How to Grow Revenue Faster in the Second Half of 2023 with Founders Fund

The category today is how to grow revenue faster in the second half of 2023. Seems timely that we're entering, uh, July. Q2 is over. Um, I have 1 to 2 calls every day with a startup founder and/or a, like, sales leader or go-to-market leader. Um, and one way that I often pick topics is, like, what is the most common conversation that I'm having with folks? Uh, and so that is how I arrived at today's topic. And just for a context setting, general sentiment from founders and go-to-market leaders— we, you know, get on these calls that I have, I say, as I said, on a daily basis— how did the first half of the year go? Almost universally it's like, well, first half of the year was pretty tough. Um, you know, we, we missed the revenue targets that we projected in like Q4 of last year where we thought we would perform in 2023. I think that's probably more common than not for SaaS businesses in the first half of this year. Maybe we reforecasted our revenue target because of that miss. But for the first time, I would say, in certainly like several months, there is like a bit of optimism that follows that it was a tough first half of the year. And people, just like the sentiment is more positive. And at the end of Q1, this, this like positive sentiment didn't exist. It was like tough Q1, we're bracing for a tough Q2. But now the conversations are more tough first half of the year, but it seems like there's like light at the end of the tunnel. There's some like positive trends in the business. We're excited about, you know, certain opportunities. And there are public data points that are reinforcing that like positive change in sentiment around public markets that are rebounding even more so today on a positive inflation print. And layoffs have slowed. I remember first quarter of this year, maybe Q4 of last year, it was like every day a new layoff announcement. And in turn, like at least in part because of these layoffs, burn has come down mostly across the board. And so folks have been able to extend their runway and people are just feeling more positive about the business than they were in, let's call it February, March, April, maybe even May. And so that sort of transcends into the number one question that I'm being asked right now, which is, what should we be doing to start growing faster in the second half of this year, given sort of like positive sentiment change that is taking place? And so that's where we'll focus today's deck. This is sort of how I approach the conversation on an individual basis, but what I'm gonna try and do is just have that conversation I'm having one-on-one with a group setting. And so we'll see how that goes. The first thing that I do is I ask a few questions about the business itself and specifically about the go-to-market strategy or the go-to-market funnel and how things are performing. And so we start with things like how many qualified opportunities are we creating each month? And even at a very early stage, businesses should have an understanding of how many qualified opportunities we created in June. I then ask like, okay, and how many qualified opportunities is that per sales rep? What do our conversion rates look like? How are these things trending over time? Do we have an implementation backlog? How long does it take to onboard a new customer? And I just try and get sort of a high-level understanding of the customer funnel as it exists in the business today and some of the trends associated with that. Um, and so, you know, maybe the takeaway from this slide is you just want to have sort of a baseline understanding of how the business is performing at a very early stage even. And we'll get into why, uh, in a couple slides here. Um, the, the next thing that I try and do is diagnose the bottleneck to closing more revenue. Um, and I'll sort of start this with The bottleneck in 4 out of 5 companies that I speak with is opportunity creation. It's demand gen. Um, and this is oftentimes misdiagnosed as conversion rates. And so when I first asked the question to folks, which is like, where— what is the largest opportunity for us to grow faster? Like, where is the bottleneck? Is it conversion rates? Is it, uh, uh, top of the funnel? Is it, um, implementation? Most folks will sort of gravitate towards, you know, like at the end of Q2, we had a couple of these big deals that we had been tracking for much of the quarter, and those deals, they didn't convert, they pushed. And so what that meant was we weren't able to hit our Q2 revenue targets. And so, you know, gosh, like had those couple big deals converted, we would have been in a much better place. And so I would say, you know, let's figure out how we could get those deals to convert next time around or get those deals to convert faster. Um, and, uh, that may be true, but the next thing that I do is push back a little bit on that and, um, just try and get an understanding again of the demand gen environment. And an easy way of doing this is I say, um, how many opportunities per AE, uh, are we creating on a monthly basis? And there should be a number for that. It's easy math, like how many total opportunities did we create in June? How many, how many sales reps do we have? Like there's your number of opportunities per sales rep. Um, another way of doing this that is a really helpful, uh, test for me is I pull up sales reps' calendars. Um, and it's not one size fits all because enterprise sales is going to be very different from transactional sales. But what I like to see is something like 2 new demos every day on a sales rep's calendar. And what that means is a sales rep is doing something like 4 customer calls every day. So if we think about a sales rep's day, there's something like 8 hours in the day. We want to be spending something like 3 to 4 of those hours customer-facing. Um, and then of course that leaves us with, you know, 4 or 5 hours to do non-customer-facing activities—follow-ups, outbound, whatever those things may be. And, um, what I see more often than not is that that environment doesn't exist. Calendars are relatively empty and/or the blocks that exist on calendars are not customer-facing activities. They're things like, you know, a prospecting block or the gym or internal meetings. And so it's important to both pull up the calendars and also see how the time is being spent to diagnose if we've got a demand gen problem Or if we're actually like swimming in demand and that isn't the bottleneck. If you get to this point where calendars are packed, you're sort of inundated with demand, you then wanna sort of move down the funnel. So are the leads converting? And if the leads aren't converting, why not? Is it a quality issue with the demos? Do we have product market fit issues with why these prospects aren't closing? Do we need sales training? Is it that our sales reps are not educated enough in the domain to be able to sell this product that otherwise would be sort of flying off the shelves? So again, we're sort of like trying to diagnose what the biggest constraint to growth here is. Again, with the caveat, like more times than not, it's demand gen. And then lastly, you know, if all of these things are happening, the bottleneck could be implementation and onboarding. I referenced Jason referring me companies to angel invest in, there's one that's performing quite well right now, and I think they'd be comfortable with me highlighting this because it's a good problem to have. Owner.com, Jason introduced me to the company. Jason's an investor. Their bottleneck is implementation. They have a lot of demand, they have a lot of customers that are signing up, and right now, it's just taking too long to onboard those folks that are raising their hand and saying, I want this. And so, the sort of like, prescription to fix that is different. But before we get there, we've gotta really diagnose what the bottleneck is. Whatever it is, again, it's likely demand gen, figure it out. The next thing that I do on these calls is I get an understanding of how the go-to-market organization maps to the customer acquisition funnel. So how many people do you have dedicated to generating demand? And it may be something like, we have a marketing leader and we have 4 SDRs. Okay, great. Um, how many people do we have further down the funnel? Um, we have 10 AEs. So 1 head of marketing, 4 SDRs, 10, 10 AEs. Okay, great. And are the AEs outbounding? And if the AEs are outbounding, What percentage of your closed revenue do we attribute to AE outbound? And so then again, we're just trying to sort of like map the existing resources both by persona and then also activity to the acquisition funnel. And we can see where people and focus is concentrated. And then you'll sort of like see the next thing that we do here with this information. Are these people and is this focus being mapped appropriately? And so if we have one marketing leader, if we have 4 SDRs and we have 10 AEs, and these 10 AEs, like in theory, they're outbounding, but they're not really generating a bunch of closed revenue. Well, like the bottleneck is demand gen. Most people and most of people's focus is further down the funnel, we have sort of a resource attribution or allocation issue on our hands. And again, like this is true with most companies that I talk to. And so the next thing that we wanna do is we want to right-size and refocus the go-to-market organization based on the bottleneck. If the bottleneck is demand gen, which most of the time it is, we really want to have all hands on deck applying pressure to this bottleneck. And so what that means is if we have a bunch of AEs that are sort of waiting around for demos to fall on their calendar like manna from heaven, uh, we need to change that. Um, and the way that we change that is we either shrink the AE team or we have the AE resources go towards demand gen, acquiring their own customers. Now, um, as companies get larger, the latter thing that I just described is harder to do. Um, this sort of like culture of outbound where AEs generate their own demand and ultimately source their own revenue, it sort of becomes ingrained in the culture. And I have seen companies really struggle with making this shift. And so if you have a mature sales organization that historically has not done much outbound, has not generated much to push demand and revenue on their own. It's hard to change that. And it's a muscle that like maybe hasn't been worked in a long time for these sales folks. And so what you may find is the right decision is actually sort of like shifting resources around. It may mean you have too many AEs. And I see this as a hangover for a lot of companies where we sort of staffed up in 2022. We hired a bunch of AEs when money was easier. And we thought that we were gonna have a bunch demand. And now we have like these leftover AEs, um, but you know, they aren't closing as much revenue. And the reality that I think a lot of people miss, and it's counterintuitive, more salespeople does not mean more sales. And when you're in a demand-constrained environment, if you have— let's, let's just use this 10 AE example to just like further, further this along the line. So, uh, if you have 10 AEs and you're demand constrained, meaning E.J.E. is getting, let's call it, a few opportunities each week. What you're doing is you're spreading the limited demand that you do have across 10 people, and there's going to be performance variance across those 10 people. And so if you shrink the team to, let's call it, 7, you know, like very plain speak here, like you fire the 3 worst performers on the team, you have just taken the sort of conversion rates on the opportunities that were going to the 3 worst performers. Um, those demos now have a higher likelihood of converting because they're going to salespeople that have a higher chance of converting them. And so in this scenario, it's actually sort of like addition by subtraction. You will close more revenue with fewer salespeople when you are in an environment that is demand constrained. And this is a conclusion that I'm coming to with a lot of companies. It's certainly not one size fits all. Again, just sort of like go back and do this test for your specific environment. But a lot of folks, like there is a mismapping of people and focus based off of this bottleneck that I described. And so that is how I sort of start to get to the outcome of generating more revenue in the second half of this year, is diagnosing the bottleneck, applying pressure on that bottleneck as much as we possibly can until it moves somewhere else. Now, we can in the question and answer period, if there are folks that are in the sort of pleasant environment of the bottleneck not being demand, we can, we can get into solutions around how to fix those things. But as I mentioned, 4 out of 5 companies, bottleneck is demand. Let's talk about some things that I recommend to help remove that bottleneck beyond just the sort of appropriate mapping of resources. The first one that I think folks oftentimes miss, and I certainly have, is to leverage your happy customers. There's an example that I'll give here, a company that I'm, I'm on the board of that Founders Fund, large investor, I'm close with Parker from Zenefits. Rippling does a really clever way of doing this that I like. So They onboard new employees through their software thousands of times a day when one of their customers hires someone. And what they do is they give an NPS survey at the end of that onboarding. So when I joined Founders Fund, I onboarded to Rippling, um, and, uh, the NPS survey, I mark it whatever I mark it based off of my experience onboarding. I probably marked it a 10. And then I would receive an email if I mark it 9 or 10 offering me— I think they give like a $25 gift card that if you post on LinkedIn about your experience onboarding with Rippling, we'll send you a $25 gift card to all the 9s and 10s. And so then on LinkedIn, when I go search for like hashtag Rippling, hashtag sponsored, I can't remember. I think that's the way that they figure out who's doing it. There are like countless posts from people that have onboarded to this product and it's free. I mean, I was about to say free marketing. It's $25 marketing, like, and it's marketing from what is, at least in theory, this like impartial third party versus a paid ad on LinkedIn. And I thought that was just a really clever and effective way of doing it. And many of these posts have like dozens if not hundreds of likes about people sort of raving about their onboarding experience with Rippling. The next thing as it pertains to leveraging your happy customers, reward the right behavior. If you see someone post on Twitter, LinkedIn, whatever, something positive about your company, send them something like send them a handwritten thank you note. And whatever you think is like a cool thing that they would appreciate. Some, let's call it like a gift and just like positively reinforce the behavior that they have gone out of their way to do to help your business. And when you do that, it will likely generate more of that type of behavior. And then another example would be like if somebody refers you a customer, Maybe you don't have a formal referral program in place, but one of your happy customers told, you know, one of their friends or colleagues that they should check you out. Send them a thank you for that. Like, hand— like, either handwrite a note or get a handwritten note done for you in an automated way and send them a bottle of champagne or like something that, you know, that they like, whatever it might be. And then lastly, one thing that— let's see, I'll try and time box this to maybe 10 minutes. We leave 25 minutes for questions. One thing that I recognized at Brex, and this happens organically. All of the focus of the business when you first start from a go-to-market standpoint is on customer acquisition because you don't have any customers. And so you hire folks for demand gen, you hire folks for closing customers in the form of salespeople, and over time you start closing a bunch of customers and your customer base grows. And one day I was looking at a report that was relevant to a meeting that I was in. And we could sort of cheat at Brex in that we could see the payments that were flowing to other cards. We linked to folks' bank accounts and we could see how much they were paying us and we could see how much they were paying American Express. And I saw one of my friends that works at a company that I had recently closed, they were still paying American Express $100,000 a month. And I texted him and I said, "Hey, I still see you have a $100,000 Amex bill, or you're paying $100,000 to Amex. Any reason you're keeping that on Amex and not moving it to Brex. And 30 seconds later, I had an email in my inbox to me and his CFO and was like, hey, uh, CFO, uh, Sam flagged that we have $100,000 going to Amex. It's probably like some legacy subscription. Can you move it over to Brex? And they did. Um, and $100,000 card spend, if we have 265 basis points of interchange, that's— let's just call it $2,500 a month in revenue. That's $30,000 of top-line revenue that took like, you know, a 30-second message to move over. And what I realized at that moment in time is we had a real missed opportunity on expanding revenue within our customer base. And so this goes back to sort of like mapping resources appropriately. What we did was we took, um, one sales rep, and this was when we were something like 8 folks on the sales team, and we moved him or her to being dedicated to expansion in the base. And he looked at, you know, these reports exactly as I just described. Where is there sort of an upsell or expansion opportunity? And he would reach out to folks. Um, I think it was a he, and, um, he was just closing more revenue than the new customer acquisition folks. Um, and so we knew that that was a sign that we were under-resourced in focusing on expansion and upsell. And that oftentimes happens sort of organically, as I described it, where you start a business, you're hyper-focused on new logo acquisition, but you start building this base of customers. And over time, there might be a real revenue opportunity that exists within the base that you are sort of underserving. Okay, back to very top of the funnel and ways to generate demand. Don't be conventional. This is like a broad category. Don't be conventional. Get creative. Here is an outbound example for what I mean by that. Most folks buy ZoomInfo and Outreach and, you know, Salesforce or whatever the systems are. They go to LinkedIn and they add accounts to Salesforce and then they use ZoomInfo to get the contact information and then they put them in like a 10-email sequence in Outreach and the response rates are like 0.8% or something outrageous. And like, you know, maybe it'll like eventually work, but it's few and far between and like, you know, a lot of wasted effort along the way. The first outbound campaign that we did at Brex was we bought 300 bottles of Veuve Clicquot champagne. So those were like $40 each. Good enough champagne that people are going to break— excuse me, good enough champagne that people are going to drink it. Not expensive enough that it's going to like break the bank. We're not sending bottles of Cristal or whatever. I think the entire campaign cost us something like $20,000. We sent the 300 bottles to early-stage tech founders who had raised money in the last 6 months. Handwritten note that was sort of automated through a handwritten note service. And it said something like, congratulations on your recent fundraise. We're, you know, an early-stage startup and know like how hard it is to build a business. 'We're cheering for you, Enrique,' who's our CEO. And then we would follow up with an email to see if they would be open to taking a demo. It'd be from Enrique and it would say, 'Hey, just wanted to see if you got the bottle that I sent you. I hope you enjoy it with the team. Wondering if you'd be open to checking out Brex.' And the stats on this were like off the charts. It was like 75% champagne to demo conversion rate. And then like 75% demo-to-close rate. Um, now like Brex is— Brex is like free in a way. Um, we made, we made money on interchange, and so 75% conversion rate is extremely high. We weren't asking for a check. Um, and I guess my point in saying that is I wouldn't necessarily expect that 75% conversion rate from demo to close to apply to other businesses just because the barriers to closing deals at Brex were lower. But, and by the way, I'm also not saying don't go send everybody bottles of champagne. Well, like, this is more just an illustration of the primary point, which is don't be conventional, think outside the box, get creative. And so that is an outbound example that was really effective for us at Brex. The next one I'll talk about is events. Most people buy a booth, they send their best sales reps, they show up with like some tchotchkes and they raffle an iPad. If we scan your badge, like, and, you know, we pull your number or whatever from the fishbowl, you get an iPad at the end of the conference. And so then you get like a bunch of people stopping by the booth, a bunch of random badges that are scanned that have nothing to do with buying your product. And you come away from that event and you're sort of like, gosh, like we scanned a lot of badges, but we didn't see much revenue from it. And that is like what most people do. Brex did things very differently. We definitely did buy the booth, and you sort of need to have a physical presence at the event. SaaStr was our best performing event. So encourage folks to take advantage of this with the annual. But we didn't just buy the booth. We did a bunch of sort of ancillary supporting activities that made our sponsorship far more effective. We sponsored the hotel key cards so that anytime anybody checked into the hotel that was associated with SaaStr, their room key was a Brex credit card. And so they were just like constantly looking at a Brex credit card because they would go in and out of their room multiple times a day. We had TaskRabbits standing outside the event handing out breakfast burritos. So there was like an immediate branding opportunity for us. We bought the billboards around the event. Uh, and so as you were walking to the event, you saw Brex branding. And at our booth, we had this magician who incorporated Brex's value prop into his magic tricks. And so whenever I looked at the expo hall, Brex's booth would be like packed with people watching this magic show, and all the other booths would be empty. And we would probably give away like a handful of $25 gift cards at the end of the magic show or whatever else. And then we would have sales reps that were scouting the crowd and seeing who is our target buyer. Are there founders that are watching this magic show? Are there CFOs that are watching this magic show? And if yes, I'm going to go talk to those people and sell to them. And so we're unconventional with our approach to sponsoring events, I guess is the— I would say long story short, but it was sort of a long story. And then, uh, the last example here on this, like, don't be, uh, conventional, get creative. Um, 2018, when Brex launched, most startups were spending a lot of money online— online advertising, LinkedIn, Google, uh, wherever you see online ads. And we wanted to be contrarian or different, and we wanted to go offline. And so what we ended up doing was we bought a bunch of billboards. We had a geographically concentrated target market that was tech startups, and most of the startups were in San Francisco. And so we bought a bunch of billboards in San Francisco. That was really effective. And it was also really helpful with our outbound because when we sent an outbound email to somebody whose headquarters was in downtown San Francisco, the probability of them replying was significantly greater. Because they had seen our billboards everywhere. And so that's sort of like a brand tailwind effect that that campaign had on outbound. The runner-up, because I've used a bunch of these examples in the past, probably at a bunch of SaaStr talks, the runner-up for this was actually coffee stands. So what we considered doing was we were going to put a bunch of like high-end coffee stands downtown San Francisco. And if you've ever been to downtown San Francisco, maybe before 2020, you would see a bunch of carts. They were carts that would do lunch and coffee and whatever else. And they were sort of like day carts that would probably show up in the morning and then they'd be gone by 5 o'clock in the afternoon or whatever. And so we were going to get a bunch of Brex-branded coffee stations, like high-end espresso machines, make lattes, whatever people like to drink in the morning. And if you weren't a Brex card holder, you paid for it like any other place. But if you showed your Brex card with your name on it and your ID or something like that, so we made sure that the name would match the ID, you got free coffee every day and it would be like a major perk for employees that had company-issued Brex cards. They got free coffee every day and like good coffee, like, you know, espresso machine, legit stuff. So those are sort of like the non-conventional examples that come to mind. When most folks were buying Google Ads, we were buying billboards and thinking about doing coffee stands outside of our customers' offices. Now, like, don't do the coffee stand example. Come up with whatever is sort of like best for your business or on brand. Do, you know, late night whiteboard session where everybody comes with 3 ideas on unconventional customer acquisition tactics and maybe vote on the best ones and do those. But that's where we landed with Brex. And then the last thing that I have, and then we can open it up to questions. For most companies, AEs really should be sourcing their own revenue. There's almost never going to be this perfect equilibrium where you have exactly the number of demos and opportunities that you're working that mean that as an AE, you're filling 8 hours a day. Day. And maybe in like, you know, boom times, that equilibrium exists, and maybe even you're more busy than you don't have enough hours in the day. But, um, there's like an ebb and flow here, and, um, many times, uh, you don't have a full 8 hours of, uh, work to, to be doing as an AE. And I would argue the second highest ROI thing you can be doing besides customer-facing, closing customers, working opportunities is sourcing more opportunities, generating your own revenue. And so I like to instill it sort of in early stages, in early stage if possible, that AEs should be sourcing their own revenue. If they're not and they're not hitting quota, you have too many AEs. You should be spreading around the limited opportunities that you do have to the highest performing AEs, and you will close more revenue.