Mature software companies share one thing in common: disproportionate spending on sales and marketing. In 2023, the median sales and marketing expenditure for the most prominent public SaaS companies was 40% of revenue (in contrast, R&D consumed just 24%). Industry giants such as Salesforce (37%), Okta (42%), Snowflake (49%), and Zscaler (52%) drive this trend.
In contrast, early-stage SaaS startups frequently prioritize product development over sales. This reflects the typical founder makeup; 50% of unicorn founders have STEM degrees, and product development aligns with their background. However, there are macro trends also at play.
Product-led growth (PLG) has become a growing ambition among fast-growing startups. PLG prioritizes product optimization to drive top-of-funnel activity. Over 60% of Forbes’s Top 100 Most Valuable Cloud Companies boast a PLG strategy, including Stripe, Canva, Notion, and our personal favorite, Airtable.
So, should startups lean into their strengths, focus on building sticky products, and allow the sales motion to take shape down the road? We think not. Despite popular belief, no product sells itself (or perhaps very few).
Founders should prioritize developing their sales skills as early as possible. Among the many hats a founder wears—whether as a fundraiser, engineer, or team manager—the role of salesperson is often the most challenging to master. However, embracing an early sales motion gives founders a deep understanding of their customers and creates an invaluable feedback loop that sharpens the go-to-market strategy.
The draw of PLG is irresistible to both founders and startup investors. A successful PLG strategy can lower customer acquisition costs (CAC) and generate a high volume of inbound leads, reducing the need for a large sales team and freeing up resources for product optimization.
PLG stresses a unique metric: time-to-value (TTV). Ideally, a prospect experiences an aha moment in minutes, if not seconds. When users experience the product’s value firsthand, they’re more likely to convert into paying customers, leading to a steady stream of qualified leads without heavy sales intervention.
Founders yearn to create a product that will obviate the need for traditional sales techniques. Unfortunately, such products seem to be the exception, rather than the norm. Even PLG companies need to have a pulse on their sales process.
While Product-Led Growth can offer numerous benefits, over-reliance on this strategy in a startup’s journey can be detrimental.
In the early stages, customer interaction is crucial for gathering sales feedback that directly informs product development. This feedback loop is essential for understanding market needs and ensuring your product remains competitive.
Early-stage founders often lament their decision to hire sales development representatives (SDRs) or business development representatives (BDRs) too soon. Adopting a purely PLG strategy too early can have the same disorienting effect. The lack of direct customer engagement and insights can result in a product offering that strays from market demand.
PLG can be effective for small and medium-sized businesses (SMBs), but often falls short when dealing with mid-market and enterprise customers who require more personalized sales interactions (and result in much larger contracts). Selling to enterprises requires a complex process, including navigating intricate contracts, managing legacy system integrations, and handling detailed negotiations.
Slack entered the market in 2013 and quickly reached 10M daily active users by 2019, focusing on PLG within SMBs and startups. Microsoft launched Teams in 2017, reaching 20M DAU by 2019 and 270M in 2022 (Slack had 18M DAU in 2022). Teams targeted larger enterprises, developing a product tailored to the needs of larger organizations. Going up against Microsoft is often a losing battle, but Slack did itself no favors by neglecting the needs of enterprise customers.
Even if your PLG approach has landed you a qualified lead within an enterprise, a structured sales motion becomes necessary to scale within the organization. Transitioning from a small user base to a larger one (also known as “land and expand”) requires a tailored approach that PLG alone may not achieve.
Sales aren’t just about closing deals; they’re the backbone of the entire business, influencing everything from website design to email campaigns to social media posts, and especially product development.
In essence, sales are everything. A well-thought-out sales strategy does more than land customers—it provides essential data and feedback that can inform a startup's evolution.
PAX is uniquely positioned to help technical founders become sales experts. Our 8-week B2B Sales Program goes beyond best practices for repeatable sales (though, this is a big part as well). We work with founders to uncover their true value proposition, or the “so what” of their product. It begins with sales.
