly memorable case, Adallom had to deal with a problem common to many companies experiencing rapid growth: an irate customer. Instinctually, the management team sent the client a handwritten letter, contacted every board member about the issue and made tough choices to resolve the issue within 48 hours. The team went so far above and beyond expectations that the customers ultimately turned down Adallom’s offer to return their payment and instead doubled-down on their relationship with the company.
Create Constraints to Focus Your Goals
Adallom’s product focus is oriented around a tectonic shift in IT: namely, the idea that data has moved to a new perimeter. Numerous startups have tackled this issue with different approaches, such as prioritization of data encryption or focusing on identity management. Adallom’s solution prioritizes the experience of the end user and the security practitioner while enabling the greatest amount of security. To ensure users would not change behavior or experience any degradation of functionality, Adallom adopted a hybrid deployment model and limited themselves to a few key SaaS applications: Salesforce, Microsoft Office 365, Google Apps, and Box. These constraints naturally limited their audience of potential early-adopter lighthouse customers, but was the right decision to benefit their users at the time.
Learn to Say No
Adallom early on was approached by many potential prospects, and learning the discipline to say ‘no’ was really tough. Discipline is tough to train, and I’ve heard the same four rationales justifying a smattering pipeline of small and large accounts over and over again at other startups too:
- It’s great for the team’s morale to see any usage of the product
- I know the guy/gal well and will get more honest feedback
- Any incremental customer helps us learn faster
- We can prioritize product feedback even from small customers
- There isn’t an opportunity cost because our sales team has excess time
Adallom’s strategy, from the start, was to build a product for large-scale enterprises like select Fortune 500 companies and other significant adopters of cloud services. These customers come with specific product requirements (think: scale, functionality, and fun features like LDAP integrations), so the best way to engage them is through the classic, go-to market enterprise model of a direct field sales organization.
In implementing this strategy, however, all of the common rationales for justifying interactions with small accounts becomes a real drag: All usage is not equal; the unit economics do not work if the ASP is not high enough; product feedback is not uniformly relevant; and the defocusing from large accounts really delays reference accounts. Although Index Ventures (and yes, it was the shortest sales cycle in company history) is proud to be an early customer of Adallom, the company wisely did not try to sell our friends at Sequoia. Eventually their more focused efforts ultimately yielded much more important reference partners like HP.
Rely on Lighthouses to Help Isolate Signal From Noise
Securing HP was an important milestone for Adallom. In fact, HP quickly became a meaningful customer, a global distribution partner and an investor in Adallom. Given HP’s reputation and size, they were able to become true advocates for Adallom’s services and not just a logo to plaster on their website. It's hard to quantify, but there’s this amazing domino effect once a company gets its first five to 10 reference accounts that changes the dynamic, speed and confidence of the organization. As with most large companies, however, HP was a challenging client to convince.
Put Together A Balanced Leadership Team
Having a successful customer-centric business starts right at the top. Founders need to be right in the trenches at the start. At Adallom, for example, the company initially took a non-scalable approach to growth: Two of the three founders were on every single customer call, and the third was delivering superfast one-day turnarounds on client requests. Though this was not sustainable, it was important early on for the founders to both inspire their customers and turn them into early adopters, as well as build the company’s collective muscle for knowing how to best sell the product.
It’s been a true pleasure supporting Assaf, Ami, Roy, Yinon, Michael, Danelle and the whole crew at Adallom, as well as collaborating with Gilli, Zohar, Jeff and Jerry. When it mattered most, these guys did what was necessary, fast. I’m so proud that they’ll continue the next step of their journey with Microsoft.