1. Know When to Bootstrap and When to Accelerate
PagerDuty started out by bootstrapping it yet after some time realised that it was either ‘go big or go home’. If they don’t invest right then in their big plans, another major player will realise the niche and take over. So they went from bootstrap to growth mode and got serious funding to develop their vision. Why did they feel qualified to make that choice? They knew they had a great product-market fit, they just needed to grow. They wanted to go beyond just alerts to provide end-to-end incident management and with all the data they had at their disposal they wanted to use machine learning kind of pattern recognition.
2. Set up a Sales Team with Technical Background
Started by 3 engineers with no startup experience, the company decided to start with product-led growth. They were biased against sales. They grew organically with the CTO handling the sales, yet it became too much for the CTO so he hired 2 salespeople for inbound, and growth immediately spiked.
5 Sales Tips for B2B Saas Startups
- Create a Low Barrier To Entry - PagerDuty had a free trial and was easy to use and adapt. Once companies were using the product, the sales team could reach out to them and potentially upsell them.
- Have Technical Sales Team - When dealing with a technical product, it helps that the salespeople have an engineering background. Most members of the PagerDuty Sales had studied engineering yet wanted to work in sales. This helped them form a rapport with customers in a way that a generic sales team couldn’t.
- Land and Expand - This technique involves starting with one team inside one company, which would grow to multiple teams, then entire departments, and perhaps until the entire company was using it. Sometimes the sales team was involved in this process - they would reach out to existing customers who were using all their seats and speak to them about their growth plan and help them assess if it's worth it to expand to other teams
- Focus on Big Companies - When someone from a Fortune 500 company signed up for a free trial, they got special attention from the sales team.
- Utilise Virtual Sales - Sales took place entirely remotely. The company managed to scale rapidly using just remote calls like Zoom or Google Meet. There was no travel involved.
3. Choose to Partner Instead of Compete
One needs to be very intentional about what they are and what they’re not. PagerDuty calls themselves the Switzerland of monitoring because they are friends and partners with everyone. By choosing to focus on their core product - the solution that brought the customers to them in the first place - they partner instead of competing with others. This allows them to concentrate their resources while providing integrations with other services. They know that their strength is in aggregating monitoring tools and focussing on the people-side of system maintenance. When something happens that requires human attention, that it gets to the right person or the right set of people as quickly as possible.
Creating an Ecosystem
PagerDuty would like to become a true platform and have an ecosystem developed around this. A true platform needs flexibility, extensibility, configurability, and allowing developers to build on top. PagerDuty has so far created an API for everything people can do with the UI and is working on encouraging an ecosystem to build around their platform.
4. Utilise YCombinator (if you can.)
Alex found YCombinator to be a boot camp in fundraising. PagerDuty had a great product and even paying customers yet YCombinator taught them how to build a pitch deck, craft a vision, and think big. YCombinator also introduced them to investors, some of whom became angel investors who helped them continue to craft their pitch and vision. James Lindenbaum stands out as an angel investor. He was one of the co-founders of Heroku and he's now running Heavybit yet he helped PagerDuty a lot in terms of fundraising. PagerDuty went on to raise a very successful series day with Andreessen.
5. Understand The Need for B2B Saas - The Customer Pain Point
Companies are coming to you because their free/open source solutions are super creative yet are time consuming and don't scale well. They would rather pay a B2B Saas product a few dollars a month instead of having to hire an engineer to do the same thing. One of Alex’s early customers was a social media company providing a service for doctors on call. When something went wrong, they would get an email from a monitoring tool. They would then perform a lookup in excel and find out who was on-call and what was their corresponding phone number. The system would then call that phone number and read over the phone the email, title of the email, and the error. However the people on the call were usually not so technical - their expertise was in dealing with doctors - they didn’t know what to make out of CPU-oh-three-dot-whatever is greater than 99%. Although it is a creative solution, in the end, they realized that it wouldn't scale and things will fall through the cracks. So they ended up using PagerDuty to take the complexity out of it.
6. Know Your Worth in the World of Tech Giants
Many times a cloud platform like Google, Microsoft, or AWS rolls out a tool similar to what DevOps solution company like PagerDuty is running. The cloud platform does that to provide a toolset for companies to use when using their cloud platform. However, does this take away business from companies like PagerDuty? Alex, who runs an on-call management system, says no. At the end of the day, people know that if they want to scale or have flexibility with their cloud platform provider, they need a standalone (with integrations) DevOps tool like PagerDuty This is especially true if a company is not 100% AWS/Azure, etc as many companies still have legacy systems and on-prem hardware that they are monitoring as well.
7.Invest in people
One thing that Alex advises young grads is to invest in people.
- Invest in Mentorships - It is important to have good mentors, people you can talk to and explore ideas with. And of course, push you out of your comfort zone. You can call a mentor anytime and be vulnerable in front of them.
- Invest in Friendships -Try to get the best work-life balance possible. If you work 80 hours a week you won’t have time to make new friends and nurture friendships. When you are young, make sure not to neglect your social life too much as these friends will be with you for life.
- Invest in Investors - One thing Y Combinator helped with is meeting with investors. Some of these investors also helped him improve his product.
- Invest in Networking - You don’t know which company will land up a customer. What are you waiting for? Get coding!