Consumerizing B2B Software

For decades enterprise software has been synonymous of pain: it's hard on the eye and even harder on the day to day. Many times I've heard stories of how traumatic it was for companies to adopt enterprise software like ERPs.

On the vendor side, things aren't always rainbows and unicorns. Selling B2B software often means months or even years to close one single deal, only to later fall into a painful implementation project, and in the worst case scenario, legal battles.

Although for many industries this might stay the same in the coming years, there are many others that have been challenged by startups implementing self-servicing software and product-led growth.

It all started in the dot com era, but for me, the first time I saw this approach was when I became a Zendesk customer.

Meeting Zendesk

In 2014, I was working at a local tech company in Ecuador as a business processes automation consultant. Our job revolved around finding out how to implement software to eliminate the use of paper and provide insights through a unified dashboard, and we wanted to upgrade our customer support process to something more powerful than just email.

I googled customer support software and an ad with the zen word caught my attention. I clicked on it and the old Zendesk website popped up, a friendly Buddha prompted me to start for free, and 30 minutes later I was sending emails to a given address and receiving them on the inbox, magic! I didn't pay a dime, didn't need to talk to anybody, and I was fully self onboarded and already perceiving value. To this day I am a happy customer paying USD $36/month.

That experience gave me a whole new perspective around the world of software for businesses and enterprises. Zendesk became my personal reference, so I wanted to learn more about them and found the perfect way to by reading Zendesk co-founder and CEO Mikkel Svane book called Startupland, which I highly recommend to anyone getting into startup world.

By reading Startupland I learned about creating long term monetary value with recurring revenue, and how to go global with a self-served experience. Zendesk's story is inspiring and remarkable, but they were not the first nor the last. Great B2B SaaS companies have emerged in the past 2 decades, reaching insanely high valuations (like Slack's 27B USD exit) by following the bottom-up sales strategy evangelized by David Sacks based on what he did at Yammer (the first "Slack"). By following these principles, many companies have built global software products and gained market share in record time.

So what are these principles?

Consumerized enterprise software

David Sacks uses this term when referring to how B2B focused startups should take the B2C (consumer) approach early on in order to conquer the market and build a sales growth machine – you can read more about this approach and other interesting takes around SaaS on his substack.

The consumerization of B2B software goes hand by hand with the bottom-up sales strategy we mentioned earlier. The idea is that by attracting the end users to your solution (the ones at the bottom of the chain and that will actually use the software on their day-to-day), they can start trying it out without a long sales process nor implementation (fully self served) and if they find enough value, then they could start paying. Later on, they'll internally push your software to more users, and eventually their company will start paying for more features, or even better, the IT department will jump in and request the enterprise plan just because they want a SLA or a custom domain (upselling).

For me, 4 things are really important when implementing these strategies on an early stage startup:

  1. Be a pain killer. Sacks also refers to 2 types of products, vitamins (nice to have) and pain killers (desperately needed). You want to make sure your company and product fall into the latter. Just think about it: when you're in pain, you’re willing to do whatever it takes to make it go away, and so are businesses. They’ll be willing to pay and prioritize the use of your product if you relieve their pain.
  2. User experience matters. Since the idea is that the software is fully self served in order to eliminate the friction from a human led sales process, you'll need a kick-ass experience to back it up. The software needs to be grandma-proof; very easy to use, and very straightforward to get to a wow moment in the shortest amount of time possible. Don’t overestimate business users just because they're professionals, they're still humans (at least for now), and they'll still get frustrated if your software is too complex or boring in its first interactions.
  3. Freemium model as an acquisition strategy. Depending on your solution and industry, a free trial might not provide enough time for the user to realize the value and be willing to pay. A limited free tier is a great way to provide a little taste of the value of your product, and then offer a paid option when the user is ready for the next level and wants more advanced features. Most successful companies using these strategies offer generous free tiers.
  4. Have an upselling strategy from the beginning. This is connected with the previous point: it is the beginning, but you do want to charge as soon as possible so you validate that people are willing to pay for your solution. You can start with something simple as, “pay X to remove Y free tier limit”.

Wrapping up

As a founder, I've failed on considering these strategies early on myself, and attempted to pursue SMBs and Enterprises as my targets. I was taunted by the shiny high ticket values (and higher recurring revenue), but was ultimately relying on manual sales processes and people rather than an automated product-led sales machine.

It's easier to start bottom-up and later increase your product's offerings and features to address enterprise-level demands, rather than the other way around.

For me, applying these principles will be a MUST DO on my next venture. It won't be easy, but nothing worthwhile ever is so I'll settle for "doable". My advice to my future self is "start small and keep incrementing while validating", and I hope it will be useful for you too.

If you're like me and love to benchmark successful businesses as an example of what to do, here are my top 3 companies (besides Zendesk, which we've exhausted in this article) that are nailing strategies like bottom-up and product led growth:

  • Airtable, who've nailed providing insane amounts of value to users without ever having to speak to a salesperson.
  • Auth0, who've truly nailed product-led growth and built a billion dollar sales machine with an impeccable upselling strategy.
  • Posthog, they’ve made it extremely easy to implement a complex solution like an analytics platform. Plus, they are fully open sourced. Checkout this great article on how they put themselves objective on nailing self service.