Decoding the 2023 Market: The Art and Science of Scaling GTM with ICONIQ Growth
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Decoding the 2023 Market: The Art and Science of Scaling GTM with ICONIQ Growth
- 3. Disclosure UNLESS OTHERWISE INDICATED, THE VIEWS EXPRESSED IN THIS PRESENTATION ARE THOSE OF ICONIQ GROWTH ("ICONIQ" OR THE "FIRM"), ARE THE RESULT OF PROPRIETARY RESEARCH, MAY BE SUBJECTIVE, AND MAY NOT BE RELIED UPON IN MAKING AN INVESTMENT DECISION. INFORMATION USED IN THIS PRESENTATION WAS OBTAINED FROM NUMEROUS SOURCES. CERTAIN OF THESE COMPANIES ARE PORTFOLIO COMPANIES OF ICONIQ GROWTH. ICONIQ GROWTH DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES AS TO THE ACCURACY OF THE INFORMATION OBTAINED FROM THESE SOURCES. THIS PRESENTATION IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE INVESTMENT ADVICE OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES WHICH WILL ONLY BE MADE PURSUANT TO DEFINITIVE OFFERING DOCUMENTS AND SUBSCRIPTION AGREEMENTS, INCLUDING, WITHOUT LIMITATION, ANY INVESTMENT FUND OR INVESTMENT PRODUCT REFERENCED HEREIN. ANY REPRODUCTION OR DISTRIBUTION OF THIS PRESENTATION IN WHOLE OR IN PART, OR THE DISCLOSURE OF ANY OF ITS CONTENTS, WITHOUT THEPRIOR CONSENT OF ICONIQ, IS PROHIBITED. THIS PRESENTATION MAY CONTAIN FORWARD-LOOKING STATEMENTS BASED ON CURRENT PLANS, ESTIMATES AND PROJECTIONS. THE RECIPIENT OF THIS PRESENTATION ("YOU") ARE CAUTIONED THAT A NUMBER OF IMPORTANT FACTORS COULD CAUSE ACTUAL RESULTS OR OUTCOMES TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN, OR IMPLIED BY, THE FORWARD-LOOKING STATEMENTS. THE NUMBERS, FIGURES AND CASE STUDIES INCLUDED IN THIS PRESENTATION HAVE BEEN INCLUDED FOR PURPOSES OF ILLUSTRATION ONLY, AND NO ASSURANCE CAN BE GIVEN THAT THE ACTUAL RESULTS OF ICONIQ OR ANY OF ITS PARTNERS AND AFFILIATES WILL CORRESPOND WITH THE RESULTS CONTEMPLATED IN THE PRESENTATION. NO INFORMATION IS CONTAINED HEREIN WITH RESPECT TO CONFLICTS OF INTEREST, WHICH MAY BE SIGNIFICANT. THE PORTFOLIO COMPANIES AND OTHER PARTIES MENTIONED HEREIN MAY REFLECT A SELECTIVE LIST OF THE PRIOR INVESTMENTS MADE BY ICONIQ. CERTAIN OF THE ECONOMIC AND MARKET INFORMATION CONTAINED HEREIN MAY HAVE BEEN OBTAINED FROM PUBLISHED SOURCES AND/OR PREPAREDBYOTHER PARTIES. WHILE SUCH SOURCES ARE BELIEVED TO BE RELIABLE, NONE OF ICONIQ OR ANY OF ITS AFFILIATES AND PARTNERS, EMPLOYEES AND REPRESENTATIVES ASSUME ANY RESPONSIBILITY FOR THE ACCURACY OF SUCH INFORMATION. ALL OF THE INFORMATION IN THE PRESENTATION IS PRESENTED AS OF THE DATE MADE AVAILABLE TO YOU (EXCEPT AS OTHERWISE SPECIFIED),AND IS SUBJECT TO CHANGE WITHOUT NOTICE, AND MAY NOT BE CURRENT OR MAY HAVE CHANGED (POSSIBLY MATERIALLY) BETWEEN THE DATE MADE AVAILABLE TO YOU AND THE DATE ACTUALLYRECEIVED OR REVIEWED BY YOU. ICONIQ ASSUMES NO OBLIGATION TO UPDATE OR OTHERWISE REVISE ANY INFORMATION, PROJECTIONS, FORECASTS OR ESTIMATES CONTAINED IN THE PRESENTATION, INCLUDING ANY REVISIONS TO REFLECT CHANGES IN ECONOMIC OR MARKET CONDITIONS OR OTHER CIRCUMSTANCES ARISING AFTER THE DATE THE ITEMS WERE MADE AVAILABLE TO YOU OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. FOR AVOIDANCE OF DOUBT, ICONIQ IS NOT ACTING AS AN ADVISER OR FIDUCIARY IN ANY RESPECT IN CONNECTION WITH PROVIDING THIS PRESENTATION AND NO RELATIONSHIP SHALL ARISE BETWEEN YOU AND ICONIQ AS A RESULT OF THIS PRESENTATION BEING MADE AVAILABLE TO YOU. ICONIQ IS A DIVERSIFIED FINANCIAL SERVICES FIRM AND HAS DIRECT CLIENT RELATIONSHIPS WITH PERSONS THAT MAY BECOME LIMITED PARTNERS OF ICONIQ FUNDS. NOTWITHSTANDING THAT A PERSON MAY BE REFERRED TO HEREIN AS A "CLIENT" OF THE FIRM, NO LIMITED PARTNER OF ANY FUND WILL, IN ITS CAPACITY AS SUCH, BE A CLIENT OF ICONIQ. THERE CAN BE NO ASSURANCE THAT THE INVESTMENTS MADE BY ANY ICONIQ FUND WILL BE PROFITABLE OR WILL EQUAL THE PERFORMANCE OF PRIOR INVESTMENTS MADE BY PERSONS DESCRIBED IN THIS PRESENTATION. Copyright © 2023 ICONIQ Capital, LLC. All Rights Reserved.
- 8. $5 to $9M $10 to $24M $25 to $49M $50 to $99M $100 to $249M $250 to $999M $1B+
- 9. A product is only as good as its go-to-market strategy
- 11. $0-$20M $20-$50M $50-$100M $100M to IPO
- 12. 81% 92% 66% 83% 19% 8% 34% 17% 2020 2021 2022 H1 2023
- 13. The Early Stage $0 to $20M ARR
- 15. $5-$10M $10-$15M $15-$20M $20-$25M $25-$30M $30-$40M $40-$50M $50-$60M The Growth Plateau
- 17. • • • •
- 21. Shorter Tenure Longer Tenure Quota < 25X ARR Quota > 25X ARR
- 24. The Early Growth Stage $20M to $50M ARR
- 25. • • • •
- 26. $1-$5M $5-$10M $10-$15M $15-$20M $20-$25M $25-$30M $30-$40M $40-$50M
- 29. <$20M $20-$50M $50-$100M $100-$500M
- 31. Quota < 14X ARR Quota > 14X ARR Shorter Tenure Longer Tenure
- 32. Product Marketing Revenue Marketing Corporate Marketing
- 33. The Growth Stage $50M to $100M ARR
- 34. • • •
- 35. 64% 67% 62% 56% 36% 33% 38% 44% $0-$20M $20-$50M $50-$100M $100M to IPO
- 36. $0-$20M $20-$50M $50-$100M $100M to IPO
- 37. $20-$50M $50-$100M $100-$250M $250M+
- 38. AE/Sales Rep BDR/SDR Professional Services Customer Support Rep
- 39. The Pre-IPO Stage $100M ARR to IPO
- 40. • • • •
- 41. By Time Before IPO By Stage of Hire
- 42. $0-$20M $20-$50M $50-$100M $100M - IPO
- 43. $0-$20M $20-$50M $50-$100M $100M - IPO
- 44. H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 2017 2018 2019 2020 2021 2022 2023
- 46. Revenue Growth Correlation Rule of 40 Correlation 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2020 2021 2022 2023
- 47. Key Takeaways
- 49. Appendix
- 50. 50 THE ICONIQ GROWTH Enterprise Five The ICONIQ SaaS Glossary See our SaaS Glossary for a completeguide to the key metrics included in this report, plus: Cost classification Revenue recognition Cohort analysis Unit economics ICONIQ Growth standards across five key metrics we believe are highly representative of a B2B SaaS company’s overall growth and efficiency:
- 52. Thank You
Editor's Notes
- Our analytics efforts were born with the same analytical rigor that has been embedded in our DNA as investors since inception. Our mission is to empower our portfolio with proprietary analytics, insights and problem-solving frameworks to make informed decisions across their business operations and strategy. This takes the form of both broad thought leadership – recent examples are the basis for what we will be sharing today – as well as deep, 1:1 partnerships and advisory work with our operating leaders.
- We are going to fly through data – can get it all on our website and will share these slides afterwards In terms of methodology, we’ll be sharing proprietary data from a few different sources: Quarterly operating data from XX ICONIQ Growth portfolio companies Proprietary survey of more than 230 SaaS GTM executives Proprietary dataset of every CMO and CRO hired at XX B2B SaaS companies from the day they were founded to the day they went public Methodology visuals with firmographics & logos
- What are we talking about today?
- As growth investors we’re lucky to have witnessed many exceptional growth stories from $10M all the way up to IPO [Gather list of portfolio companies speaking at SaaStr so we can call it out as makes sense] Ideally you have the best product, but the companies that win and are the market leaders have the best product and the best GTM (e.g., Microsoft)
- Companies invest a lot in go-to-market, and it only gets more important as companies scale
- And in today’s macro environment, go-to-market strategy is perhaps more important than ever. Most companies have experienced continued headwinds through most of 2022 and 2023 year to date Graph of topline attainment by year and quarter When we look at performance against key go-to-market metrics in 2022-2023 compared to prior years, the macro impact to both growth and efficiency metrics is significant GTM metrics scorecard: ARR Growth, NDR, Net Magic Number in 2022-23 compared to 2019-2021 (and maybe before) Talk track: performance against metrics Today we’ll discuss how companies build a strong go-to-market motion starting from the beginning through IPO
- Today we’ll focus on the how – how do companies drive strong GTM execution as they scale
- As growth investors we’re lucky to have witnessed many exceptional growth stories from $10M all the way up to IPO [Gather list of portfolio companies speaking at SaaStr so we can call it out as makes sense] As SaaS companies scale, many experience a growth plateau after reaching $10M ARR ARR growth rate by ARR scale One of the key drivers required to navigate this growth hurdle is an organization’s go-to-market strategy and execution
- What are good measures of product market fit? Net dollar retention is one of the best
- GTM teams are focused on: Landing new logos. During this stage, new logo ARR drives ~70% of ARR growth Logo churn is the top driver of total churn, as companies identify and refine their ideal customer profile
- Early Ics are foundational – critical to get these right One of the biggest questions you’ll face when building your go-to-market motion is how to build and scale your teams. Here’s what the typically go-to-market org looks like during this stage [Perspectives from CRO of Cloudflare - from May 2023 dinner] Founders will always be the best sales person but founders are also the best at a lot of other things: have to both stay involved but identify the right times to step back There is a magic to founders being involved with customers which is so critical to the product roadmap and always ensure that your team knows that no customer call is too small to invite the founder Often there is a risk for founders that if you delegate customer conversations, critical feedback gets filtered and you don’t get a true understanding of customers’ problems Chris’ advice is to think about the finding the right way to scale your role as a founder as a trust exercise – if, as a founder, you believe you are getting the unfiltered truth and feedback from your team particularly around product and allocation of resources, it is a good signal that you can step back. If you hear too much variability in the feedback and don’t trust the perspectives, stay involved Roles and responsibilities can look different at this stage For example, the role of CS evolves as companies scale [Perspective from Angi Holt - CCO formerly of Productiv, now of Datadog] Hiring can be challenging in the early stage: find people that are willing to build with you and your customers CS is the band-aid at early stage companies. Hire people that are going to be able to partner with your customers to understand their use cases and fill in product gaps. When you’re still trying to find product market fit, you want your CS people to be jacks of all trades. As you scale and your product becomes more mature, your CSMs can become more specialized or commercialized Another example: often your first sales rep will be hired before your first dedicated sales leader. This person will be integral in building the early versions of your sales process and establishing relationships with your earliest customers
- Hiring a sales leader 40% of companies have a sales leader before $10M ARR, but most do not. Of course, this will depend on your operating model
- FYI, you’re going to have multiple sales leaders as you scale (usually 2-3), but your first one should…
- CAROLINE TO UPDATE TALK TRACK Generally, Early Stage companies are looking for one of two things when they make their first Sales hire: they want someone who has been a Head of Sales before, or they want someone who has experience running a big book of business. Typically it is hard for companies to get someone who checks both of these boxes (and most commonly, companies wind up hiring someone with neither). Early Stage companies found the greatest success when hiring for a prior quota of ~25X+ current ARR (so for a $10M ARR company, that would be a prior quota of >$250M). (this refers to an executive’s prior personal revenue accountability or quota, not the full company number). It turns out that having been a Head of Sales before doesn’t matter all that much Optimizing for prior Head of Sales experience instead of scale resulted in a >3X higher early departure rate. Scale can compensate for a lack of prior leadership experience, and failure to scale up proves to be a bigger risk than failure to scale down (many Founders worry that a leader’s scale from a large company may be too vast relative to where the company is, but the data suggests that this need not be a fear as these leaders wind up having great tenures) Heads of Sales with neither trait fared the worst.
- Incentives and compensation structures are a critical component of go-to-market strategy. Incentives align your go-to-market teams towards shared business objectives Go-to-market teams - particularly those most directly responsible for revenue generation - are often incentivized by a portion of their compensation tied to performance, called variable compensation Tie this variable compensation to performance against individual goals - and make sure individual goals are tied to company goals The most common metrics for Account Executives: closed won ARR, contract term (longer contracts better) The most common metrics for CSMs: Net Dollar Retention, Gross Dollar Retention, Renewal Rate
- Reward strong performance Use accelerators Don’t cap commissions (except for exceptional situations) Talk track : in the early stages, strong performers should be making 2-3x their variable compensation
- Note about why how we’ve structured this: we’re going to walk through critical drivers of strong GTM execution by scale
- Talk track: during this stage, operationalizing is critical. Prepare your GTM motion for scale GTM teams are focused on: Landing new logos. During this stage, new logo ARR drives ~70% of ARR growth Logo churn is the top driver of total churn, as companies identify and refine their ideal customer profile
- This is the first time you’re really scaling out this team and you must operationalize to support the growth
- Most companies segment their teams by company scale % of companies segmenting by top methods You’ll have sales reps aligned to each segment AE headcount per segment (maybe ratios of SMB EEs to Mid-market EEs to Enterprise EEs)
- Companies build a robust tech stack at this stage Talk track: AI commentary These are the most popular, but always be on the lookout for newcomers The importance of tooling is in part the role these play in allowing you to track and measure sales activities to work towards forecast visibility and revenue predictability You should have full forecast visibility, and you should work towards revenue predictability (gets more important as you approach IPO, which we’ll come back to). Track conversion rates from the top to the bottom of the funnel and work to improve them Talk track: should really be investing in measuring your sales process. Get really granular – what activities (emails calls meetings) are working, how many are needed to create an SQL, what campaigns are working, what do conversion rates look like by persona / company segment, etc.
- Talk track: During this stage, quota attainment starts to decrease and ramp time starts to increase. Invest in sales and enablement to manage through this Onboarding and enablement is very important, but it’s a waste of time to over-invest in it if you haven’t achieved repeatability yet. An onboarding and enablement program is meant to teach and coach reps on what works and how to do what works, so you need to know that first You should be building structure into your enablement programs at this point. Highspot’s “sales enablement maturity framework” says this is when you should start being structured around sales specific sales playbooks and activities, and rigorous in terms of coaching and practice
- Talk track: An enablement program is only as good as your coaches. Set
- With the freeze in IPOs over the past 18+ months, going public may not be top of mind right now – but it actually should be, at least from a team-building perspective. We typically see the CRO join 3 years before IPO (on average). Building a predictable revenue engine can take time, so more time is often beneficial when building your IPO-ready team. Optimizing for longevity starts to become important at this stage. As we saw with Early Stage sales leaders, during the Early Growth Stage, scale trumps prior Head of Sales experience (internal note – this comparison is not shown on slide but could be interesting lead-in) For Heads of Sales hired between $20M-$50M ARR, we see ~14X+ ARR as the figure that leads to greater success in terms of tenure and longevity You’ll notice that the relative scale requirement has decreased since Early Stage (25X ARR to 14X ARR), but the absolute scale requirement has, of course, increased. Assuming you are right around the midpoint of this stage, you would be looking for someone who has owned a personal revenue number or carried a quota of around $500M ARR. Certainly there are leaders who made it to IPO without demonstrating this quota threshold, however, in terms of minimizing downside risk (having an important hire depart prematurely) and maximizing potential, “more is more” when it comes to scale
- We have found that each Marketing leader typically has a “major,” or a predominant strength. The three primary personas are: Product Marketers, Revenue Marketers, and Corporate Marketers. You want a leader who can adeptly manage your entire marketing strategy, but the question inevitably arises around in which of these areas your leader should “spike.”
- Note about why how we’ve structured this: we’re going to walk through critical drivers of strong GTM execution by scale
- GTM teams are focused on: Landing new logos. During this stage, new logo ARR drives ~70% of ARR growth Logo churn is the top driver of total churn, as companies identify and refine their ideal customer profile
- - Of course there are some one-time marketing expenses related to IPO event itself, but for the most part, a steady increase in marketing overtime is what drives further scaling as companies approach IPO
- At this stage, you should be developing an enterprise-ready product and testing your sales process up-market Could layer in some light G&E insights here in terms of net new arr generation by scale, ACV by scale 100% stacked bar of customer mix by segment by ARR scale Commentary: this is mostly mid-market to enterprise companies, but the same trend is true of SMB as well
- You may think about building out more robust support and services teams / capabilities to support larger enterprise customers, with the ultimate goal of retaining and expanding these customers over time Over time, customer support and other professional services like integration support become a larger portion of overall services revenue
- Note about why how we’ve structured this: we’re going to walk through critical drivers of strong GTM execution by scale
- GTM teams are focused on: Landing new logos. During this stage, new logo ARR drives ~70% of ARR growth Logo churn is the top driver of total churn, as companies identify and refine their ideal customer profile
- We typically see the IPO-leading CMO join 2 years before IPO (at the median)
- For SaaS companies founded in the US, around 80% of their total revenue on average comes from north america until they reach $100M ARR. At this stage, revenue from EMEA and APAC grow to 30-40% of revenue 100% stacked bar of revenue source by region and ARR scale Talk track: [Perspectives from Xactly’s head of Japan expansion & Drata CRO] Caution against doing this too soon. Signals you should be ready to think about expansion include: You have competitors in this market You have existing customers based in this region with strong uses cases and adoption You have enough existing customers to have a referral network: customer references are key when entering other geos. The first thing our prospects ask is “who in Japan is using this” Use partners to help you expand internationally