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Summary
Pete Kuman, a partner at Y Combinator, walks through closing enterprise sales for startups. He emphasizes the learnable nature of sales, especially for founders, and outlines the steps of the sales funnel: prospecting, outreach, qualification, pricing, closing, and implementation. Pete offers tactical advice and personal anecdotes, stressing the importance of founders doing their own sales initially and understanding the customer's problem deeply. He also highlights mistakes to avoid, such as talking to the wrong customers and underpricing the product.
Highlights
Learn how to close your first enterprise customers step-by-step. 🛠️
Sales is the number one concern for most founders at Y Combinator. 📈
Technical founders often excel in sales due to their expertise and conviction. 👩💻
Sales before product-market fit is fundamentally entrepreneurial. 📉
A sales hypothesis can make prospecting easier and more effective. 💡
Make your outreach efforts more efficient by generating inbound demand. 🌐
Don't waste time talking to bad customers who won't buy your product. ⏳
Great demos feel like storytelling and are tailored to the audience. 📖
High prices can indicate a serious need for your product. 💲
Managing implementation effectively ensures customer success and retention. 🎯
Key Takeaways
Sales is a learnable skill, even for technical founders. 💪
Founders should do their own sales before hiring salespeople. 🚀
Understanding the customer's problem is crucial. 🔍
Prospecting requires a clear sales hypothesis. 📊
Generating inbound demand can make outreach easier. 📧
Avoid talking to bad customers who won't buy your product. 🙅
Tailor your demo to the specific needs of your audience. 🎥
Pricing involves experimentation; don't be afraid to quote high. 💸
Closing deals require understanding the procurement process. 📝
Implementing the product successfully is key to retaining customers. 🔑
Overview
Pete Kuman, a Y Combinator partner and experienced entrepreneur, shares valuable insights into the world of enterprise sales for startups. He dives deep into the various stages of the sales funnel, providing tactical advice and counterintuitive lessons learned from his own experiences. Pete emphasizes that sales is a skill that even technical founders can master with practice and perseverance.
One of the key points Pete makes is the importance of founders doing their own sales initially. He argues that sales before achieving product-market fit requires deep knowledge of the product and close interaction with potential customers. This hands-on approach helps founders understand the market better and tailor their offerings accordingly. Pete also highlights common pitfalls to avoid, such as engaging with the wrong customers and undervaluing the product.
Pete's talk is filled with actionable tips, from creating a strong sales hypothesis for effective prospecting to delivering compelling demos and handling the pricing and closing stages. He stresses the need for constant experimentation and learning throughout the sales process. By the end of the talk, founders are equipped with the knowledge and strategies to navigate the complex yet rewarding journey of enterprise sales, ultimately gaining a new superpower to drive their startup's growth.
Enterprise Sales | Startup School Transcription
00:00 - 00:30 [Music] my name is Pete Kuman I'm a group partner at YC and a YC Alum I was co-founder and CTO of optimis Le in the winter 2010 batch in this talk I'm going to walk step by step through the process of closing your first Enterprise customers I'm going to do that by focusing on successive steps in the sales funnel prospecting Outreach
00:30 - 01:00 qualification pricing closing and implementation I'll do my best to include lots of tactical advice and counterintuitive lessons I picked up while I was learning how to sell at optimiz Le I'm going to focus on Enterprise sales for software startups but this talk should still be broadly useful to any founder getting started with sales regardless of the size of your customers or what you're selling why am I giving this talk well first I know there's demand for this sales is the number one concern during the the
01:00 - 01:30 batch for most of the founders that I work with at YC second I know from experience that sales is a learnable skill my co-founder Dan and I both had technical backgrounds we knew how to build a product but we didn't know how to get people to use it we figured it out through trial and error and that's the first big lesson I want to impart today if you're the founder of an early stage startup and you're building a product that you're hoping other businesses will buy you are capable of
01:30 - 02:00 selling it that's the good news the bad news is that you're probably the only person capable of selling your product that is if you aren't able to sell your product yourself at first chances are you're not going to be able to hire somebody else to do it for you now if you're anything like we were you're probably thinking there are lots of talented salespeople out there wouldn't it be faster to hire one of them than try to do it ourselves after all that's what youd probably do with any other role like designers or lawyers or accountants the problem is that sales
02:00 - 02:30 before you find product Market fit is very different from sales after you find product Market fit sales pre pmf is fundamentally entrepreneurial it requires vision and credibility with customers and lots of experimentation and a tight feedback loop with the people building the product this is a role for Founders so does that mean if you're a team of technical Founders building a product you should go find a business co-founder to do sales well you probably don't need a business co-founder to sell either I've worked
02:30 - 03:00 with many technical Founders who turned out to be great at selling in some cases very much to their surprise so why is that well if you're a technical founder building a product you have several advantages that will give you a big leg up in selling first you're an expert both in the problem you're solving and the product you're building and second you have conviction you sincerely believe that your product will solve your customer's problem expertise and
03:00 - 03:30 conviction are surprisingly important in sales this is especially surprising to people who mistakenly think that selling is a dark art full of psychological tricks sales isn't about tricking people it's fundamentally about helping people solve their problems and Engineers are great at doing that anyway now that I've hopefully convinced you that you're capable of selling your product let's talk about how to do that like I said we're going to go through the step in a typical sales funnel together let's start with prospecting prospecting means
03:30 - 04:00 finding potential customers the output of this step is a list of companies you think might need your product and the specific humans at those companies you think might buy it there are lots of tools you can use for prospecting but before you start you need a hypothesis a sales hypothesis goes something like this customer X has problem Y and our product will help them solve it a good hypothesis makes prospecting Easy by clarifying who you should be talking to
04:00 - 04:30 for example at optimizely our initial hypothesis was something like this marketers at small and medium Tech media and e-commerce companies want to run AB tests on their websites but they can't because off-the-shelf experimentation tools require users to write code optimizely will enable them to run AB tests without writing code and once you have a clear hypothesis like that you can get to work on prospecting start by identif identifying companies that are
04:30 - 05:00 likely to suffer from the problem you're solving one way to do this is to buy industry lists of all of the companies in a given sector and then use some filtering criteria to qualify those companies and narrow your target list for example at optimizely we used a tool called builtwith to figure out whether prospects were using analytics tools and JavaScript Frameworks because those were signals that a company was relatively sophisticated and cared about their website once you have list of companies
05:00 - 05:30 you'll need to find the right humans at those companies and their contact information there are tools that make this easier this video was recorded during the winter 24 batch and many Founders in the current batch are using Apollo and Linkedin sales navigator for that now that you have a list of leads that is specific humans that are likely to buy at the companies you're selling to you'll need to get their attention this step is called Outreach the goal of Outreach is usually to schedule a meeting with your prospect most Founders
05:30 - 06:00 think of cold Outreach as the primary mechanism for doing this but the easiest way to get a meeting with a prospect is to get them to reach out to you even if you're planning on using a sales Le approach you should still do everything you can to generate inbound demand launch early and often create technical content like videos and blog posts that prospects can find while searching for a solution to their problem build self-served demos that people can share find online forums where your customers hang out and establish yourself as an
06:00 - 06:30 expert by answering questions there's no one way to do this but the better you get at grabbing your customers attention and getting them to reach out to you the more efficient your sales process will be on that note if your customers all hang out and Industry conferences you should be there too find a way to get a list of attendees ahead of time and set up lots of meetings in advance once you've identified a specific Prospect you want to talk to start by trying to find a warm introduction if you can look
06:30 - 07:00 on LinkedIn for shared connections and ask for an intro sending cold emails is usually the least efficient way of getting prospects attention but it can still be effective if you approach it the right way start by writing each email by hand make your emails short and to the point and make the ask clear you should also make it clear why you're reaching out to each recipient specifically humans have built-in spam filters and if your email looks like it was sent to thousands of people it's going to get deleted on this last Point
07:00 - 07:30 there's a handy rule of thumb to keep in mind for cold emails only send emails that you yourself would be excited to read if you wouldn't be excited to get the email you're about to send your prospect probably won't either before we move on I want to spend some time talking about a particular anti-pattern I see with a lot of YC Founders many Founders start by talking to anyone who will take their call and the problem with this approach is that it selects for the people who are easiest to talk to not the people who will be be great
07:30 - 08:00 customers so if you're not disciplined about it you'll end up wasting all your time chasing bad customers that are easy to talk to I see YC Founders make this mistake all the time and I get it when you're starting a company it's hard to get people to pay attention to you cold emailing is a demoralizing grind so it's tempting to go after the people who will talk to you even if they won't ever buy your product and the reason this mistake is so dangerous is because talking to bad customers gives you the illusion that you're making progress when you're
08:00 - 08:30 not you'll get lotss of great product feedback from people who think they're doing you a favor but because you're not actually talking to someone who needs your product this kind of feedback is useless at best and counterproductive at worst in practice I see Founders make this mistake in two ways first by trying to sell enterprise software to startups now if your product solves a problem that companies only have when they get big like for example an HR information system then trying to sell it to startups is a waste of time but Founders
08:30 - 09:00 still do it all the time because other startups are much easier to talk to than busy big company Executives and the second is trying to go bottom up with a product that needs to be adopted top down and that's a little jargony so let me illustrate it with an example imagine you're building productivity software like notion your product can be adopted bottom up meaning that individual employees or teams can start using it independently without having to coordinate with anyone else inside the
09:00 - 09:30 company and in this case talking to individual contributors or their direct managers is totally fine but what if you're building building software for large hospitals in order for a hospital to start using your product you're going to need a lot of different teams to coordinate with each other so you might need the CIO to sign off on your security and compliance and you need their software team to integrate your product with their in-house systems you need the doctors to enter billing codes at after each appointment and you need
09:30 - 10:00 their Ops Team to manage Collections and so on and so on and in this case talking to an individual doctor won't be useful you need to talk to a senior leader like a CFO or a CIO to do a deal now there's a meme that YC says you should sell to companies who will buy quickly even if they aren't good customers this is a misconception you should try to find companies that will buy quickly but you shouldn't spend time trying to sell to companies that don't actually need your product or won't be good customers you
10:00 - 10:30 need to find people who have the problem you're solving and the budget and decision-making authority to buy your product we'll spend more time on this point later let's get back to our sales funnel so you've managed to get your prospect on the phone your job on the first call is not to sell your product that comes later in the first call we're just trying to do two things first we're trying to qualify our Prospect by figuring out whether they have the problem we're trying to solve and the budget and decision-making authority to
10:30 - 11:00 buy the product and second we're trying to schedule a follow-up call for a product demo now many Founders face plant in the first call by diving straight into their pitch these Founders are making one of the biggest founder sales mistakes not asking enough questions and they make this mistake because they misunderstand how sales work they think of the company they're trying to sell to as a big monolithic entity and they think of the sales process as adversar where it's their job to come up with a
11:00 - 11:30 perfect pitch that will break down their targets defenses but outside of some used car dealerships that's not how sales works in the real world in the real world you're almost always selling to an individual human not a big monolithic entity and that's good news because humans are easier to understand than organizations and that turns out to be really important in the real world sales is not adversarial it's about deeply understanding a customer's problem and help helping them solve it
11:30 - 12:00 and great salespeople spend most of their time listening because that's the best way to understand someone's problem they ask all sorts of questions what made you decide to take this call tell me about this problem how long have you had it how bad is it who else does it affect how do you quantify the impact why haven't you solved it already what's your budget for solving it how does your organization buy software who makes the buying decision who else will need to weigh in on this decision now sometimes
12:00 - 12:30 when you ask questions like these you discover that your prospect doesn't actually have the problem you're trying to solve or they have it but they don't care enough about it to buy a solution or they don't have any budget or any number of other reasons that they won't actually be a good customer for you and if you do that that's great you just saved yourself and your prospect a lot of time and you can focus your energy on other prospects that are more likely to buy now if on the other hand it turns out that your prospect does have a
12:30 - 13:00 problem you can solve you're in luck you've earned the opportunity to show them how your product works the next step is a demo most Founders think of a demo as a chance to finally show off their product in my experience thinking about it this way is a Surefire way to deliver a bad demo that's because your job in a demo is not to show off your product it's to convince your audience that you can help them solve their problem and one helpful trick I've learned is to think of your demo as the
13:00 - 13:30 script for a great movie a great script always starts with a recap of who the main character is that's your user and the problem she's trying to solve this is your chance to demonstrate how well you were listening during your first call if your audience believes you understand their company and their problems they're going to take you seriously when you talk about how to solve them when you're ready to show the product resist the urge to take your audience on a feature tour where you walk from screen to screen showing them
13:30 - 14:00 everything your product can do instead tell a story that shows exactly how your main character solves her problem and this is the point great demos actually feel like good stories they have a flow where each step leads to the next and every feature you show has a clear reason for being there they usually have one or more magic moments where you surprise your audience with how easy or delightful something is and great demos are also personalized for the audience this is where you get to use all of the
14:00 - 14:30 information you collected during that first call tailor the demo to their company use their logo their website their customers uh the names of the people on their team the more you can do to help them visualize exactly how your product would work in their company the better I'll give you an example from the early days of optimizely when Dan and I started building we booked demos with all of our competitors and every single one of them used a website to show what
14:30 - 15:00 it was like to use their products to run AB tests and we thought this was really lame so we spent weeks building a feature that made it easy to demo our product right on our customers websites instead of a dummy website and I knew it was worth it when I saw marketer eyes light up when they watched us change things on their landing page that would have taken them months to do on their own so if you do a good job your prospects and their team will come out of this meeting convinced that you can solve their problem and if that's the
15:00 - 15:30 case it's time to talk about pricing I get a lot of questions from Founders asking how to price their products and the truth is there isn't a simple formula for doing this so if there isn't a formula how do you pick a number well fortunately you can ask questions earlier in the process that will make your job easier here like how much is this problem costing your company how many people are responsible for maintaining your in-house solution what's your budget for solving this problem how much are you spending on my competitor and it's okay to wait to
15:30 - 16:00 share your pricing until you've had a chance to ask these questions in fact if your product requires lots of work or customization to implement you probably shouldn't quote a price until you understand exactly what your customer needs in any case even if you asked all of these questions upfront the reality is that pricing involves a lot of guessing in the beginning and the advice that I give to startups is to think of each pricing conversation you have as an opportunity to run an experiment in
16:00 - 16:30 which you test a price point and then learn from your prospect's reaction to it in the early days of optimizely we had published self-serve pricing for customers who just wanted to swipe a credit card for a basic version of our product and an Enterprise plan that required you to go through sales we didn't publish pricing for the Enterprise plan which gave us the flexibility to try a different price each time the pricing mistake that Founders make most often is charging too little for their product or even making it free in exchange for product feedback
16:30 - 17:00 Founders do this because they're worried about charging too much they think they're going to scare customers away one of the most surprising things I learned was that when a customer really wants your product it's hard to scare them away by quoting a price that's too high for example I remember my co-founder Dan coming out of a sales call and telling me that he'd worked up the nerve to quote the prospect $10,000 a month for our software and the prospect ended up talking us down to 2,000 a month and then buying our initial quote was 5x what they were
17:00 - 17:30 willing to pay and they still bought in fact higher prices can help you figure out whether customers actually need your product the cison brothers famously charged more for stripe in the beginning than their competition did the fact that they were able to sell their product anyway was compelling evidence that they were on to something and it helped them focus on the customers who were most desperate for a solution high prices make customers more serious this brings me to another important point about pricing remember that the most important
17:30 - 18:00 conversations about pricing will happen without you in the room your prospect will need to convince others in the organization that your product is worth the price you're asking you can make their job easier by giving them slides or a PDF one pager that explains how your pricing works it's usually a good idea to include an overview of your product and the benefits of using it in case your prospect needs to talk to people who aren't familiar with it in any case don't spend too much time thinking about pricing in the beginning pick number ideally one that makes you a
18:00 - 18:30 little uncomfortable and pay attention to how your prospect reacts it's okay to let them negotiate you down remember in your first few sales you're optimizing for learning not unit economics now that you've agreed on a price it's time to close the deal closing is not a single conversation it's a bunch of things that need to happen from the moment your customer decides they want your product to the moment they actually buy it big companies especially ones in highly regulated Industries have formal
18:30 - 19:00 procurement processes that usually include stuff like security and privacy reviews legal reviews and signoff from compliance teams it's less formal in smaller companies but you should expect at a minimum to go through a redlining process with their legal team the biggest mistake that I see Founders make at this stage is getting surprised and discovering that what they thought was a done deal is in fact not done at all and may take weeks or months of additional back and forth or fall through completely now the way to avoid getting surprised is once again to ask a lot of
19:00 - 19:30 questions asking your prospect upfront how they buy software and who needs to sign off will give you a clear picture of the hurdles you're going to have to overcome in order to get a signature you should do everything you can at this stage to move through the procurement process quickly ask explicitly if there are steps like filling out a security questionnaire that you can get started on early and execute in parallel and keep your legal documents as simple as possible I recommend starting with the
19:30 - 20:00 open- source templates published by YC company common paper keep timelines and scope of work out of the legal contract if you can and put them in an order form or a shared project tracking document instead and most importantly remember that your prospect who at this point has become your Champion is your biggest Ally you should be in constant communication with them and when you need help getting something unstuck you should ask them first remember they can't solve their problem until you get through procurement so they're heavily
20:00 - 20:30 incentivized to help you make it happen now that you have a signature congratulations it's time for your customer to actually start using your product this is the implementation and it's the last step we're going to talk about today and I'm going to lead with this the single biggest mistake that Founders make is thinking that implementation is the customer's job we made this mistake more than once at optimizely in fact we closed six figure deals with customers that were excited about our product and then we discovered
20:30 - 21:00 a year later when it was time for them to renew that they hadn't run a single AB test with optimizely and this was confusing at first why would a customer who is willing to pay so much for a product fail to use it at all in this case the approximate cause is that the marketing team who bought our software couldn't convince the software engineering team to help them install it on their website the real cause though is we didn't do our jobs we thought our customer was buying a product so we sold them one and left the rest up to them in
21:00 - 21:30 reality our customers were buying a solution to a problem and all of the work required to get from product to solution was our responsibility we learned to start asking marketing leaders about the work required to implement optimizely very early in the sales process we started building detailed implementation plans with marketing and Engineering leaders well before a contract got signed and in fact if we weren't able to do that we wouldn't sign a contract at all and the
21:30 - 22:00 trick we learned was to treat the customer implementation the same way that we would a high priority project inside of our own company by project managing it so we put together a shared road map we made sure that every task headed owner we set up regular check-in meetings to hold everyone on our side and theirs accountable for getting it done your sales funnel only really ends when your customer is using your product habitually and when you get to that point congratulations hopefully you have a customer for life all right we've
22:00 - 22:30 covered a lot today from prospecting to doing your first call delivering a great demo pricing closing and finally managing the implementation of course there's so much more to learn about sales and the best Founders devour everything they can on the topic if you want to go deeper I recommend Peter kazi's book founding sales it's a fantastic resource and it's free online but like most most of the hard things about building a company the best way to
22:30 - 23:00 learn is by going out and doing the thing so if you only remember one thing it should be this just get started you'll make mistakes but with enough attempts you'll figure it out and selling will start to feel natural pretty soon you'll discover that you've acquired a new superpower you'll find it's useful not only in getting customers and revenue but in fundraising and hiring too and soon enough you'll be the one giving advice like this to new Founders thanks for watching [Music]