Going from a business of 50 people to 150 people, growing revenue 5x, and completing two major rounds of funding will teach a person a lot about the startup world. Sarah Breathnach, Head of Demand Gen and Field Marketing at Hunters and 3x startup marketing leader, did just that.
In the first SaaStr workshop Wednesday of the new year — held every Wednesday at 10 a.m. — Breathnach shares why hiring a marketing team to do lead generation is a big mistake.
Why Early-Stage Startups Stop Growing
Startups are fun and exciting but also very challenging. Between every single revenue milestone, there’s a danger zone called the Valley of Death. For anyone between $1 and $10M, it genuinely feels like you’re crossing through a valley of death to get to the next milestone. It’s an enormous feat requiring a lot of thought around strategy and execution.
The book Scaling Up looked at 28 million firms. Out of these 28M startups, only 17,000 startups reached $50M ARR. That’s only .06% of companies.
So why do some startups not make it through those valleys of death?
As someone in marketing who works closely with sales, Breathnach has seen a clear pattern for companies that stop growing rapidly beyond $10M ARR. What she’s learned is:
“They’re very good at capturing existing demand but failing to create new demand.”
95% of B2B buyers are NOT in-market for your product at any given time. So if your team is only capturing that 5% and not educating and nurturing the other 95%, you’ll exhaust your audience. A time will come when your sales team will struggle to bring in new customers if they aren’t focusing on strategies to capture the 95% who aren’t looking for you.
What do you do when only 5% are in-market?
The reality is most people aren’t ready to buy. Successful startup teams spend time retargeting, educating, and nurturing that 95% to hit numbers this quarter and building demand for future quarters so the business can compound over time.
Lead Generation Could Be Your Downfall
Lead gen and demand gen are often used interchangeably, but they aren’t one and the same. Understanding each could be the difference between your company imploding in the valley of death or exploding thanks to fishing with the right lure.
The Difference Between Lead Gen and Demand Gen
Lead generation is a short-term mindset. “How can we get as many leads as possible right now?” This mindset leads to low-intent buyers who aren’t ready to buy. It also means lower conversions toward pipeline and revenue because only 5% are ready to buy. 95% are left on the table.
Casting a wide net and capturing everyone with the Ideal Customer Profile through lots of dials, purchased lists, and cold outreach isn’t going to help you through the valley of death. If your company measures success through leads and MQLs, you’re missing the boat.
A successful business is one that plans on sticking around. If a customer doesn’t buy now, they keep them engaged until they’re ready. So instead of casting a wide net with no control over the types of fish you’re bagging, use a speargun to capture the exact fish you want.
Fish analogies aside, let’s look at demand gen. What is it?
As you can probably guess by now, the speargun is demand generation — the targeted efforts toward qualified buyers who have declared their intent to buy.
It’s the opposite of lead gen. It’s a long-term mindset focused on revenue and building a solid pipeline for this quarter and many quarters after.
They don’t care about leads. They care about longevity and building a bridge across those valleys of death.
If you hear yourself saying, “But I care about longevity and creating pipelines of qualified buyers too!” Good. It’s time to eliminate any outdated notions of lead generation being the most efficient and effective means of measuring success and adopt demand generation, where you’re creating real value with people in the 5% and 95%.
Volume vs. Value — Is There A Middle Ground?
If someone asked you whether you wanted a high volume of leads with lower conversion rates or a lower volume of leads with higher conversion rates, which would you choose?
Hopefully, the latter.
If a sales team is working on a large number of low-intent leads, they’re likely spending a lot of time using bad data, unsuccessfully prospecting, and following up with people who don’t want to hear from them, i.e., a lot of wasted time.
Lead generation is about purchasing email lists and cold outreach, while demand generation is about building lists of people who want to be there and provide value.
Of course, if you have talented SDRs and AEs who are persistent, someone will eventually agree to have a meeting, but what an inefficient way to convert leads into customers.
A lower volume of leads can be scary for people, triggering a scarcity feeling thanks to lead volume being the go-to measurement of success for companies for a long time.
But it doesn’t have to be.
Fewer leads with a higher intent to buy are more likely to convert into an opportunity than more leads with a low intent to buy. Learn how to generate demand instead of generating leads, and your team will go far.
How To Create A Demand Gen Strategy
To create a demand-generation strategy, you will need to hire a marketing leader. But not just any marketing leader.
Hire a marketing leader who can:
- Build the brand and capture demand. The best marketing leader will be able to capture the 5% who are in-market to buy while building a strategy to capture the 95% who aren’t.
- Hire and retain a world-class team. They should learn and know your strengths and optimize for any weaknesses.
- Maintain strong relationships with Sales, Product, and Partnerships. They should be on the same page with Sales, understand the product’s value, be aligned on roadmaps and releases, and prioritize partnerships to help make the leap from one significant milestone to another.
- Think like a CEO. More and more marketing leaders understand the importance of thinking like a CEO, with strong fundamentals and unit economics to run an efficient and profitable business, and less about only making things look pretty.
- Actively engage with customers. A great marketing leader takes the time to genuinely know a customer, build a relationship with them, and advocate for them in discussions with other teams.
- If you’re hiring a marketing team to do lead generation, those opportunities rarely ever close. Your sales team will waste time on low-intent leads, and that wasted time will cost you a lot of money.
- Lead generation leads to reporting inflated pipeline numbers. The CEO will think there is a ton of pipeline, but those leads don’t intend to become customers, which means an inflated number landing in front of boards and investors too.
- Lead gen leads to unsustainably high customer acquisition costs. Focus on efficiency and demand and less on general, unqualified leads.
Every Wednesday at 10 a.m. PST, SaaStr will hold live, interactive workshops on Zoom where experts in the community share their insights. Sign up HERE!