First enterprise customers – revenue or user engagement?

Since we are seed investors in enterprise technology, I am often asked this question. The answer on the surface seems quite obvious — generate as much revenue as you can to prove that customers find value and are willing to pay. My answer is the less obvious one — focus first on user engagement and the revenue and bookings will follow.

Wait, isn’t user engagement more of a consumer metric? It is, but it is equally as important to focus on this metric in the enterprise. No matter what business you are in, you need to ensure that your ultimate customer (the end user) is happy and absolutely loves using your product. I have seen countless situations where a startup extracts initial dollars top-down from an enterprise but ultimately cannot get traction because the end users don’t love the product. Without love of product there is no user engagement, and without user engagement, there is no long-term customer.

This is especially important in the age of SaaS as switching costs are quite low for substitute solutions. This is also the reason why next to VP of Sales, I would argue a VP of Customer Happiness/Success is a crucial hire. One is for generating new revenue and the other is for expanding existing customers and reducing churn. It is also why a number of companies have been created to help understand and monitor user engagement in the enterprise to proactively determine issues before they happen (totango, gainsight, and preact — full disclosure, my fund is an investor)

What is user engagement in the enterprise? When understanding initial customer traction, we like to understand how a product/solution can/will become a daily habit for the user. It is pretty clear that the more an end user interacts with the product the more important it becomes and ultimately the more value it provides. Another important metric to optimize for would be expansion of users within an existing account. In other words, how do you sell into one user and create viral loops (sharing dashboards, etc) and expand the active user base for the product. Once again, this sounds like a consumer metric but quite an important one —the more people that use it the more it becomes part of the ingrained workflow creating more value.

The challenge sometimes is that many enterprise tech companies are designed to work in the background, invisibly to automate tasks or aggregate data to reduce noise. If your tech is seamlessly analyzing data in the background, you need to find ways to show the user how awesome your product is by either sending alerts or creating some other eye candy to remind the user that your product is working and important. I have seen a few of our portfolio companies implement some simple changes regarding this and see their usage increase significantly.

So to recap, revenue matters but the path starts with optimizing for the end user in the enterprise and focusing on engagement. Once you create happy end users who love your product, the revenue will follow.

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Revenues kill the dream

Revenues kill the dream

I was on the phone yesterday with the CEO of one of our portfolio companies, and we were talking about goals for the next few months and in particular, what the company needed to get a Series A done. Her answer was quite simply “make the product delightful.” She continued: “I want to iterate to […]

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One VC’s take on NYC and Enterprise Tech

One VC’s take on NYC and Enterprise Tech

When Willie Sutton, the prolific bank robber, was asked why he robbed banks, he answered, “because that’s where the money is.” When asked by investors in early 2010, why we were starting a seed fund focused on enterprise and leveraging NYC, I answered with Willie’s quip but also said, “because that’s where the customer-driven talent is.” One […]

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boldstart ventures in 2014 – our ethos

As we look into 2014, we thought it was important to reflect on our activities in 2013 and refocus and refine our thinking and messaging as a firm. We are thematic in our approach and primarily known as seed investors with a focus on enterprise and companies that can scale quickly. To date our messaging […]

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Branding first starts with your team

Branding first starts with your team

External branding starts with developing a consistent, internal message first. When you think of branding and positioning, remember that your first line of offense and the most important representation of your company comes from your employees.  Make sure you have a succinct, crisp and clear 2-3 sentence pitch on what you do and that everyone […]

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Camping out and closing deals

Camping out and closing deals

I am sure you can see a common thread in many of my recent posts – Sales, Sales, Sales!  I don’t care how great your product is because without an ability to articulate the value proposition succinctly, tell the world about it in a capital efficient manner, and sell the damn thing, you are SOL […]

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Cutco Knives and startups

Cutco Knives and startups

When I worked for Cutco Knives one summer in college selling the world’s finest cutlery, my dream was to sell the Homemaker +8 at every meeting.  It was the Rolls Royce of knife sets and in every sales call I had, I always tried to flog the deluxe set.  Of course, more often than not, I left […]

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Startups and Intellectual Property (IP)

Lately questions about Intellectual Property or IP have been cropping up left and right.  Eliot Durbin (my partner at BOLDstart Ventures) and I had a long discussion this morning in preparation for his panel today about IP and patents.  Last week, we met with a company and when we asked about their core IP, they […]

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What entrepreneurs can learn from Jeff Spicoli

I know I may be dating myself here, but over the past few weeks I couldn’t help but think about the movie Fast Times at Ridgemont High and one of the standout characters, Jeff Spicoli.  When asked by Mr. Hand, his teacher, why he keeps coming late and wasting his time, Spicoli answers, “I don’t […]

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Never give up but move on quickly

As a young kid, I was always taught the valuable lesson of never giving up or quitting.  No matter how many times you get knocked down, you have to stand up and keep moving.  That is the same trait that I also admire in many of the entrepreneurs that I have funded over the years. […]

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