Whatfix is a SaaS platform that accelerates the adoption of enterprise software for organisations. It provides a guidance layer on top of existing applications so employees can learn to effectively use these softwares. Founded in 2014, today Whatfix has 600+ customers and 500+ employees across the world. With their head office is in San Jose California, a big part of Whatfix R&D - and interestingly, sales teams - operate out of India. To date, Whatfix has raised about US$150 mn from Sequoia, SoftBank, Eight Roads Ventures and others, and is at heart guided by the principles of Value SaaS - or capital efficient - growth.
Note: This interview was recorded in late 2020. Edited transcripts:
Sales in a new category: It begins with creating your demand
When you are operating in a new category, there are advantages and disadvantages.
The disadvantages are that you need to spend more time in creating your demand, that is educating and consulting your target companies. No one is searching for you and nobody knows this kind of a solution exists. In our case as well, even though we have competition that is 6X bigger than us, 75- 80% of the time our potential customers haven’t heard about us.
So when you are selling in a new category, your sales cycle becomes longer, your demand-generation is harder, you have to spend a lot of time in consulting, educating your customers on what kind of value or the ROI they can derive from your product.
The truth: no one is looking for you... yet
Say you are part of a CRM and the head of sales at an established company like General Motors or Pepsi or Coke says I want to redo my CRM stack. That guy is not going to Google you or even search for a CRM product. They're just going to go to their head of procurement and give them a budget. And the head of procurement is also not going to Google you. They will go to a Deloitte or McKinsey and say, 'this is the RFP, can you guys bid for it'. Again the guys at McKinsey are not going to Google. They know that they need to create a solution using Salesforce or Oracle, build a stack and propose to them. So nowhere is anyone actually looking for a CRM.
Whether in the consulting world or in large enterprise sales, the mindshare is occupied by top three or four players. So if you're not one of the top four players, it's very hard to get that mindshare. That's where you want to start differently. You need to be locally present, you need to do things differently.
Be where opportunity lies
Let's take the same example forward. Let's say the head of a CRM stack has been replaced. A new CRM stack is there. Now there are thousands of AEs across the globe who are not filling up the data correctly. The predictability of forecasting has been lost. This head of sales goes to the head of sales enablement and says, ‘my sales guys are not using this. You spent $23 million. What do we do?’ That's where they will start seeing that traditional solutions are not working.
They might call up Gartner and say, during this change management, what are the other companies doing. They might start looking for vendors who can help them out. Maybe they might Google. They might look at some white papers. They might ask colleagues in the industry about what they are doing. That's where the new category advantages are.
That's what happened with us. Initially it was a lot of hard struggle but gradually a lot of enterprises started inbounding us. Today, every week we might see two or three large enterprises inbounding us. You name it, any industry, in any segment, whether it's insurance, whether it's finance, whether it's technology, some noticeable logos will be using WhatFix.
Narrow down focus to unleash inbound & partnerships
We were getting inbounds right from the start, only volumes differed. Earlier we were getting one or two inbounds in a week, now we are getting 20 a day.
There are several ways to run inbounds.
Piggyback on big competitors: Like I mentioned earlier, we have a competitor that is 6X bigger than us and was 10X bigger earlier. Sometimes, your competitors are also doing a lot of evangelisation and are spending a lot. You can piggyback on them. So when somebody's searching for a competitor, I can be there.
We narrowed down to two particular functions, that is CRM and SEM. We actually went behind those two functions and started writing a lot of content around that.
Show up where the users are: We started attending a lot of events around CRM and SEM. Any events of Salesforce, we were present there.
Salesforce also does a lot of city-level events and we were there. We were present in the Salesforce community.
When you narrow down on one or two functions or one or two softwares, it becomes easier to create your message. It's easier to narrow down your go-to market channels, easier to actually identify which events you want to be present for and which to skip. That worked for us.
Every year we went with double the strength. We’ve been going to Dreamforce for the last 5-6 years, and where in the first event we collected 250 contacts, last event we collected 3000. Similarly, we doubled down on SuccessFactors events as well.
Partnerships: Also on the partner side, of all revenue we add per quarter, almost 24% comes from partner channels. So our sales and partner channels are going in a similar fashion.
Our partners fall into two major buckets - Wipro, Infosys, Accenture or vendors who can directly take us to those companies. Those companies are pretty huge with a hundred thousand employees and hundreds of practices. Where do I go? So, it took a year for us to crack anything. But then when we narrowed down our focus to CRM and SEM, it became very clear that a there is a CRM practice in Salesforce, a CRM practice within Wipro, a Salesforce practice within Infosys, one within Accenture.
Now, when I am present at the many Salesforce events, I start meeting those partners as well and they are relevant for us. When you start going deeper into one or two functions, you start getting the referrals also, you start getting the bowling pin effect.
Expanding TAM: Going narrow may uncover a big adjacent market for your product
Sometimes you don't realize the use cases for your product. Initially, Whatfix focused on end-user facing use cases. After some time, we realized Whatfix could be deployed within organizations because when a Salesforce or Workday gets deployed, they get customized, and when they get customized training has to be tailored. When I started multiplying, the TAM suddenly became pretty huge, up to $9 billion.
So now when we go to VCs and open our TAM slide, they say let’s not discuss that we know that. I think you are very conservative.
The lesson is, sometimes if you go narrow on an ICP (Ideal Customer Profile) and if you crack it, there is a very big adjacent market, which you will sometimes realize over a period of time.
How to think about ROI and arrive at yours
For new categories figuring pricing and ROI (Return on Investment) are a function of trial and error. If your customers don’t have an idea of ROI, it becomes even more important to communicate and think from their perspective.
Finding your champion and equipping her/him with decision-making data: The person you're pitching to may not be the final decision maker. S/he might go to someone else to get the budget. So you need to think how can I equip this guy with all possible information so he can win his case and get a budget approval. So one of the questions, his boss, would ask is, 'If I'm spending $50,000, what would I get back on this.' So you have to equip that guy as much as possible. You also get the story from this guy, 'How is your budget process? There's a few companies in your domain. This is how they have used our product and this is the value they have derived.'
If you don't have enough data points, you can make assumptions and iterate whose with your buyer, who is going to be your champion.
This is how Whatfix approached ROI. We looked at how many support queries our champion gets in a year. Let's say, of all queries, 60% are for the platform. We say Whatfix can get rid of 30%. What is the cost of getting rid of the 30%? Say it's $30,000. So, if I'm saving you $30,000 in a year, that's mine. Plus, I'm going to save you a certain time for your documentation. Apart from these 3000 queries, I'm going to give back the 300 minutes saved to the sales guy - 300 minutes is like six hours of top-line I can add.
Some of those assumptions may be right, some may not be right and the buyer may help you correct those. After 5-6 times, it will become a standard for that specific use case.
Hiring for sales in a new category: What to look for
When it comes to sales, everyone makes mistakes. Even the large companies make mistakes.
Hustlers who can define playbooks are who you need: Now going back to the Salesforce example. When I go to buy Salesforce, I've already decided that I want to buy Salesforce. I'm just going to go there to negotiate and see what’s the best price I can get. So. the caliber of a sales guy there possibly may not be suitable for your early stage company because when he goes there to sell your product, nobody has heard about it. You have to start from educating why they should buy you, why not from a larger competitor. There are a lot of questions the sales rep has to deal with whereas one from a larger company may not even have to deal with those.
So when you start building, it doesn't matter whether it's sales or any other department, what I have learned is when your playbook is not defined clearly - what is working and what is not working - you need hustlers. Someone who doesn't put the constraints very quickly, or doesn't draw the boundaries very quickly and actually figures out the playbook.
Once you have a playbook, you need a Scaler: Once you have built up that playbook, then it becomes all about scaling, it's about creating processes or avoiding leaks in the processes, tightening the processes so you can start measuring and keep improving. You need the scaler to hire and train people, can keep looking at numbers and optimise and scale them.
'Sales is all about objection-handling': So for us the guys who were successful at an early stage were people who did their research well. When you have to pitch someone, inbound or outbound, you need to know very well how to position a product in a better way. And that will only be possible if the person is good at research, quickly identifying the need of the company, personalizing demo etc - basically someone who is street smart because sales is all about objection-handling.
So based on what channel you're getting your leads from, you may have to tweak the DNA of your sales rep.
If it's an inbound, for example, be better prepared that they have seen at least a couple of other competitors. So they will have a lot of objections like how do you compare yourself with competitor A or B, or that a competitor is selling at half the price or they have so many features. So your sales person has to be really smart in handling those objections.
If you're going outbound. There's high probability your buyers have not heard about your competitors, your category. So you might have to start at a different play - why is you category important, is the product important, is there an opportunity cost if they don’t buy now. So now you're spending a lot of time in educating about your category and less about the product.
So your research, listening skills, communication skills, demo skills is what we looked at, apart from the hustle.
Pioneering an unconventional model for sales
We hired several AEs (Account executives) in the US - feet-on-street. AEs are divided into territories, and when you go territory-wise, AEs double down on expansion, then start closing on partnership deals, then inbounds and last is outbound.
Ideally when you have an AE in a territory, you want them to go outbound. But that was not working for us because we are landing at 50-60 K in even in the larger enterprises. To make the quota, they needed to do 15-20 deals in a year and feet-on-street doing 20 days in a year is hard. So expansion becomes the easier option. When we analyzed our competition, we realized that 70% of the revenue comes from expansions. Very good sign. But then, when 20-25% comes from the new logo, it's an opportunity. So how do we crack this?
So when mid-last year we saw our AEs struggling in the US - they wanted expansion leads, they also wanted partner leads. We told them to only go for outbound; some of them resigned. Some of them were not successful. We thought let's do it differently.
We parallely started a team in India. Now, we have a BDR team, which is going to create opportunities from India, and an AE team that will exclusively focus only on outbound. That started showing some results.
And now for expansion, we need an in-region team because we need to build relationships. So we hired a VP in Seattle. He has an AE in Dallas, an AE in New Jersey, one in the Bay Area, one each in Germany and the UK. These guys have only 10 logos where we have already landed, like Amazon or MetLife and their job is only to expand those. They will not look at inbound or outbound. This is like creating an engine.
So we compared how the industry was working. I spoke to a couple of guys. They said nobody has tried this differently - exclusive AEs for outbound, exclusive for expansion - generally people hire for a category and mix those. So we are trying something different and if this works, I think we have another business model, which we can exponentially scale rapidly because of the India-US combination.
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