Marketing a movement over a product with Terminus' Sangram Vajre
Sangram Vajre: Being intentional is way more important than being brilliant. You can have the best ideas in the world, but if you're not aligned, it doesn't really matter.
VO Peep: I'm Peep Laja. I don't do fluff. I don't do filler. I don't do emojis. What I do is study winners in B2B SaaS because I want to know: how much is strategy? How much is luck? And how do they win?
This week, Sangram Vajre, co-founder and Chief Evangelist at Terminus, an account based marketing platform. Terminus was founded in 2014. In the first year, they hit 1 million in revenue, and 5 million the next, and 15 million the next. They've continued their exponential growth since then, acquiring five companies and expanding to about 350 employees.
In this episode, we learn how Terminus has created a category by starting a movement that was bigger than the company itself, and the strategies they have used to further boost their growth. Let's get into it.
Sangram Vajre: In 2014, I was working at Salesforce. And I remember this very clearly, where we had like the best numbers we possibly could in number of leads that we created for the company. And I remember the head of sales coming to me and saying, "Well, that was awesome, Sangram. What you and your team did for the business is phenomenal." And I was like, "Yeah, man, I'm so excited. The team is doing great. I think we're going to do some good things this year and above." And he said, "Well, can you generate 3000 more leads every single month, starting next month." And I sank in my seat, man, because I was like, dude, why are we not talking about pipeline velocity? Why are we not talking about a better conversion rate? Why are we not talk about expansion? Why do we need more leads? I literally felt like I was a coin operated lead machine. And my whole value that day-- I was so high to so low in the same day. And I felt like, there's gotta be a better way to do this where marketers are not looked upon as a coin operated lead machine, but they can drive revenue and business outcomes. So, that was the genesis of the problem that I saw in the market, was the perception of what marketing did in B2B. And I thought there's gotta be a better way that led to the whole idea of ABM and the flip my funnel movement.
Peep Laja: So in your first year you already did $1M in revenue. So, what was the product that you were selling in your year one?
Sangram Vajre: First year was crazy. It was more about the movement than the product, quite frankly, because we started this thing called flip my funnel and over the last five years or so the company, there were like a hundred thousand people in the community of flip my funnel. And we started with this idea that there has gotta be a better way, and the better way has to be a different way of seeing the market. So, you think about the old funnel, which is broad at the top and narrow at the bottom; we just flipped it and called it flip my funnel. And in the first year we did four different events in four different cities. So, Atlanta, San Francisco, Boston, Chicago-- I think probably five. Austin, as well. And we went around all these cities with the top thought leaders in the marketplace around B2B marketing and sales, asking people and talking about, like, we got to challenge the status quo of marketing and sales. There has to be a better way to do these things. What is it? And we didn't say we have the answer, but we were the one curating this conversation. So, that brought in analysts to come to this event, it brought in media to check out what's going on. We even brought in some of the competitors who were starting to talk about account based marketing at that time at the same event. So, all of a sudden became an industry event. And because it became an industry event, a lot of people were like, "If they're believing in this problem so much, they must have a better solution." So, they would ask us. The inbound was crazy. We were not even doing outbound calls at that time because the first year, every time we would do an event, we would probably close about 30 or 40 deals. And what we were selling at that time was an advertising product where we were saying, "We can target your best fit accounts through advertising." The whole first year, what led to a million dollars in growth, was literally a great point of view that was about challenging the status of marketing and sales, a clear picture of success, which was the flipped funnel, and a timing where everyone felt frustrated about how marketers are treated and thought about. And all of that all came together in that one year.
VO: What Sangram just described is a common strategy for companies who are early to the categories. You create a community around the problem or identity of the target audience. A great community has two key characteristics. One, it unites people would share the identity or point of view. Two, these people are working towards the same end objective. Community is a hell of moat. Often there's a winner-takes-all community with only scraps left for others. First-mover advantage is massive in communities. It's so much harder for others to come and build a community in the same space if you manage to bring everyone together in yours.
Peep Laja: How does flip my funnel jam with account based marketing? And how did you come up with that terminology?
Sangram Vajre: The flip my funnel is really interesting. It's one of those where, as a marketer, when we started Terminus, I wanted to do a Terminus event. And I quickly realized every time I would say, "Alright, we want to do a marketing event and it will be hosted by Terminus," nobody wanted to sponsor it. Nobody really wanted to do anything with it. And I was like, "Okay, if nobody's sponsoring, there's no way we're going to drive this event forward. So, I was on a flight from San Francisco and long story short, I was drawing this flipped funnel. I came from a conference, it was a marketing conference by Scott Brinker in 2015. I drew on a piece of napkin, a flipped funnel. Like, what if the way people thought about marketing and sales was different? What if it was flipped? And that led to the idea of flip my funnel and as soon as I landed, I bought the domain, "flip my funnel" for eight bucks and wrote a blog post on LinkedIn and that really went viral, in a sense, in 2015 timeframe. And that led to the conversation where everybody said, "Oh, that's a great idea. Wish somebody was doing an event together." So we moved all of our time and energy into building a flip my funnel conference and all of a sudden, all the same people, the sponsors who wouldn't want a sponsor a Terminus event, wanted to sponsor a flip my funnel event. And here's what I learned. People really want to be behind a movement. They want to be behind a problem. They don't want to be behind a product as such, because they don't know if the product is going to work or not, but you put a problem in front of them, you create a movement for them, people want to be part of that. And ABM is the output of a strategy called flip my funnel. It is like, if you flip the funnel where you start with the best accounts and you go after them, you will have better results. It was an emotional view of like, that's how it should be. You know, why are we not doing that? And ABM became a way of creating an output for it. So it goes hand in hand. It was a strategy that was a clear picture of success, more so than anything.
VO: Solid messaging, storytelling and community building efforts, all come from this. "We're all in this together." It's the foundation of a great community. Companies need to get clear on their point of view. The change you help people navigate. Once you have it, you're already closer to winning on brand. A great way to think about brand is: what does it say about me when I buy you? Instead of trying to push your views onto your audience, you welcome them into a new and exciting world. Change is the only constant thing, so what has changed in the world? What is happening today that needs our attention. Your brand becomes a tour guide to this new reality and your job is to help them see the world from a fresh perspective. You want people to adopt your story as their own. You want people to nod their heads and go, "I've been saying this for years!"
Peep Laja: The phrase, account based marketing, tell me about that. How did you land on it and why did you decide to adopt it?
Sangram Vajre: In the early days we didn't call it that. We call it account-based advertising internally, because our product was an advertising product. So we called it account-based advertising, but we never marketed it as account-based advertising because we didn't know what else we were going to have, but we did know there's going to be more than advertising. So, we called it account based marketing specifically so that it gives us room to grow. And as a result of that, it allowed us to do five acquisitions in the last seven, eight years of our existence because it allowed us to grow into marketing. It allowed us to grow into customer needs. We had that internal gut feeling that account-based advertising will niche us into an advertising platform while our vision was to build a greater strategy where marketers don't have to be at the mercy of leads. They need to be able to drive business outcomes and revenue. So, we are so grateful that we had that hindsight vision on calling it bigger than what it was. A lot of companies get too niche too quick and therefore they lose the opportunity to grow. And the reality is, if you position yourself too quickly, too narrow, it is really hard for you to then position yourself too broad, too quickly. So it's an art and science. And I think we were at the right place at the right time in many ways.
VO: Focus brings its advantages. When a company has a narrow focus, it increases its ability to take a hit. The more focused you are on any one thing, the bigger attack on that one thing you can take and remain standing. This is robustness. Organizations also need resilience, the ability to stand up when you have fallen down. An overly narrow focus can even eliminate that capable. Surprises will inevitably come along that hit so hard that they challenge the strategy at its very core. Only a matter of time. To win, you need a defensible niche (try to appeal too broadly and you'll end up appealing to no one) and a larger vision (an understanding that your company's more than one specific solution to one specific problem). As Strava co-founder and Executive Chairman, Mark Gainey, explains you need both:
Mark Gainey: At Strava, from day one, we can show you the business plan, our vision was this idea of: what would it be like to bring this global community of athletes together? Because we believe that that's what inspires you to keep going, is the people who keep people active. But our go to market was, let's go deep with this niche in cycling, right? I've seen way too many entrepreneurs, they do one of two problems. Number one, they immediately think that their vision has got to be their go to market. They try to basically be everything to everybody. Or, I see the opposite problem. I often see entrepreneurs who take their initial product idea and they think that's the company. Remember as entrepreneurs you're in the business of building a company, not a product. The product is a means to the end. So again, don't confuse these two. They're really important and you need them both. You need them both for the company. You need them for investors. You need them for employees. This is what inspires everybody.
Peep Laja: Today you have five products. So, why did you decide to expand the product portfolio and what was the strategic thinking behind it?
Sangram Vajre: That question really lands into the third book I've written, published last year called "MOVE: The 4-Question Go-to-Market Framework." And what's interesting about that question is that companies go through what I believe are three stages. Problem market fit, product market fit, and platform market fit. So, when you got a problem market fit, what that means is, you know, you're trying to figure it out if the problem is real, if somebody is going to pay us money, is that market for real? And at that time, you're just trying to get more customers faster. So you focus on what every company typically in that stage focuses on: ARR, which is annual recurring revenue, getting more customers faster, right? As you get to the product market fit stage, that's when you have now customers that are longer than a year. So, guess what? Retention becomes really, really important.
So now you're looking at not only how fast you get new customers, you start looking at how many customers you will retain, what is our GRR? Our gross retention rate. GRR becomes your most important metric. And we were there in our third year, fourth year of our business. And then as companies move from product to platform, which is what we did, we're going from a single product company to a multi-product company, which is a platform, your market expands. You stop selling to just to one type of buyer. You sell to multiple types of buyers. Now, what's important for you is called NRR: net retention rate, which means how much more wallet share can you have from your existing customers? Can you expand with an existing customers because your TAM all of a sudden starts focusing on that. So, to me, it's a natural evolution of businesses. You go from problem, to product, to platform. You go from focusing all-in on ARR to GRR to NRR. And if you look at any healthy business now, if you look at anything, you would see that NRR over a hundred percent is something that they focus on. So, I would take a month where our ARR is not as high as it needed to be, but if the NRR drops below a hundred percent, that's a problem, because as the business becomes bigger, every time you lose a customer, every time the customer is buying from somebody else, you're just losing a lot of opportunity. And it shows in the numbers in a big way. So, it's just a natural progression of company growth.
Peep Laja: You decided to acquire a number of companies along the way instead of building it in house. Why?
Sangram Vajre: The reality is the first company we bought, BrightFunnel, we were doing account-based advertising ourselves. And we had hundreds of our customers for doing account-based advertising. But towards the time they were about to renew, they would ask this question: I don't know how to show the ROI of this. And if you can't show ROI, you're going to have churn issues and they're not going to renew. And so we ourselves started to investigate, what do we do to help companies and marketers figure out how to show ROI to their boss? We started to use this product called BrightFunnel to do that. Because until that point, every single analytics tool only demonstrated funnels in terms of leads, and nobody really was giving an account-based approach or account-based analytics. So we used to use BrightFunnel and we had an internal conversation with our board like, look, we can go build what they build. It will take us six years (because at that time, BrightFunnel was six years old). It's at least going to take four to six years to build that. Or, we can figure out a way to just acquire that company and fastball our roadmap way ahead of it. Somehow, all the stars aligned and we were able to do that, but that was the reason: we were listening to our customers, knowing that it's greater than account-based advertising. Acquiring BrightFunnel only meant that now we have account-based analytics. And later, we can have account-based email signatures. Then we had account-based, later on, insight graphs. So all of these allowed us to grow, to support the vision of having and doing everything account-based, but allowed us to grow and gave us room in marketing and different levels of it.
VO: Terminus acquired BrightFunnel to fill a gap they saw in their product, but that's only one way strategic acquisitions can be useful. You might choose to acquire a competitor rather than compete with them, or use an acquisition to expand your offering and fast track your company growth. The important thing is that you have a strategy for acquisitions and mergers, and that you stick with it.
Here's Padmasree Warrior describing the three strategic categories of acquisition she focused on during her time as the former Chief Technology and Strategy Officer at Cisco.
Padmasree Warrior: We already have what we call a pipeline of companies that we may acquire in the future. The way we think about acquisitions, we think of them in three buckets. The first bucket is what we call tech and talent acquisition. So these tend to be, from our perspective, smaller acquisitions, so a hundred million dollars valuation or less roughly. They are sometimes also called tuck-in acquisitions, so they actually support our entire strategy. Then we have a middle set of acquisitions, roughly in the hundred million to a billion dollars or so range, where they are strategic. They fill a gap for us. They extend us into a new market, but they don't have the growth yet and we can add strength to them and grow them fast because we have a huge sales team that can sell that product. And the third category, which are probably the most complex but contribute a lot more to revenue, are what we call platform acquisitions. So platform acquisitions are a billion dollars about, and they usually come with their own brand, their own sales team, marketing. So, they tend to be more complex from an integration point of view, but they also bring a lot of revenue.
Peep Laja: So, when you were acquiring these companies, did you use the VC money you had raised to fund it or was your also your revenue growing? Was it a mix?
Sangram Vajre: The majority of it we acquired based on our equity, pretty much. We gave equity to most of the companies we acquired and obviously some VC money. Not a whole lot. I think we acquired BrightFunnel going into our third year as a business. So, in three years-- and BrightFunnel was there for six years. So we were acquiring a company that was older than us, had more people than us at one point, and had raised way more money. But for some reason, they were not doing so well in their business results and their outcomes were not that great. So, we were able to trade equity because they could see the we would be a bigger company in a matter of time. So trading equity would actually give all of them a better chance of having a better outcome than what they would have got for their own company at that time. Again, we learned along the way, we didn't know all these things when you start the company. You don't even think about this stuff. But as it came about, it is like, woah. Now the same equity that they have, when we give them equity in Terminus, their value of that equity has just quadrupled because Terminus valuation is way higher than theirs. So we were able to trade a lot of this on equity. Some of that was a little bit of cash, but our equity really did most of the talking.
Peep Laja: So this was year three. In the early days you, you mentioned you really grew on the back of demand generation: events, the flip my funnel podcast, you wrote a book. What else was working for you back then in terms of marketing and acquiring customers?
Sangram Vajre: So all of our demand generation was really this community that we were building, and even though it was a community, we were able to benefit from it because we are very authentic around the way we went about it. We never made it a Terminus community. We just kept it focused on independently. A lot of times, the events that companies do are all about them. And in the process, the customer starts feeling like, "Well, what's in it for me? I know you're saying that your product is the most awesome product ever created since a slice of bread. I get it. What about me?" And I think what we did from day one that was unique is, it was always about the community. So, we literally did events and said, here are the topics, choose the speakers, choose the topics you want. We created awards. That worked really well. If you're talking about building a category, one of the most important things one should do is build awards. So we created awards for ABMera called ABMies. And for five straight years, we have been running the ABM awards at the conference. Another thing we did was, every year, we were putting together -- and we've been doing it for I think seven years in a row -- the state of ABM. That allowed us to talk about what's happening. Have a clear point of view on the marketplace and gave the world here's where the market is moving. So we kind of own the narrative around account based marketing. So a combination of events, combination of awards, state of ABM podcast, it was all flip my funnel. It was all about the community. And that literally gave us the arms and legs to grow further in our business.
VO: Someone having a well articulated, clear point of view is very attractive. A company leading with a point of view of what's wrong, and how it should be, is interesting. A person having a strong, non-obvious point of view on how marketing or content or brand building should be done is compelling. I might not agree every time, but I respect it. And so do many other people, people are drawn to strong opinions, passionate beliefs. The absence of a strong point of view is...meh. When someone cares way more than me about how certain things should be done, that's hot. There's some subconscious safety in there. In contrast, people with no particular POV are less interesting. Spend time getting clarity on your point of view. Here's Dave Peterson, co-funding partner at Play Bigger Advisors and CMO at Celonis, explaining why POV plays an important role in establishing new categories.
Dave Peterson: Every category designer, the "Category Kings" that we know, and those entrepreneurs are kind of locked in our minds, has a point of view. And a point of view is often mistaken for messaging. Or marketing. Or even positioning. And it's all of those, but it's more than that, and it's bigger than that. A point of view establishes what you stand for and establishes what you stand against. It attracts the people you want to attract into your business, into your ecosystem, into your category, and it repels the people you don't want to do business with. And the point of view is built around framing the problem, painting clear ramifications for not solving that problem, sharing the vision for the future and outlining what to do now.
Peep Laja: So you guys are a category creator, but over time you weren't the only game in town. So, what was your competitive strategy like?
Sangram Vajre: Oh, we embrace that. I've always said there is no such thing as category of one. If you hear anybody say, "You know, we really don't have any competitors." If that's the case, then you probably shouldn't be in the business. Because that just means that nobody really wants it. If people wanted what you have, then there'll be more people. If people are flying, there will be more airlines. Like, it just makes sense. So, I'm very apprehensive with founders that I'm advising and boards that I'm on when they say, "Well, we really don't have any competitors." That's a bad, bad, bad thing. That means you are in the wrong place. So having competitors is great. And our strategy was, we wanted to build a category. We wanted to be part of building a category. So we invited 6sense, Engagio Demandbase. All of our competitors have sponsored all of our conferences. So, what's exciting about that was all of these companies had to invest in building the category of ABM. And we loved that, we even gave them all the stage and had them talk because we owned the narrative and we wanted to bring all of them alongside on creating this big category because we just knew that as long as the category is big enough, then everybody will have a larger stake and there's enough to go around. Each one of us brings something different to the table. So, that's great. The reality is, the market wants the best product to win, and the best product will win. If you are able to create that at a bigger level, they will actually give you a premium. So, what we saw was we were growing faster than most of our competitors purely because everybody coming into the community knew that we were behind the movement. So, that gave us an edge all along, especially in the early days.
Peep Laja: What are the moats you are building, looking into the future.
Sangram Vajre: We still want to continue to own the narrative which is why we're creating frameworks. Flip my funnel is a framework, TEAM is a framework, MOVE is a framework. The three Ps, problem, product, platform. So we are educators first, we help everybody to learn the best practices around it. And we are technology second, meaning we are helping people to do that in a faster and more efficient way. And it doesn't mean that technology is not important. It means that we recognize the need for strategy over execution. Like you've got to have that strategy first. In many ways, we also want to continue to create an ecosystem around us. That's very natural now that we have multiple products, people want to hook up and having integrated ABM campaigns where somebody can send an email, then they see an ad, then they get a direct mail, then they see a call coming in. People want to see that whole conversation, the buyer journey, altogether. So we feel like we are best positioned to develop something like. And that's where we want to focus on for the next decade.
VO: Assuming that you want significant growth for your business, broadly speaking you have two options to win the game. One: win the brand preference war. Two: build a new subcategory and make competitors irrelevant in the brand preference game. You try to, one: get inside the consideration set. And two: be the brand they pick from that limited selection. If you're in a mature, established category, you're up against many tens, if not hundreds, of direct competitors. Let's be honest, even if you build a new CRM startup that has every single feature that Salesforce has, and you're maybe even 10 times cheaper, you still won't win. Hell, you won't even break into the top 20. Most likely you're going to be ignored as more of the same. This very thing is happening in email marketing. There are 100 email marketing tools that have every single feature that MailChimp has. And they're also cheaper. Are they winning? Not at all. The market positions are extremely stable. Incremental innovation, meaning someone has a feature that others don't, is not enough to affect market dynamics in a significant way. Excess share of voice, meaning outspending others in the category relative to their market share, does work, but it will take many years and a lot of money. Creating a new subcategory might just be an easier game to win. Take door locks. I personally know of Kwikset, but there are lots of multi-billion dollar brands that I've never heard of. If you were to start a brand new door lock company, the odds of you winning the market or getting any word of mouth are extremely slim. What's a door lock that I use? It's a brand called August, and I chose it intentionally. So, how did I even find out about them? Because it's a different category product: it's a smart lock. By creating a new subcategory, you create a new set of must haves (in their case, a mobile app controlled door lock that auto unlocks your door with Bluetooth and so on) that makes the parent category options irrelevant. I'm no longer considering Kwikset. You're get inside the consideration set by creating a new set. The other way is to become a leader in an emerging category while all the pieces are still up in the air. We can see this in the global payroll category, a massive land grab is happening with Deel, Oyster, and Remote fighting for market positions. I'm not sure which one of them was the first, but it doesn't really matter. Toyota Prius was not the first compact hybrid, but became the leader fast and became the exemplar brand. And now all other hybrids are measured against the Prius. First mover advantage can help. Remain a monopoly for as long as you can, while you build up your moats and shape the category definition. If you're successful, all the brands that follow have to play your game. Yeti built the premium cooler subcategory. They established themselves as the commercial leader, they built the brand, and now can charge a price premium. Yeti became the exemplar brand that all other premium coolers are measured against. Terminus is definitely playing the brand relevance game. They built their own subcategory, defined the category, and instead of competing with incumbents head-on, they made them irrelevant by creating a new game.
Peep Laja: It's been eight years since you started the company. Over the years you've picked up lessons learned, so if you had to give three to five pieces of advice to fellow B2B SaaS founders, what would that advice be?
Sangram Vajre: Well, one would be that being intentional is way more important than being brilliant. You can have the best ideas in the world, but if you're not aligned it doesn't really matter. It really doesn't matter. If my team and I were not aligned on flip my funnel as the thing, and we created everything around it, we would have been noise. We wouldn't have that clear differentiation out there in the marketplace. We would just have been buried with like 8,000 other B2B SaaS tech companies that get burried every year. So, the idea is that you've gotta be intentional about what you want to do and where you want to focus on and what your point of view is. It's way more important than just being brilliant and coming up with something new every single day. It doesn't help. That's one. Maybe the other thing that I'm a big fan of is -- I have been quoted for this too many times not to own it -- is that you gotta have forcing functions in your organization and in your life. So, I think about forcing functions like flip my funnel events. It forced us to have our product ready faster. It forced us to have our narrative put together. It forced us to have the salespeople have their conversation talk track ready, it forced marketing to have their collateral ready. So everybody was forced to have some sort of deliverable without even asking them because we had a compelling event happening. Well, did we have to do four events? No. Nobody said that. Nobody's charter says that. But we did that. And to me, that was a way of creating a sense of urgency in the organization that forced people to take action and have bias towards action in some way. So, forcing functions is a big one. That creates sense of urgency. The other part is, Frank Slootman, who is the CEO of Snowflake, he wrote a book recently called Amp Up, and I was reading it and he talked about the fact that execution is greater than strategy.
Frank Slootman: No strategy is better than execution. In other words, your strategy is not worth a goddamn if you can't execute it. You can go far with a mediocre strategy but very, very strong execution. And the reason is, if you're a good executer, you will also gradually become a better strategist because she can now distinguish between whether the sources of problems are strategic, or execution operational.
Sangram Vajre: And it took me a moment to realize what he was saying as I read through the rest of it. And his point was, look, the best strategy comes from relentless and ruthless execution. You keep executing, keep executing, see what doesn't work, and you iterate and you come up with something new, come up with something new, and all of a sudden that becomes your strategy. And before you know it, you can't really see the difference between the execution part left and strategy began or vice versa. companies and founders need to understand that 95% of the decisions they will make, they are all reversible. You may make a wrong decision and you go this path, and then you shift and go this path.
But the idea that you don't make decisions that you don't move fast, or you don't take action, that's unacceptable because that will kill your business.
VO: So, what are the three strategies Terminus is using to win? One. They created a strong point of view and built a movement around it. By marketing the category, and the category taking off, their brand won.
Sangram Vajre: So all of our demand generation was really this community that we were building. And a lot of people were like, "If they're believing in this problem so much, they must have a better solution." So they would ask us. The inbound was crazy.
VO: Two. They accounted for future expansion and avoided cornering themselves into too narrow of a niche.
Sangram Vajre: A lot of companies get too niche too quick and therefore they lose the opportunity to grow. And the reality is, if you position yourself too quickly, too narrow it is really hard for you to then position yourself too broad, too quickly.
VO: Three, they fast tracked growth by acquiring companies who had technology that filled in gaps in their offering.
Sangram Vajre: We had an internal conversation with our board like, look, we can go build what they built. It will take us six years. Or we can figure out a way to just acquire that company and fastball our roadmap way ahead of it.
VO: One last takeaway from Sangram:
Sangram Vajre: People really want to be behind a movement. They want to be behind it problem. They don't want to be behind a product as such, because they don't know if the product is going to work or not. But you put a problem in front of them. You create a movement for them. People want to be part of that.
VO: And that's how you win. I'm Peep Laja. For more tips on how to win, follow me on LinkedIn or Twitter. Thanks for listening.