When Ought to You Add a Second Product? Solutions from the CEOs of Twilio, Veeva, Amplitude, HubSpot, Gainsight and Extra

Just a few years again on the second SaaStr Annual, we put back-to-back a seemingly very totally different set of audio system, Jeff Lawson CEO of Twilio (transcript right here) and Peter Gassner of Veeva (transcript right here).

Each are two of essentially the most spectacular and provoking public SaaS CEOs — however their merchandise and corporations couldn’t be extra totally different.  Veeva sells eight determine offers to a really small variety of very refined prospects, whereas Twilio has an enormous lengthy tail and begins at $0.0085 a minute. 🙂

However I wished to pair them for a number of causes.  One was to get a way of what the bar was to drag off a profitable SaaS IPO lately (reply = oh man, very excessive).  One other was to see examples of some comparatively capital environment friendly corporations (Veeva raised lower than $10m in VC cash on the best way to $6 billion in worth!).

And a 3rd key level was to find out about a topic I take into consideration rather a lot, which is “When is the best time so as to add a brand new product?”

Including a brand new product line is extremely distracting.  It’s not simply constructing the 1.0, that’s the comparatively straightforward half.  However it will get extremely sophisticated after that.  Do you could have two gross sales groups?  Who will get what a part of the long-term improvement price range?  The place does advertising and marketing allocate its assets?  And most significantly, a number of merchandise could be very distracting on the administration crew degree.   The brand new product tends to dominate the discussions, but by definition, is just a tiny p.c of the revenues within the early days.  The very last thing you need the crew doing is chasing a shiny penny, when what actually issues is hitting the plan for the quarter.

The solutions from Twilio and Veeva had been radically totally different 🙂

Jeff Lawson of Twilio’s reply, as you may count on from a B2D firm, is principally — simply strive it.  Particularly if there seems to be demand.  For those who can construct it pretty simply, and the purchasers need it, strive it.  You possibly can at all times kill it later.   And clearly, this labored very effectively for them — at the very least as much as $1B ARR or so.  Then, they purchased Sendgrid and Section so as to add on huge extra product strains quicker and larger.

Peter Gassner of Veeva’s reply was seemingly the alternative.  His level was first, don’t take the straightforward route.  Your prospects will need issues which might be pretty straightforward to construct, and also you’ll perceive these issues effectively, as a result of they’re adds-on to what you’re already promoting.  However his level was these not often transfer the needle.  You don’t desire a new product so as to add 10%-20% in income … you wish to construct a brand new product that may do 100%+ of your current product’s income.  In any other case, it’s too distracting and received’t in the end transfer the needle.  So he challenged us to maneuver out of our consolation zone in wanting to construct the simpler, however in the end smaller add-on merchandise, and take bolder steps.

Veeva did this, including a second core product, its Vault to its Pharma CRM.  The overlap wasn’t large, and actually is diverging extra over time — however the impression has been large to the highest line development.

And since then, Vault has out-accelerated their preliminary product, CRM:

Now quick ahead 4-5 years, and Vault has grow to be not simply Veeva’s largest product line … however its future:

And extra lately, I did a deep dive with Dharmesh Shah, co-founder and CTO of HubSpot and the way and once they went multi-product:

And Spencer Skates, CEO of Amplitude, did an unbelievable SaaStr session right here on how important it was to be really multi-product by $100,000,000 in ARR … and the massive errors that made attempting to promote to totally different ICPs right here:

After which the opposite day we did a deep dive with Nick Mehta, CEO of Gainsight, as they’re crossing $200,000,000 in ARR … on his Prime 10 errors.  #8?  Not going multi-product early sufficient.  They began to hit headwinds at $50m ARR by carry too sluggish to roll out their second act.  An excellent convo right here:

So what ought to you do right here? 

I want I had some magic solutions.  I struggled with this rather a lot myself.  In my first startup, it was clear to me that nothwithstanding closing $6m in revenues our first yr, that our TAM was doubtless lower than $100m.  So we constructed a second product line our first yr.  We knew we needed to.  So I wished to start out as early as attainable.

At Adobe Signal / EchoSign, I wished to do that early too, however it was simply too distracting.  The product went from easy to very complicated as we served extra nuanced enterprise wants.  The calls for there have been so heavy on the group that there was no approach, at the very least till $15m in ARR, at the very least, we may ever have launched an actual second product.  Though I spec’d out a number of.

Most Massive Firms find yourself fixing this with M&A, at the very least partially.  Salesforce’s Advertising Cloud is a big income driver, and a big p.c of it and nearly all of the Commerce Cloud is from acquisitions:

However a number of learnings from corporations I’ve labored with and noticed:

• Sometime, nearly everybody provides a second product.  The query is when.  Not everybody does, however nearly all distributors do.  So perhaps whilst early as a number of million in ARR, when you begin to actually perceive your market, begin serious about what you may do right here.
• Promoting a second SaaS product may be very onerous.  In case you are B2D and/or freemium and don’t want a devoted gross sales crew, it may be a little simpler.  However sustaining distinct gross sales, advertising and marketing, buyer success and product groups is a big useful resource battle.  The prototype is simply the very starting of a journey.
• Don’t let a further product be an excuse.  Let or not it’s an enabler.  A second product can’t bail out your gross sales crew.  It may’t clear up your miss for the yr in income.  Don’t let it grow to be like a function hole, an excuse to overlook the plan.
• It’s a very good purpose to boost a little more money.  In case your second product begins to work, you will want to employees it.  There are good and unhealthy causes to boost extra money.  This can be a good one.  At the very least after launch, you’ll want a devoted crew of at the very least some measurement.
• Perceive when you can co-sell the product, for actual.  That is tougher than it sounds, but when the merchandise actually are adjoining to one another, your gross sales crew might be able to promote each.  This makes staffing gross sales a lot simpler right here.  However — it additionally makes the income facet tougher in lots of instances.  As a result of the gross sales crew will wish to throw the second product in at no cost, or at the very least very low cost, to get the deal closed.
• Get on a jet. 🙂  Or least Zooms.  OK, that is essentially the most damaged report SaaStr recommendation.  However generally you possibly can actually solely intuit when to go for it on a second product by having talked to 100 prospects.  You — the founder.  Not simply your VP of Product or your head of gross sales.  They may carry you again tons of suggestions.  However it not often will provide help to resolve when to go for it on a second product.  Your prospects are certainly one of your perfect sources of learnings right here.  They’ll let you know all concerning the white area and gaps you assume you’re attacking along with your potential second product.  And you must go to them face-to-face to actually study.

Good luck.  These things is hard.  Simply plan at the back of your thoughts on constructing a second product by $100m in ARR. 🙂

(observe: an up to date SaaStr Basic submit)