Finding the Bigs and Smalls
Growing catches up to us all. Following my curiosity to find our customer segments. Seeking help to sit next to the money. Inventing new roles at Slack.
By October, 2014, I needed help. It was obvious to anyone paying attention that our growth was continuing and by all signs would persist. So, good news, right?
8 months after launching our paid product we were still measuring growth on a week-over-week basis and seeing it compounding between 3% and 5%.
On a slow week, it was just overwhelming. On a busy week with a big press hit or an announcement, it was like opening another firehose of new signups, new inquiries, new conversions to paid customers. It was the best kind of a magical, overwhelming, lucky feeling.
And it could have killed us too. Yet my recollection is that we mostly kept it together. I arrived home each night saying to my wife “there is so much good work to do that I can’t even get to because I can’t get through the essential work.”
Our team was stretched and operating at full capacity and enjoying each moment of it. It was bananas good and I was hitting the wall.
A Curiosity About Customers
One day Stewart stopped by my desk and told me we were going to hire some help for Accounts, which meant some help for me. We hadn’t talked about hiring anyone, but he kept in close touch with our numbers, and he could see each part of the business was running flat out.
So I had to hire folks. We all had to hire folks. This bit of news from the boss was excellent because it was around the same moment that I was doing some calculation on our sales. Specifically, I was trying to figure out what percentage of our customers I had worked with, who they happened to be and how much work they each required.
What prompted my investigation was hitting the $10-million annual recurring revenue (ARR) milestone. We were growing fast. We’d whooshed past $10-million in less than 8 months. I felt I needed to know more about how we got there to maybe gain some insight into where we were headed.
I confess, my curiosity was firstly self serving: of that $10-million in revenue, how much had I worked on? I did a few cross references and came up with a rough number of $3.2-million. Sha-bang. Sitting next to the money did seem good.
My second flash of curiosity focused on the nature of our customer base. Who were these customers that I ended up working with? And what could they tell us about who we needed to serve in the future?
I remembered some specific deals but the daily flow of work had made all those #accounts I’d been working with blur together. I needed some perspective in the aggregate. The future was coming at us pretty fast.
In the bigger picture, our website kept getting better at explaining Slack. The Slackbot onboarding tutorial that everyone did when they first used the product helped a ton to move commercial prospects ahead. The upgrade process could be entirely self serve and smooth and standardized. No one needed to talk with me. So what made anyone get in touch with Slack (me) at all? I dug into the numbers to see what I could find.
The first thing I noticed is that the customers I worked with were actually a few different types of customers.
Customer Type 1: These folks were seeking something that they weren’t finding on our website. Non-profits looking for non-profit pricing. Communities (open source projects, #zork players, soccer teams, etc.) using Slack to organize themselves and looking for a complimentary upgrade. Educational organizations looking for educational pricing.
All those folks were easy enough help with some information and specialized pricing. Or, in the case of communities, encourage them to keep using the Free plan. These were our customers in the broad sense, but they weren’t the customers that had driven us to $10-million in revenues.
We eventually created non-profit pricing and education pricing but those folks were largely on their own at the time. We needed to say no nicely to them to keep ourselves sane and focus on...
Customer Type 2: These folks were from companies that either needed 2-3 touches (an email, a phone call, a screen share) or needed 20+ touches. So really, these proved to be two different types of customers who all needed help upgrading.
The customers who needed 2-3 touches I discovered were small businesses — a 10-person interior design studio, a 40-person marketing consultancy, a 5-person electrician contractor with 4 trucks doing field work and 1 office manager running jobs. They had some simple questions about getting up and running. They wanted to know if they could bring in outside consultants to only part of Slack. I answered their questions and they upgraded.
The customers who needed 20+ touches were tech companies or tech departments within mid-market or large organizations — a 2,000-person animation team across 3 offices and 2 time zones, a 600-person network management team at a cable company, a 900-person e-commerce company. They wanted to talk about security. They wanted to negotiate an annual contract with lawyers and custom pricing. They wanted us to fill out the vendor questionnaire from their procurement team.
I answered their questions and they came back with more questions. Selling to them was a process and we had to work hard to earn their business.
A Barbell Distribution
So zoom out with me now and it’s pretty clear to see that our customers were basically showing us our 3 early market segments:
Self Service — These customers visited the website, used the product and upgraded all on their own. No touches needed.
Small and Medium-Sized Businesses (SMBs) — These customers needed a bit of help, especially in a few niche cases, but then proved pretty self sufficient. 2-3 touches needed.
Enterprises — These customers needed dedicated help and expected hands-on account management to work with them to buy the product. They represented significant deals and expected to be treated as significant customers. 20+ touches needed.
Now take out the self service customers (because they — ahem — served themselves) and we called the pattern of inquiries from the balance of customers a barbell distribution — 2-3 touches at the SMBs end of the scale; 20+ touches at the Enterprise end of the scale. We saw very little in between, with 5 or 7 or even 12 or 15 touches. They just didn’t exist in our customer base.
We had SMBs and we had Enterprises. That was pretty much it. And those two types of customer segments remained pretty consistent for a long time.
So now that I understood our customer segments, I had to think ahead. If we were going to hire new people in Accounts to help these customers, what kinds of people did we need to hire? Who did we need to add to take Slack from $10-million in ARR to $100-million and beyond?
And with that question in mind, I started into my third job at Slack: Sales Manager.
My Third Job
I had started as a consultant in Marketing. Then I had been a solo operator, the first Accounts / Sales person at Slack. Now I had to become the first Sales Manager, hiring and building a team.
Did I have any clue about this transition? Was there a meeting with HR? Did my job title change? Nope to all of these questions.
We were a startup of around ~30 people just trying to hold it all together and not snuff out the magic that made it all work. There was no meeting with HR because there was no HR. We operated on trust and faith and belief in the story of our growth.
We knew we had found something special and rare. We’d come through the fire of real and then potential failure, gained a bit of traction and we could now afford to spend a bit of money on hiring people and larger offices and other markers of early success.
Our understanding of our own position grew as our business grew. We felt a bit less risky to ourselves. We started to look for new offices. We started to talk about planning beyond the next month or two. We started to grow up, just a little bit.
And into this growing momentum, I was about to start my third job at Slack.
Up next: Hiring Good Hybrids — Thinking about hiring. Showing your work. Scoring candidates. Lying at work. Finding our first 5.