Which Sales Strategy Is Best For Your Startup?

Hi, my name is Pete. I'm a visiting group partner at Y Combinator and formerly co-founder and CTO at Optimizely. Today we're going to talk about two different ways to sell your products to large organizations: Bottoms Up and Top Down. This is versus selling to corporate executives. It was all word of mouth; it had spread virally. Let's compare the two things.

Let's start by defining top-down sales. Top-down sales usually starts with a decision maker high up in an organization. If you're getting started with a top-down sales motion, it usually goes something like this: you start by identifying a lead and getting their attention, and that's usually the hard part. Then, validate they have a problem you can solve and convince them you can solve it. Next, jump through a bunch of bureaucratic procurement hoops, get them to sign a contract, onboard the customer, and profit.

Top-down sales usually work well for products that appeal to executives, usually because it helps them move an important number in the right direction or accomplish some strategic goal with their organization. Sometimes, those products are expensive to implement, and they often require a lot of support. The biggest advantage of top-down selling is probably that there's a playbook, and it usually works. It may take some grinding, but if you know who your customers are and you understand their problems, you're eventually going to find someone who will pay you for a solution.

It can be tough to get an executive's attention, but when you do, they usually make great customers. In fact, startups that start by selling top-down often have much better retention metrics early on than startups who start by selling Bottoms Up. The biggest downside of selling top-down is probably that it's easy to get pulled into building one-off features for large customers, especially as a startup. If you're not careful, these can turn into consulting relationships.

Another drawback of top-down selling is that the only way to scale that motion is by building out an Enterprise sales team, and that's really expensive. The cost of scaling an Enterprise sales team effectively creates a floor price for your product. This is usually around 10K for mid-market and 100K for Enterprise. If you try to charge less than that, the unit economics just don't work.

Let's take a look at how to build a top-down sales motion. Start by defining your target customer. Who are the companies that need your product, and who are the people inside of those companies that have the problem you're trying to solve? Next, find leads that fit your profile; LinkedIn is super useful for this. Then, you have to get their attention, and this is the hard part. If you can get warm introductions through your network or your investors, great! If you can't do that, try cold emailing. There are tools like ZoomInfo, Hunter.io, or LinkedIn Sales Navigator where you can find contact information.

Write all of your emails by hand and make them as personalized as possible. Now let's take a look at Bottoms Up sales. Bottoms Up sales usually start with the user. The typical motion looks a little something like this: start by building a self-serve product that people can adopt on their own without talking to you first. Now, you need to find a cheap distribution channel that scales. This is kind of a fancy way of saying find a way to get a lot of people's attention without spending a lot of money.

Next, use that distribution channel to get lots of users and then find companies where people are already using your product and convince them to sign a contract in exchange for more features or bulk pricing. Bottoms Up sales work well for startups that solve pain points for individuals or small teams. The products need to be easy to adopt, and it helps if they spread virally inside an organization. A perfect example of this is Slack.

Small teams could adopt Slack on their own without ever talking to a salesperson, and once it was adopted, it tended to spread virally inside an organization. The Slack sales team could wait to reach out until adoption had reached some critical point inside of that team. It makes their sales cycle very efficient. The advantages of the Bottoms Up model are obvious: it's very efficient. Who wouldn't want to build a product that allows you to sit back and rake in leads without lifting a finger?

Unfortunately, in reality, it almost never works like this. Viral product growth is really difficult to achieve, and the companies that do this usually find some non-obvious untapped marketing channel in order to acquire a lot of early users. The dirty secret about Bottoms Up sales is that they do require salespeople; Slack employs a lot of them. The difference is that you can build a really efficient sales cycle when your prospects are already using your product.

You can use that to lower your prices or increase your margins, whichever helps you win. If you're trying to build a Bottoms Up sales motion, here are some things to keep in mind. First, you probably can't actually build a great product without talking to your customers, and most Bottoms Up startups start with cold calling too. It's an unfortunate reality of connecting with early customers. You have to be obsessed with getting rid of all of the friction in your product experience.

Test your landing page by showing it to people and asking them to explain it to you, and then rewrite it until it's crystal clear. Watch people go through your product onboarding and get rid of anything that is confusing or that pisses them off. Instrument everything so that you can identify drop-off points in your funnel and then use A/B testing to fix them. Use freemium pricing to your advantage. One tried and true way of doing this is to make the features that individual users like free and then charge money for the features that teams need to collaborate.

So, wrapping it all up: startups use a top-down motion to sell expensive products to executives at large companies. They use a Bottoms Up motion to acquire lots of individual users so that they can sell to the executives they work for. Now, neither one of these is obviously better than the other. In fact, if you look at the top YC B2B SaaS companies, there's a roughly even split between top down and bottoms up.

At the end of the day, it depends on whose problem you're solving. If your pitch resonates most with individual contributors or small teams, you're probably going to need to go Bottoms Up. On the other hand, if your pitch resonates most with executives, you'll need to go top down. I hope this video helped you get a sense of which model makes the most sense for your startup. Thanks for watching.