Cipio Partners: How to Scale Your Go-to-Market Strategy at Every Stage

And provide employer branding also for American companies. So check out welcome to the Jungle.

Awesome. Okay, super exciting, Great name. Welcome to the Jungle. What has most surprised you about venture capital this year?

Well, that's an interesting one, maybe a difficult one. So we all in sort of difficult times, right? Inflation rising, there's a war in Ukraine and all that has already happened in 2022 and people were very relaxed about it in 2022. But as we said, I'm at conference here, there's a little bit of nervousness right now in 2023. So I think we're looking at some interesting times and maybe also some difficult quarters. And I hope we'll be back to normal and more positive climate by the end of this year and maybe early 2024. So it's a bit bumpy and it's always an interesting period. How the industry reacts to that.

Yeah, that is a little bit of an easy question this year of what is the most surprising thing in vc. But challenging times just make things stronger. So I'm excited to see what lies ahead as well as in 2024. Last question before we hand it over to you for your content. Who is one of your favorite co investors?

So my favorite FM number I guess. And we're not very loyal. We work with a lot of funds across Europe. But since I mentioned welcome to the Jungle, I'll mention who we did it with. And that's a firm called Revaya. And what's really interesting about them, they're women led. So all the GPs are women and they're super young on top. And I have to with what they have built in only four years and the professionalism and the experience they bring, they're absolutely on par with many much more experienced and more established players. So it's a fantastic team and if they continue to do a job like that, I think revaia will be a great firm to watch over the coming years. Wow.

Okay. Well love the women empowerment plug as well. All right, with that we will transition over to your slides.

Super. So welcome again everybody. I see there's still some people coming on. We have 66. That's a great showing. I'm amazed. Very, very good to have you all with us. Maybe just two words on myself and Scipio Partners. So Cipio Partners is a pan European growth equity firm. We are early growth investor mostly in software and software enabled business models. Have a lot of companies in Germany, France and the Nordics, UK and so on, but only in Europe, operating out of Germany and are investing in software companies typically in a 10 to 30 million ARR range. That's about our sweet spot. I'm a managing partner there. I've been doing this for many, many years. But I still enjoy coming to the office or coming to my home office more often just as much as I used to on the first day. So it's a great privilege to be working with exciting software companies and ambitious founders and I enjoy every day of it. So I thought I'd speak about one thing that we have seen that we have worked on with our firms a few times over the past years as they grow. And let me move forward here in the slides. It's not working. Here we go. So I'm going to speak about how to adapt your go to market strategy at every stage of growth. So we all know about product, market fit and go to market fit. But I think the insight here and the thing to take away is that it's not a static, it is changing over time as companies develop. And so you need to readjust that and you need to rethink that from time to time. So let me explain a little bit what I'm what we're talking about. So you have to choose your weapons, your go to market tools, depending on what you hunt for, right? So if your business is to go after very small deals, then you probably have a small lifetime customer value. And so the amount of budget you have for customer acquisition cost is obviously small as well. So these are the mice. Then you could have a business where targets are, the accounts are slightly larger, LTV is slightly higher. Obviously you can spend more money and so on until you get to the whales where you are hunting really, really big deals. Lifetime customer value could be millions of and so there you can spend the consequent amount of money to actually win these accounts. And different companies will have go to market fit at sort of different levels and different points in this little metrics. Obviously you don't want to be on the sort of top left where you have high customer acquisition costs and low lifetime customer value. That's not a working business and you can fail. But, but anywhere on this diagonal line you can have a thriving business. And so basically the different operating points if you want. And so wherever you are, you have a certain budget for your CAC and amount of money that you can spend. Now if your CAC target is low, you're probably focusing on small and medium businesses and the tools you're gonna use, most likely things like inbound sales, low touch or no touch self service virality will be very important to Create traffic and win new customers, you will do some content marketing and sales cycle could be very short. People simply coming on your website and checking in, giving you credit card. The medium CAC target will be slightly different. So probably your lower enterprise focus. You might then have an inside sales organization. So you have BP sales, you have SDRs and so on and your sales cycle is probably slightly longer. And then if your CAC budget is large, we are probably focusing on large enterprise. You have high touch sales, you have experienced sales executive, much more expensive ones as well. And unfortunately your sales cycle will be slightly longer and again it can work at any of these levels. Now if you have gotomarket fit, you have a clear sales model and you have a repeatable go to market playbook. But over time things change and that's really the core insight. So if you want to maintain your growth rate, you have to grow your new alr. So every year you have to find more new customers, right? Otherwise your growth will be slowing down and at the same time hopefully your company is becoming more mature, right? So you started maybe with an MVP and the price point was low. But as you invest over several years in your product, the solution is becoming more complete and more powerful and you can raise prices. Maybe you have add on modules where you can sort of expand the solution. But in any case your opera should, should grow. And assuming your ARPA grows but your churn doesn't grow, then what is actually happening is that the lifetime customer value is growing. So what does that mean? That means your lifetime customer value is growing, your CAC budget is growing. And if you really want to take advantage of this higher opera, well, you shouldn't continue to just sell the way you have been selling before, but suddenly you can do new things, right? So you should from time to time continuously revisit what's your target, what can you do and what are the, sorry, what are the errors in your quiver? So can you add new sales tools, new sales approaches to win these larger customers more quickly? And so several things we have seen in our portfolio, so one sort of basic move is adding outbound. So thinking about a successful high growth company in our portfolio that's purely relying on inbound, or at least was purely relying on inbound when we first invested. The new ARR however was stable and since they were only doing inbound, there was really no way to accelerate, right? They couldn't do more, to have more leads and convert more. And so the new IR was basically stable and the growth rate every year was slowing down until they made a move and they basically said, look, we have a more powerful product. We'll introduce an enterprise plan. We will add new features, more under this enterprise plan rather than on the lower plan. And that enabled them, at least for part of their customer base or part of their business, to move up the price point quite substantially and have higher lifetime customer value. And that meant they could invest more money behind these customers. So when they saw these customers, they would go after them with an outbound sales team. And the enterprise plan actually became the fastest growing piece of the company and the overall growth picked up again. Another business we invested in needed to make a little bit of a strategic move. So they had an SMB positioning and frankly the LTV to cap ratio wasn't that great. They had improved it somewhat when we invested, but it wasn't that great. And so they needed to work on it. And basically what they did is they clarified the icp. They were sort of cutting off a smaller customer where they basically said there's no point in going after them and they would churn too quickly. So they're even pruning some of them, pushing them out or forcing them to pay higher prices. They invested strategically into the product features that allowed them to move more upmarket and to satisfy the demand of larger customers. And then that enabled them to put more money behind customer acquisition in a profitable way and it led to faster growth. So here two examples where over time people didn't stick with their custom with their go to market fit. They moved into, at least partially, into sort of new playbooks, new ways of acquiring customers. And it allowed them to win bigger customers and to accelerate growth. So to recap, you start out to find the right good to market that provides an acceptable CAC for the achievable ARPA and for the achievable lifetime customer value. Then hopefully over time you grow your ARR, you increase your ARPA and you increase your ltp. And that allows you to proactively change the way you go to market. Increase customer acquisition costs for these higher value customers and you find a new go to market, iterate every time there's a misadjustment and start over again. It's basically the concept here. So before we get into the Q and A, I have a couple of questions, maybe to the audience, and I'm not sure how we're going to do this, but I'm sure you find a way. So I have two questions, really. I've given you two examples. I would be curious whether you and your companies have seen Similar situations. Have you seen situations where go to market strategies had to change over time because the business was growing, the ARPA was growing and you had to adjust to different customers.

If you would like to join the conversation, you can put your answer within the chat. Or if you would like to unmute yourself, talk through the answer, join the conversation out loud. There is also the reaction button. If you click in your zoom and you can raise your hand that way, Fred, it looks like you unmuted. Do you have something to add to the conversation?

Yeah, I do. Thank you very much for the presentation. It's a. And what you went over here is very relevant, Roland. So thank you. Dr. Shan, to your question. We got very lucky when we started our company. As we built our platform, a mutual friend of my partners and I contacted us for lunch. And over lunch she introduced us to a vertical that's underserved. And so while our marketing strategies evolved because these folks don't respond to emails and digital technology, our vertical is very well defined and we haven't run into any of those issues yet. But what we're running into is now our vertical market leap over opportunities, the crossover opportunities. How do you recommend dealing with, you know, another industry finding you and going, hey, we want this?

Yeah, that's a, that's a slightly different situation. But I mean I think every industry has sort of their, their platforms, right? The places where they operate and some industries, particularly more traditional industries, maybe still more face to face, might be more on conferences. And that's sort of what I hear between the lines of your question, that this new vertical is not as digital. And so you don't reach them on LinkedIn, you don't reach them as well on the sort of digital marketing platforms that we tend to, tend to be using in SaaS companies. And I think there it's a matter of being innovative and using these different, maybe more trade fair focused or publication focused marketing strategies.

Well, if I may, one of the things that I've seen coming up on a lot of the SaaS, well on at least one SaaS startup, is people talking about postcards. And when I realized we had the boot and truck crowd was our vertical, I started a postcard campaign about six years ago. Literal postcard to the mailbox. Because these folks are going to their mailbox and walking back to their desk and the first client that responded was near me. So I drove down to his office and my postcard was leaning against his monitor reminding him to call me. You do not get that with digital technology.

No, that's a great example and it shows how an original idea draws people's attention. I mean digital is super efficient, but everybody's doing it. So you don't stand out by doing digital marketing. Your postcard is something that probably these people don't get a postcard never ever. And so it stands out. Some people use handwritten letters. Right. And it's also a way to stand out and to do something different. And I think that's a little bit the core idea of good marketing, that you do something that, that draws people's attention and is noticed. Right. I think it's a fantastic idea.

And then one last comment on my part is I just returned from an industry conference. I have a license, my vertical is a licensed industry so they have their annual conferences. I return from that product marketing research, future product development research, face to face contact demos. I had clients coming over and demoing my product for prospects. So the face to face, especially post pandemic, I think that really needs to be utilized. And as a last comment, Steve Jobs and Bill Gates independently were driving RV around the United States going to user groups when they started Microsoft and Apple and back then, you know, those were the people that were on the bulletin boards. So anyway, thank you very much.

Right. Thank you very much for your questions. Very, very insightful. Maybe on the comment of driving around the RVs, I mean that I think the personal meeting drives enormous loyalty, right. That really people really connect to the company if it's not just the website but if it's a, if it's a person's face. And so seeing the, this CEO of the company at a user group meeting, I think that's, that drives enormous loyalty. So as long as you can do that, I think it's fantastic.

Well, our LTV is enough that it's worth it. The ROI is significant enough to make it worth it. And I actually a year ago I did do an RV trip of my own and I went around the western United States and made sales calls. I'm going to do it again this summer or fall probably. And okay, very good travels.

Thank you very much.

Love that example. I believe it was either last week or the week before we had another example of a similar audience and using either beer nights or donut nights to have that like face to face connection with the audience versus the traditional web interfaces, et cetera. Does anyone else want to hop in on what examples have you seen where go to market strategies have evolved with growth? Anyone else want to jump in? Feel free to unmute yourself.

We can move to the next question.

Okay, feel free.

So the other question I have, and I haven't seen good examples of it really to be honest is have you seen cases where the CAC and the ARPA have actually been purposefully reduced to increase the service or market size? Right. I mean, maybe the company started at big tickets and then purposefully reduced the offering to a low end and to try to win additional customers. So I think that's another interesting move to, to broaden the appeal of the market. Anybody seen or done that? And what's the experience with it?

Yeah, I can, I can chime in.

Sure.

AJ yeah, I've seen, I've seen two, two examples where this was done. One was in a, in a software category called cpq, configure price code and, and some related pieces of software. And then also. So anything which is adjacent to CRM, most of the companies started by selling to the large enterprise and then eventually started moving down market. Main observation was yes, the ARPA was reduced significantly, almost one third to one fifth. But what we found was that the original product, you couldn't sell the original product into, into a different market, which is like an SMB market, because the cost to implement it was very high. It lacked the out of the box features. And so you almost had to go back to the drawing board even though you used part of the code. But you have to create a new product. It almost looks like a new product and it requires a completely different GTM motion and supportability motion. Those, those were in both cases that was the experience that you cannot just take an enterprise grade product and reduce ARPA to go down market and increase your serviceable market size.

That's a very interesting insight. It doesn't surprise me that that is the observation. I mean, if you look at sort of disruptive innovation that generally that always comes from the bottom, right? Somebody starts a product that's maybe a little less performant, much simpler, but has some other advantages, right? And then that slowly grows from the bottom to the top. That move is relatively easy. You expand functionality, you make the product more powerful, and then you can move up market. Going the other way has a lot of challenges. And if you're in the investment world, what we see very often is actually that maybe the large players that are serving the enterprise market at some point, they don't go down market themselves, but they make an acquisition of a product in the same vertical that they're operating. But that's more sort of SMB or lower enterprise positioned. So they buy somebody who has the more Suitable product and fill the gap.

Just a very, very quick comment. I don't want to monopolize, but. So I was also part of an acquisition where we acquired an SMB company. Huge cultural issues. Because the cultural ethos of a company selling into SMB is very different from the cultural ethos of companies selling into large enterprises. It's very hard to make some of those acquisitions work. The only one that I know that most people will probably know is Oracle acquiring netsuite where they kind of kept it a little bit different and kept it going. Yeah. So the interesting part over there that everyone is seeing right now is Salesforce and HubSpot. Salesforce finds it very hard to go down market, but HubSpot is slowly getting upmarket.

Upmarket. Yeah. Absolutely. Good. Any questions from the audience?

Yes, we definitely have a few. Milind, if you want to kick us off.

Sure. Thanks a lot for the presentation. I thought it was very helpful. One of the questions I had was on the customer acquisition cost. And so based on your experience, Ronald, or whoever is in the group here, what is it that you have seen as a good proxy to use for SMB B2C businesses? What would be the average CAC for it? If that makes sense. Okay. Yeah. I mean, I think the notion of average there is probably complicated. What we always look at is mainly two things, right? I mean, one is payback. How quickly do you make the money back? And I guess 12 months is something that's sort of the benchmark that's acceptable. If it's more than 12 months, there might be a situation where it works, but it could be complicated. And certainly growing fast becomes expensive. If it's more than 12 months, if it's less than 12 months, if it's maybe six months, then it starts to be very attractive. That's the one thing we always look at. The other one is sort of the ratio between the customer lifetime value and cac. So what you generally want is at least a three times payback. But we see many companies that do much better than that, that have five, six, seven, eight, up to 10 times maybe. So the higher that number, the better it is. That was helpful. Thank you so much, Joe. You're welcome.

Great. We have two different questions that kind of complement each other. Any advice from our target Expanding market from US to Europe and then the question after that was how to approach new geographies.

To Europe. Well, that's a big question and probably could be a seminar in itself. Right. I mean, I think the first thing you have to do before you come to Europe is to try to understand how the European market needs may be different. Right. There are often regulatory issues. There's GDPR in Europe, which is taken very seriously here. And it's a huge issue for companies and it's something that US players in the home market encounter much less. Right. So if you're dealing with customer data in a big way, then that's potentially an issue. So I think those are the things to look at. And then the question is how do you start penetrating the market? Right. And sas, luckily that works in both directions. A lot can be done without really establishing a presence locally. So certainly self service moves and online marketing works really, really well remotely. But inside sales you can probably done remotely and don't necessarily have to have people on the ground to find any European language really. And so you can start doing some business. And I think once you have established a certain footprint and you really understand the markets better than you can double down with local teams. My companies mostly move the other way. But that's also the advice we're giving them to sort of do their research, test it out in a remote way and then move over in a progressive way. It's very easy to build a local organization, but earn a lot of money, hire the wrong people and a year later have very little to show to force. So the progressive approach, just dipping a toe in the water and before you put in the whole foot is clearly what we recommend. Either way.

Great. And that goes for all new geographies as well.

Absolutely, absolutely.

Great. Okay, the next question comes from Ajay.

Hey, thank you. I've been working with quite a few companies where I find that, you know, the early stage product market fit starts becoming very wobbly and loose over time for many different reasons. Either because they've not seen that many customers or competition really gets in, especially in like in sales, tech and martech categories. Question for you is what advice do you have in terms of helping companies detect if they're losing their product market fit? And then what do you do if that happens? Especially if you raise the series A and B and you're a lot of, you're under a lot of pressure to deliver growth and you're knockout between trying to deliver the growth. But with a loose product market.

Yeah, that's a very good question. And happens frequently. Right. So I think how do you see product market fit becoming wobbly? Well, probably you see it in your KPIs, right. So sales becomes less efficient, maybe churn increases and somehow you sort of see and obviously also you Maybe have some anecdotal evidence when you speak to your customers, but you clearly see it in the KPIs that they're deteriorating and your company is not as efficient any longer as it used to be. And then if you have raised a lot of money and you're under pressure to scale up, that's when it becomes really dangerous. Because if you start scaling when the KPIs are not good, well, chances are you're spending a lot of money on new customers which will subsequently churn very quickly. And so it's fully invested cash. And as hard as it is, I think the only thing really that makes sense at that point is to hit a little bit the brakes and really go back to the drawing board and get that product market fit right. Because there's no point in spending millions and millions to scale up. If your customers will subsequently churn, that will come back to haunt you. So I think you need to have an honest conversation with your board and really say tell them what the issue is and get them behind that measure. And I think in the end of the day it's probably better not to increase the burn, wait six months to maybe adjust the positioning, maybe adjust some features in the product, get that right and scale then rather than to do it the other way around because you won't be able to fix it.

Thanks.

Great. Okay, a few just quick housekeeping things before we move on to our next questions. As a reminder, these sessions are being live streamed onto YouTube so you can find them directly after this session. Already on YouTube. A lot of people asking for the recording of this session or past sessions. You can always find them right after the session on YouTube and love all the interactivity, people taking notes, sharing notes, documents. That is what these sessions are for. Making sure your questions are answered, that you are able to connect with other SaaS leaders. So love all that interactivity and thank you for doing that. Our next question. I think we have another question from Fred in the chat. If you want to unmute yourself and.

Ask.

I can see you're about to unmute.

There you go.

So I, it's, it's a question, but it might be kind of a duck question, but are investors now looking at B2B's that are in relatively recession proof or recession mitigated markets?

The question is whether investors are looking for these recession proof markets.

Yeah. Are those now starting to bubble to the top of the, of the gating factors of the markets that we address? Because whether there's an impending recession or not, we're Having difficulties. And so if your market depends, if your market gets hit by a recession, there goes your mrr. But if you've got a market that is relatively safe from a recession, then that makes it a much more worthwhile investment at this time.

So no, that's absolutely, that's absolutely top of mind for investors today that if you invest in a new company, you think about how would the business of that company be impacted by an impending recession and by the ongoing inflation that we have all across the western world. Right. And there are markets that are perceived to be relatively recession proof because, I don't know, the end market might be governance, might be sectors that are very resilient, like maybe healthcare or the product might be perceived as being essential. Right. Medicine instead of vitamins.

Painkiller A little bit.

Exactly. Painkiller instead of vitamins. So will you, in the current environment, forego security? No, you won't. And you will spend the money because if you lose your inform, if you lose your data or you're being hacked or victim of ransomware, that's disastrous. Right. So you will spend that money, but maybe marketing will be slightly less important because the markets are not growing that much anyway. And so you spend less money on marketing and you try to be more effective. And so those would be verticals that may be not favored these days. So absolutely, that's top of mind for investors.

Okay, thank you.

Yes, everyone should just be investing in Advil after this year. No, Just kidding. All right, our next question comes from Artie.

Hi. So if I've started like a company that started out intending to have like a B2C offering and the CAC to LTV is pretty good there, but with like pretty low revenue per user. But if we've added tier selling to businesses as a worse CAC to LTV ratio, but a lot more revenue, would it be better to invest resources in the B2B offering or stay focused on the B2C offering? I mean, I think it depends. As long as if you have good growth in your B2C offering, and that's sort of the more profitable investment in the long term. Right. Because you have more lifetime customer value per dollar invested, you should probably continue doing that and focus on that because you will create more value for every dollar of investment that you can afford. It may be, and that's what you often see in companies, it may be that at some point you reach some saturation of those markets. Right. And then if you want to continue to grow further, you need to move into higher tiers and Even though the efficiency might be slightly lower, as long as you get a good return, you can grow the overall business even in your sort of traditional market segment. I mean, as you reach sort of more saturation, probably those ratios are deteriorating over time. Right. And that's another indicator that maybe it's time to look for the adjacent markets, whether that's another vertical or it's a higher tier to find renewed growth. Yeah. Thank you. You're welcome. Martin.

Great. And Lev, I think you have a Boston Red Sox hat on. Spent much time in Boston, so love that. All right, moving on to Leah's question.

Hey, my question is about an initial go to market strategy. So do you have any advice on go to market strategy for companies that are starting out small and have no venture, no investor funding? We are looking at how to get distribution and I know you mentioned viral and, and self serve, but I mean, what other strategies can you give? I mean, I think self service is something you definitely should start with if you have a reasonably small product and need a low cost distribution. Because essentially if you set it up on a website, it's there, it's relatively free and you can start driving traffic to your website with different means that don't need to cost that much. Content marketing, something that we have seen in companies is that they are setting up small comparison sites where maybe your, your product is compared with, with, with some competition and so, so, so people can see the product there, see some advantages of your product and are then driven to, to your website. People also work with, with influencers, ambassadors. Right. And they don't need or anything. And again expand the reach of your product. So there's a lot of sort of inbound motions that make sense and that can drive traffic to your website and that you can convert them relatively cheaply. The challenge with that is it has generally a limit to how much you can do. Right. And it's work, but it doesn't cost money. But there's a limit to how much you can do. And eventually if you want to accelerate growth, you will need to have new motions and find new channels, but certainly to establish. In the early days. I think that's something you should always do in that.

Great, thank you. All right, great. I think my wi fi cut out a little bit on that one. Leah, did you get the full answer? I'm not sure if it was me or Roland on that one.

It cut out a little bit, but I think I got the gist.

Okay, any follow up questions there?

My Internet connection is a bit shaky here. Enough so them. No, I mean if we were afraid.

Of work, we wouldn't be in this, right? So we just gotta dig in.

Absolutely.

Great. Okay, I think we are done with questions in the chat. If anyone does have any last minute questions, unmute yourself or forever hold your peace. All right, I think that is it. Thank you so much everyone. Thank you for all of your questions, your interactivity, your comments in the chat. Loved that Roland asked you some questions this time. A good way to shake these up. And thank you so much, Roland. This is another great session and we really appreciate your insights all the way from Amsterdam.

Thank you Sastra, for having me and thank you everybody for joining and the great questions. I really enjoyed the conversations with you guys. Wish you best of luck with your respective companies and who knows, maybe one time we meet in person and we can do an investment. Thank you, Roland.

Yes, definitely. Sasser Europa might be that opportunity. If you're not already going, definitely buy your tickets. We will see you there. But next week we have secrets to scale a company in hyper growth mode with Solanas, so definitely tune in. We will see you next week. And Roland, we will see you soon as well.

Absolutely. See you in London at Sastra Europe.

All right, Peter Zane, bye everyone.