The Artful Blend of Developer and Enterprise Go-To-Market

In a pre-cloud world, getting new applications deployed took months or even years. Today developers can build prototypes in less than a day. Much of that improvement is thanks to a world of software and cloud infrastructure now readily available for rapid application deployment.

For infrastructure startups providing the tools to build and deploy new applications, the shift has also brought new routes to market. For example, a huge part of new infrastructure is open-source software, and that has provided a springboard for startups. But balancing those efforts along with a successful enterprise strategy remains the winning combination.

Last week we learned an important lesson on blending developer and enterprise go-to-market activities. Docker, once one of the highest flying infrastructure startups, announced it will sell its enterprise business to Mirantis, and get a fresh round of funding to focus on “advancing developer workflows for modern apps.” This is not the outcome an early category leader hopes to achieve. For more detail on Docker, see Tom Krazit of Mostly Cloudy, Unicorn down: Docker gives up on the enterprise.

The overall takeaway is clear. The next great infrastructure startups will successfully blend developer AND enterprise approaches.

Developers reign with cloud and open source

As open-source adoption and cloud deployments surged in the last decade, developers became the starting point for new infrastructure. Projects can now be scoped, researched, prototyped, and deployed in just days or weeks compared to legacy IT deployment models that could take months or even years.

This led to a wave of developer-first approaches and successful IPOs from companies like MongoDB and Elastic.

Enterprises drive the fastest growing infrastructure startups

Even with the importance of developer-centric approaches, enterprise deals with values greater than $100,000 or coming from Fortune 1000 companies, propel revenue for the fastest growing companies. While developers drive infrastructure innovation, the enterprise buyer drives the economy.

Recent infrastructure IPOs from companies like Cloudflare and Datadog showcase this trend in their S-1 documents. Both companies went public in September 2019.

In the Cloudflare S-1, the company notes

the number of customers with Annualized Billings of greater than $100,000 grew from 240 as of June 30, 2018 to 408 as of June 30, 2019, a 70% increase year-over-year.

and we have customers with Annualized Billings in excess of $3 million.

In the Datadog S-1, the company notes

Approximately 590 of our customers as of June 30, 2019 had annual run-rate revenue, or ARR, of $100,000 or more, increasing from approximately 450, 240 and 130 customers as of December 31, 2018, 2017 and 2016.

Further, as of June 30, 2019, we had 42 customers with ARR of $1.0 million or more, up from 29, 12 and two customers as of December 31, 2018, 2017 and 2016.

The enterprise message is strong for private companies too. In October, Databricks landed a $400 million round at a staggering $6.2 billion dollar valuation. It’s CEO was quoted on a recent podcast,

The way I look at the company is build amazing software that you can monetize with enterprise customers.
— Ali Ghodsi, CEO, Databricks

Across the developer and enterprise spectrum

Developers are almost always responsible for the initial identification of new infrastructure tools. However, the enterprise buying pattern is notably different.

The dichotomy mandates a cohesive strategy.

Elements of an blended approach

Given the broad needs from developers and enterprise buyers, infrastructure companies must focus on both from the get go. We’ll call these go-to-market approaches the Quick Start and the Account Plan.

The quick start

Most startups employ a quick start approach through a freemium offering, open-source project, or cut-and-paste pre-built applications or code. These methods get developers up and running with the product quickly, allowing the product to speak for itself. As adoption shifts from developers to an enterprise buyer, nothing beats “installed and working” as a step to a paid-for enterprise deployment.

With the public companies mentioned earlier, Cloudflare has a free offering to protect small websites leading to over 20 million Internet properties using its platform. Datadog has a free offering to capture log information from 5 hosts and store 1-day’s worth of data.

Another private company, HashiCorp, which 1 year ago was valued close to $2 billion, uses open-source developer workflow tools to drive initial adoption. In the same podcast linked above, HashiCorp co-founder and CTO Armon Dadgar explains the need to focus on revenue.

If you’re solving a large enough problem, you eventually need teams of dozens, hundreds, thousands to work on that problem. You need a business. There has to be a topline connected to your bottom line.
–Armon Dadgar, HashiCorp

He also outlines a clear delineation between the open-source and enterprise approaches.

we think of our split as what’s technical complexity versus what’s organizational.

if we’re solving for something that’s fundamentally caused by the organization, that is an enterprise thing. Is it a core technical thing that we’re solving where the tool fundamentally needs it? That’s open source.

Another way to describe this is benefits to the individual can fall into a wide go-to-market approach of open-source and freemium, whereas benefits to the organization should remain part of an enterprise strategy.

The account plan

Whereas the quick start approach starts with the individual and bubbles up to the enterprise buyer, the account plan starts top down.

For infrastructure startups looking to achieve best-in-class growth, they must also have an account plan focused on larger enterprises. Today Account-based Marketing, or ABM for short, is popular to describe targeting the accounts you perceive as likely customers of your product, and establishing a strategy to secure them.

Infrastructure startups might know that their technology is particularly suitable to the insurance industry, or retail, or to companies that are moving to the cloud, or companies that have too much unstructured data, or something else. Pick a way to narrow your market to a specific customer segment, and then make sure you win that segment.

An account-centric approach puts infrastructure startups on the path to securing the enterprise deals needed to reach billions in revenue.

The road ahead

A primary drivers for all of the new software and cloud infrastructure is the ongoing push to deploy new applications. In a report on “The New Stack’ from this summer, Morgan Stanley analysts write,

In the digital era, businesses now rely on a staggering number of critical applications to support their operations, so the need for rapid, flexible software development is directly connected to business success

With future trends such as the low code/no code movement, the audience base for enabling application acceleration will only grow.

For companies looking to provide the software and tools to power this next wave of builders, the go-to-market approaches are becoming increasingly clear, requiring an artful blend of bottoms up and top down.