From my notes on the Y-Combinator talk by Anu Hariharan
🚨 tl;dr: An enterprise model for a startup means that your startup is primarily selling to big shinny enterprise customers. The most important metrics are Bookings, Total Customers, and Revenue. When distinguishing between bookings and revenue, the details matter. One is a leading metric and one is a trailing metric.
🏢 What is enterprise software sales?
- An enterprise company sells services or software to other businesses on a per license basis. These contracts have fixed terms, designated contract values, and come up for renewal at the end of the term.
- Enterprise sales usually involves larger contracts and longer sales cycles than traditional sales to SMB (small / medium businesses). You also usually need to go through multiple decision makers. This can mean a higher level of risk than traditional sales.
- There is some overlap here between the Enterprise selling model and the SAAS selling model. To my mind, it’s mostly one of targeting and the length of sales cycles. If you’re pushing for enterprise sales you are trying to sell to the biggest of the big and excluding smaller companies and startups.
📊 What are the top metrics for a startup selling to enterprise?
- Top metrics: Bookings, total customers, and revenue
- Bookings: Sum of value of all customer contracts.
- Letters of intent and verbal agreements don’t count. It only counts if ink is on paper…or touchpad scribble is on Docusign I guess.
- Total Customers: Total number of unique contracted customers today.
- My question: is that customers or logos? Sometimes you can sell within an organization to different departments.
- Revenue: actual money coming in.
- Bookings and Revenue are not interchangable. Neither are Bookings and ACV (annual contract value)
- Booking and Revenue are different because a company may sign a contract ahead of time. Which means you recognize that value in Bookings but you don’t recognize it in Revenue until the service is delivered.
- Yes, that means that Revenue is a significantly trailing metric.