Amusing as these might be, I have a serious reason for sharing this interest: while we VCs tend to focus on success, there is a great deal to be learned from failure. I’m not the only person who believes this. Tom Kalinske is one of America’s great business leaders. A former CEO of Sega, Mattel and other companies, Tom has shepherded such iconic brands as Barbie, Hot Wheels, Sonic the Hedgehog, and LeapFrog.

Tom has an interesting and valuable perspective on business failures. He says, “In my experience, fear of failure in decision-making keeps executives from taking risks that could be huge successes. At Sega, I used to reward well-thought-out failures in product or marketing with a check. I wanted to make certain as a company we continued to take ‘good risks.’ On the other hand, I’d give a rubber chicken to execs who were too cautious on a decision, where the outcome was OK but should have been much better.”

Most of the entrepreneurs I work with are certainly risk-takers but they’re also mindful. They seek actionable advice not only on what to do but also what not to do. They’re eager for suggestions to avoid making similar mistakes.

That is why I have created a two-part blog series about lessons I’ve have learned from observing and working with failed companies as well as successful ones. This one deals with product failures, the other with company failures.

Why Do Some Products Fail?

The single biggest reason why products fail is a poor product/market fit. That is, there aren’t enough customers who are willing to pay for the product. There are myriad reasons for a poor product/market fit. The product may lack critical features; or maybe it has too many features. It may be too different from alternative solutions for some, while not being different enough for others. Buyers may perceive its price as too high. The list goes on.

It takes time, hard work, and a willingness to change to create a strong product/market fit.

Here are four lessons I have learned from analyzing failed products. I hope they provide some helpful guidance in your own search for a great product/market fit.

1. A product is not a market

Startups rightly focus on getting their first product out the door and into the hands of initial customers. Selling a few early products may be a good start, but it does not necessarily prove there will be enough customers in the future to make a viable market – that is, a critical mass of individuals or companies who face similar problems and will pay for a solution. For the product to be marketable, you also must be able to identify and reach these customers in efficient ways.

It’s important to distinguish between “bad” products and “failed” products. They aren’t always the same thing. Bad products give customers numerous reasons to turn away: inadequate features, poor quality, lack of support, frustrating interface, etc. Failed products may be well-defined, well-produced, and well-supported but they never reach escape velocity. Why? Well, there can be any number of reasons. Some of the most common are:

• • It takes time for customers to understand the compelling value of the product, delaying repeat business.
  • The universe of willing buyers with adequate budget is too small to generate sufficient revenue.
  • Sales volumes are too low to achieve economies of scale, undercutting profitability.
  • Innovative products may require lengthy sales cycles to explain their benefits, followed by large amounts of handholding after purchase.
  • The product, though attractive in many ways, may be perceived as “nice-to-have” not “must-have.”

2. Customers ultimately define the value of the product, not you

Comedians try out new material to see what kills and what bombs. The jokes may be good, but it’s the reaction that determines success. The same is often true for entrepreneurs bringing a new technology or product to market. Customers and products may find a product interesting, appealing, even impressive. But only when they’re willing to pay money will it have any value.

So, customers and prospects are the best source for feedback on your product idea, and what a justifiable price might be. If you’re a founder in search of financing, your chances of success will improve if you can demonstrate – through 1:1 interviews and other research – that a group of individuals with a common problem find your solution so compelling that they’re willing to pay for it.

Remember, you may speak the language of features, but customers understand value in terms of benefits.

3. You must have compelling competitive differentiation

Every product – even the most innovative – has competition. It can be direct (a product in the same category) or indirect (tackling the problem in a different way). Even a prospective customer’s inertia is a form of competition.

To make a sale, then, you must show how your solution is superior to all forms of competition. Here are some guidelines to consider in crafting your competitive positioning:

• • Don’t just compare features. Describe the whole product you offer, which wraps core product features with other qualities (such as support, customization, company reputation) to create a successful customer experience.
  • Recognize the power of incumbent vendors to retain their customers. Identify weaknesses you can exploit and emphasize how you can help the customer better.
  • Some of the biggest hurdles may not relate directly to the product, e.g., convincing customers to work with a new vendor or find new budget.
  • It’s an even harder task when you have a category-creating product or concept that requires a lot of education and explanation. Emphasize the benefits of seeing things a whole new way.
  • If you have a competitive advantage in price, develop tools and analyses that show superior ROI.
  • Leverage your early customers. Learn from their experiences with your solution and turn their observations into selling points.

4. Innovation isn’t always improvement

Every new product idea isn’t a great one. As I stated in point 2, a product has value only if customers are willing to pay for it. Even successful companies with loyal customers can have product failures when people don’t find the new item compelling.

One of the all-time classic product failures was New Coke. In 1985, Coca-Cola changed the formula of the world’s most popular soft drink. (It wasn’t actually called New Coke; only the product in the can changed.) Customers hated the change, and it was quickly apparent that New Coke was a disaster. Three months later, the original formula was revived as Classic Coke. The new formula was rebranded Coke II in 1990 and died an unlamented death in 2002. To this day, the episode remains the epitome of what can happen when a company toys with a successful product in the name of innovation and change.

Here’s another case study: BIC sells nearly $2 billion worth of pens a year and is synonymous with writing instruments. In 2012, it introduced “BIC for Her,” a line of pens ostensibly designed to meet the unique pen needs of women??? It was almost immediately mocked in thousands of online reviews for its irrelevance and misogyny. Another example of an innovation no one wanted.

A brand can lose credibility and acceptance if it strays too far from its core business. For example, who thought the name Harley-Davidson or Burger King would add panache to the cologne market? While Coors has millions of fans for its beer, few were interested when the company introduced sparkling water. And is it any surprise that there wasn’t huge interest in Cheetos Cosmetics or bacon lip balm?

Even the strongest market leaders in technology have product failures. Apple, which over the past few years has appeared to do no wrong, had the Lisa and Newton. Amazon had the FirePhone. And Microsoft has had its share of flops, including the Kin mobile phone and Zune music player. It even endangered its lucrative operating system business with Windows Vista.

Great products don’t sell themselves. Following these lessons will help you reach the pinnacle of product success – when customers come to you asking to buy.

The post Learning from Failure: 4 Lessons from Famous Product Flops appeared first on Norwest Venture Partners.

Hi, I’m Priti Youssef Choksi with a Norwest Nowcast about the opportunities I see for early-stage AI companies. As you can imagine, we’ve seen our share of business ideas around AI lately. I tend to evaluate companies in this space according to three criteria.

First is the quality of the team.

Second, I asked myself, do they have unique access to data beyond what’s available in today’s foundation models?

And third, the ability to integrate their solution into existing workflows. I’m going to focus on this last point today.

Now, humans aren’t going away anytime soon. And the key value proposition of AI is working alongside us humans to unlock our productivity. You can broadly divide people’s work into two types of tasks: creative, learning-oriented tasks — perfect for us humans — and repetitive, process-oriented tasks — ideal for AI. The latter don’t require any ongoing inputs, but you cannot get your work done without them. That is a sweet spot for AI startups.

Now, early-stage companies that try to introduce standalone AI products into the market will have a hard time driving distribution. Instead, founders should ask themselves, “how will my solution incorporate AI into people’s existing workflows?” That is, how will it optimize those repetitive tasks without requiring people to learn net-new processes?

Ultimately, AI will become part of everything we do. And while we have to ask ourselves whether or not the use of AI is appropriate for a particular use case, I’d caution against treating it like a standalone technology. That’s why I believe startups like Xembly, one of our portfolio companies, have the right approach. Xembly provides an automated, AI-powered chief of staff that works within the apps we already use every day to coordinate tasks and maximize efficiency.

I expect to see a lot more tools winning market share by offering such an AI integration play. What do you think? Use the comment section below to share your opinions?

The post The Best Opportunities for AI Startups appeared first on Norwest Venture Partners.

In the first article on this topic, “Product-led Growth: What Startup Founders Need to Know,” I discussed what PLG is and how entrepreneurs can determine if it’s right for their B2B SaaS startups. In this article, I detail the steps for implementing PLG strategies.

Before you begin

PLG, like any other go-to-market approach, is a means to an end. It serves the higher purpose of business growth and profitability. Implementing PLG just for the sake of it – without analyzing the best overall GTM motion for your specific product-market permutation – can be counterproductive. Every company needs to analyze the dynamics of its addressable market, the product/solution it offers to address the market opportunity, incumbent buyer personas and behaviors, and the evaluation/adoption journey in order to determine the best GTM approach.

If you are uncertain if PLG is a fit for you, review the first article in this series, or engage a consultant who specializes in PLG.

Build a PLG Operating System

The most successful PLG-driven companies build enduring PLG systems, which they can iterate, improve, and scale to fit their growth over time. This involves taking a holistic view across multiple components that together create an effective and efficient PLG motion. Here are the main components:

1. Focused objectives
2. Audience dynamics
3. Product mechanics
4. Experimentation framework
5. Operating stack
6. Growth ops
7. PLG scrum team

The figure below shows how they work together within a system.

The following sections explain how each component contributes to a PLG system.

1. Focused Objectives

PLG fails when it’s randomly applied across every generic growth objective. At every stage, a growing company will identify and prioritize the objectives they must achieve – to first survive and then thrive. Without a clear understanding of priority objectives, PLG is an ineffective tool.

Start by applying a first-principles approach to ruthlessly prioritize what you’re trying to solve for and why it matters. Being hypothesis-driven means that proving and disproving are equally beneficial outcomes.

Articulate specific measurable outcomes and rank-order them across your flow:

1. customer acquisition (trial or free signup)
2. monetization (free/trial-to-paid conversion)
3. cross-flow expansion
4. upsell/upgrade
5. cross-sell (for multi-product businesses)

These are not binary choices, but you will learn a lot about your priorities by playing the $10 dollar game: If you had to allocate $10 worth of “priority” across these stages of your flow, how would you do it? And spending $2 on each stage is not an option!

2. Audience Dynamics

To design the right buyer and adoption journey for product-led growth, you need a clear picture of the key “actors” in your flow. Clearly describe and differentiate among buyers, users, and administrators. Whether your motion is single-player or multiplayer, these roles can be assumed by fundamentally different people.

Each actor will play their part in growth, and you will need to understand their persona (triggers, needs, FUD, etc.) to design suitable hypotheses and growth experiments.

3. Product Mechanics

Closely study and catalog the mechanics within every aspect of your product (including pricing and packaging) to identify specific areas that are conducive for customer nudges and viral loops. For instance, does your product use a freemium or trial model? Both offerings serve similar objectives: avoiding the “cold start” challenge, where a user launches the product, experiences a blank canvas, gets paralyzed before experiencing the full potential of the product, and eventually abandons the trial.

Digging into their respective product mechanics reveals nuances that could indicate whether one is a better fit for your business than the other.

Free Trial vs. Freemium

In highly saturated categories with multiple competitors, buyers mostly know the market’s problems and what the potential solutions are. In this case, a free (time-based) trial makes sense because the potential buyer has done their research and just needs to quickly evaluate if your product fits the bill (i.e., they are arriving at your website with intent). They want to experience the full power of your product, albeit for a limited amount of time, so that they can make the right decision. Their objective is to validate their assumptions about your product.

In emerging categories with different types of solutions trying to solve a particular problem, buyers will have interest but won’t quite know if you’re right for them. It’ll take longer to convert their interest into intent. In this situation, it’s fruitful to be patient with your users by providing a freemium option. In this scenario, the buyer will evaluate a subset of features to see if they begin to address their needs.

Because this category is still emerging, some buyers likely won’t be a good fit. Make it easy for them to quickly understand how your product solves their problem without pressuring them with a time-based trial. This allows you to widen the funnel and maximize the number of potential buyers/users.

To thoroughly document your product mechanics, start by deconstructing the entire user journey into a series of micro-tasks (or jobs to be done) that map across the journey.

For example, the Slack user journey broke down like this:

1. Signup welcome for the initiator
2. Nurture in-product and via email to motivate the team initiator to invite at least three other teammates
3. Provide in-product education for the initiator and their teammates
4. Motivate the team to set up the right Slack channels for conversations
5. Motivate the team to install the primary Slack integrations (e.g., GSuite, Dropbox, etc.)
6. Motivate the team to insert or upload at least three documents per person over N days
7. Motivate the team to exchange at least X number of messages within N days
8. Provide the initiator with an admin email weekly (and monthly)
9. And so on…

While not exhaustive, the above example unpacks user onboarding into much smaller steps. And in each step, you can determine the best methods (e.g., in-product messaging or cues, email, bots, or even humans) to chain together successful actions. By solving each micro-step on behalf of the user, you can create a successful path through onboarding into activation, usage, and ultimately, engagement and expansion.

4. Experimentation Framework

Ask your team to treat growth like a product and encourage experimentation within the steps of your identified product mechanics to help increase your PLG conversion. Offer a disciplined set of methods to design, organize, and prioritize experiments in a structured way. There are plenty of structured prioritization methods – ranging from RICE to KANO, MoSCoW and story mapping – that can be applied by growth teams.

For example, the RICE method uses four variables to create a score that you can use to prioritize growth experiments:

1. Reach – Start by estimating the size of the user base that the experiment will reach. That is, how many potential users will be exposed to this change (in messaging, pricing, packaging, or a user flow)?
2. Impact – Next, use a simple scoring mechanism (e.g., 1 – 5) to estimate how much this experiment will change the metric you’re trying to affect. For example, if you’re trying to move the needle on a conversion rate, what is the estimated impact of this experiment?
3. Confidence – Use a 0 – 100% scale to estimate your confidence level in achieving the impact you’ve determined. Your hypothesis will likely have gaps and you will be working with incomplete data. The confidence score helps you balance between optimism and pessimism.
4. Effort – Finally, estimate the amount of work that needs to be done to implement this change. This can usually be measured by your engineering team in person-weeks or person-months.

You can start by scoring and ranking each of your ideas or experiments. These can then be evaluated by your teams and scheduled for implementation in a particular agile sprint backlog. But as you start becoming more sophisticated, you can start mapping these ideas by comparing reach vs impact or impact vs effort (for example). In environments where you have lots of viable ideas in the backlog, this further comparison will help you sequence which ones to implement sooner than later.

By running quantitative experiments, all internal stakeholders can get an objective view of what may (or may not) work. Doing this will avoid subjective debates, create alignment, and also help you make decisions with a clear view of the risks and tradeoffs.

5. Operating Stack

You can’t grow what you don’t measure. Spend time upfront aligning on the right KPIs and then create consistent analytical views for measuring progress. Doing so has a few benefits:

• More time learning, less time rebuilding infrastructure
• Common success metrics everyone can trust with less debate on whose interpretation of the KPIs matters more
• Flexibility to spin up new experiments as your markets and audience change
• Speed of going from hypothesis to test without having to reconfigure systems and rebuild data models

By mapping out the stack and implementing a strong foundation for measurement, you can focus on the outcomes and methods to drive your growth.

Here’s an example of a complete operating tech stack for PLG.

6. Growth Ops

PLG can and should feed your entire company’s progress and velocity; it may be product-led but it needs to be a whole-company effort. A product-qualified lead (PQL) is when a user that fits your ideal customer profile takes a set of actions that signal that they’re ready to buy your product. This is where you need functions across the business working together like an operating system to drive growth in a seamless and efficient way. This operating system is similar to a router, ensuring that the right lead gets the right type of attention and nurture from multiple teams within your company – from product and marketing to sales and customer success.

Think of growth ops as this operating system: business processes and service-level agreements between GTM teams so that PQLs flow through smoothly.

When a PQL threshold is reached for a particular user, here are a few examples of the triggers and actions you could orchestrate for each team:

• Product – In-product messaging can be triggered and docs/education can be surfaced to start the conversion process of the PQL
• Marketing – Nurture campaigns can be activated via email and other channels (e.g., webinars, events, etc.) to help move customers in the PQL state closer to purchase
• Sales – By layering on firmographics (size of company, vertical, etc.), you can route the PQL to the appropriate sales team, giving you the opportunity to tailor the next steps for that customer based on whether they fall into the enterprise or mid-market/sales-assist category
• Customer success – In scenarios where PQLs are related to expansion (e.g., a new instance or new team using the product from the same customer), PQLs can be routed to customer success so that they can follow up as part of their routine as well

7. PLG Scrum Team

Ultimately, growth is driven by the right mix of people with the right skills and competencies to ensure that the PLG system is much bigger than the sum of its parts. This team will build, iterate, and operate your growth engine in a self-sustaining way, with purpose and clarity.

It’s tempting to “borrow” talented team members from across your organization and make PLG a side gig for them. Avoid this as much as possible. Make this their full-time objective so that they don’t get stretched too thin or frequently context-switch and lose focus.

When all these components are implemented together, your company will have a holistic PLG system that will scale as your company grows.

About the author

Harsh Jawharkar is a growth leader and executive advisor, partnering with investors, founders, and CXOs to shape and accelerate growth across all stages. Harsh has built and scaled a diverse array of marketing organizations to drive growth at category-defining SaaS companies like Atlassian, Slack, Narvar, and Zendesk. Harsh began his career in product development, combining his background in engineering and design to ship large-scale cloud products at companies like PayPal and Sapient.

The post A Pragmatic Guide to Holistic, Scalable Product-led Growth appeared first on Norwest Venture Partners.

Every week I speak with founders and CEOs who are building exciting new B2B SaaS companies. They’ve established product-market fit, grown organically, and just raised capital. Then comes the big question: what’s my go-to-market strategy to build and scale this business?

That’s when I get the call. They’ve heard about the success that companies such as Atlassian and Slack have had with product-led growth (PLG) and want to know if they can employ the same approach. I walk each founder through the essentials of PLG, help them to understand whether or not it’s right for their business, and if it’s a fit, ultimately explain how they should build a PLG system.

After having many of these conversations, I realized that collecting my thoughts in a structured guide could help others who have the same questions. If you are an entrepreneur leading a B2B SaaS startup and you need to evaluate product-led growth as a go-to-market strategy, this article will help get you up to speed.

What is Product-led Growth (PLG)?

PLG is a go-to-market approach for growing a user base by allowing users to directly experience the value of a product’s features through a frictionless adoption and purchase flow. In PLG, user experience with the product itself – rather than sales outreach – is the primary driver for converting free evaluations into purchases and growth.

At a high level, PLG offers startups two primary benefits:

1. Time to value – The sooner your customers interact with and use the product, the sooner you will fulfill all the promises and claims you’ve made via marketing. The longer it takes a customer to realize your product’s benefits, the higher the risk of losing that customer to a competitor’s solution or their existing one.
2. Maximize benefit consumption – Once your customers experience the value you promise, your product needs to motivate them to use it at its maximum value. If they fail to reach their true usage threshold, you will end up with unfulfilled customer potential leading to flatter growth curves and eventual churn.

And PLG is more scalable than other go-to-market approaches. Businesses and their customers achieve these benefits through frictionless product evaluation, self-service purchase, seamless adoption, and viral adoption across teams.

How did PLG start?

To understand how PLG emerged, we have to look back. Over the past two decades, SaaS has largely displaced the previous era of on-premise software, most of which was sold with perpetual licenses, maintenance contracts, and a heavy reliance on field sales.

SaaS democratized software purchasing. A majority of SaaS companies rely on static plans or tiers to sell to specific executive personas (e.g. CIO, CTO, CMO, etc.). If they are unable to reach their persona through sales and marketing outreach, their growth stalls.

Today, a steady stream of cloud-born companies empower anyone at any level in an organization to quickly adopt a solution with frictionless purchase, seamless activation, and intelligent product guidance to expand their usage. Companies such as Slack, Atlassian, Twilio, and Dropbox pioneered PLG and they continue to iterate and improve it.

What are the defining characteristics of PLG?

While not exhaustive, these are the primary attributes of a mature PLG approach:

• Evaluation – clear product demo(s), trial or free version, transparent pricing and packaging
• Purchase – simple, self-service, no jumping through hoops, as easy as a credit card payment
• Adoption – guided onboarding, ongoing in-product activation, post-purchase education
• Engagement – features that encourage the growth of users within existing teams or expansion into other teams

What is not PLG?

It’s not uncommon for companies to mistakenly believe they are implementing a PLG approach. These are the tell-tale signs that they are not:

• No pricing or packaging published on the website
• Customer needs to contact someone as the only way to purchase the product
• No investment in a singular try-buy-adopt journey (onboarding, activation, engagement)
• Simply offering a time-based trial or free version (freemium) without investing in onboarding, expansion, and cross-team usage within the product itself
• Reliance on referral marketing incentives (such as credits, features, storage) for referring other users or customers

The business case for PLG

All entrepreneurs trying to grow their companies face the same challenges. They need to find where their demand is, build awareness and interest in those markets, and then convert that interest into new business. The typical channels they use to reach those prospects are highly competitive, increasingly expensive, and difficult to scale in a linear fashion. As a result, top-line growth through the typical channels becomes challenging. To achieve efficient and exponential top-line growth, companies need to look outside the traditional, hyper-competitive pools of demand (where everyone else is also fighting for attention). Enter PLG.

With product-led growth, startups can achieve low churn and highly cost-effective expansion. Especially valuable in lean times, PLG can act as a business growth engine that runs more efficiently than heavier sales-based models.

Here are the business outcomes that define successful PLG companies:

1. High aggregate growth – overall increases in volume of customers, users, and revenue
2. Low customer and user churn – preempt a leaky funnel as well as a leaky product
3. High intra-expansion – for team-based products, PLG companies are able to successfully expand usage within the team or department of the initial adopter
4. High inter-acquisition – PLG companies design the right cross-flow paths to expose adjacent teams and functions to the value of their product, driving expansion by acquiring new users and teams within the target customer

Is PLG Right for Your Startup?

To evaluate whether PLG is a fit for your company, consider the following core requirements and analyze if, how, and to what degree you can meet them before moving forward:

1. Buyer persona – do target customers have the inclination to self-evaluate your product? For example, if an engineering manager can quickly enter their credit card info and onboard their team to evaluate your product, then PLG is a great fit for you. On the other hand if your target persona is a CIO, whose time is scarce, then PLG may not be a great fit for you because that buyer won’t have the time or inclination to try or buy your product themselves.
2. Decision-making – does trying or buying your product require a series of steps across different functions (e.g. IT, procurement, finance, risk/compliance, etc.)? If your prospective customer needs to coordinate across and get multiple approvals from different departments, it will slow down their ability to try the product, making it a poor fit for PLG. On the other hand, if an individual employee is empowered to pick tools that address their specific needs, it frees them up to make quick decisions. If your product fits this profile, PLG is a good fit.
3. Self-serve friction – how hard will it be to build and operate commerce systems that allow a buyer to quickly enroll in a trial or free version and then purchase the product without human intervention? PLG relies on this type of upgrade or purchase flow, which requires a system to record the statuses and process payment transactions for thousands of customers, at scale, in a performant and error-free way. This is a time-consuming and intensive undertaking. PLG may not be a good fit if you cannot build this type of high-velocity commerce system.
4. Time to value – how long will it take for a user to start experiencing the benefits of the product? Will the learning curve delay a user’s realization of your product’s promise? For PLG to work, users need to be guided towards experiencing the usefulness of the product’s features as soon as possible. Certain products will have dependencies outside of the user’s control, such as complex data migrations, integrations with other systems, etc. For these types of products, PLG may not be the best fit because it will take considerable time and effort to help users realize the value of the product.

Note that adopting PLG does not mean:

• You can stop doing marketing (there is no “field of dreams”; your users won’t come just because you build a product)
• You get rid of your sales and customer success teams
• You don’t have to invest in any customer or user acquisition (i.e., performance marketing, demand generation, etc.)

If you answered yes to most of these questions, you may be ready for a deeper dive into the details of planning and implementing a PLG strategy. Those details will be covered in the second of this two-part series: “A Pragmatic Guide to Holistic, Scalable Product-led Growth.”

About the author: Harsh Jawharkar is a growth leader and executive advisor, partnering with investors, founders, and CXOs to shape and accelerate growth across all stages. Harsh has built and scaled a diverse array of marketing organizations to drive growth at category-defining SaaS companies like Atlassian, Slack, Narvar, and Zendesk. Harsh began his career in product development, combining his background in engineering and design to ship large-scale cloud products at companies like PayPal and Sapient.

The post Product-led Growth: What Startup Founders Need to Know appeared first on Norwest Venture Partners.

On top of that, employees signing up for SaaS subscriptions on credit cards have further exacerbated things with the so-called “shadow IT” problem. The way organizations purchase software has fundamentally changed. In the old days, the CIO drove all IT spending in a centralized fashion and the value of that software usually accrued to the organization (e.g. ERP implementations like Netsuite, SAP, etc.). We now live in a world in which the buyers of software are focused on the value that accrues to themselves as individuals (e.g. productivity apps like Airtable, Notion, etc. that help you get your job done faster.).

All this has led to massive SaaS sprawl! 61% of IT executives say their organization is currently subscribing to more than 100 cloud-based tech tools. And how are they managing this mess? Wait for it…. Good ole’ spreadsheets!

Today we give a kiss goodbye to the SaaS spreadsheet. Productiv, a Norwest portfolio company, is announcing a free SaaS Management offering called Essentials. It’s a 360-degree view of all your SaaS applications and subscriptions. Essentials connects to your SSO system to gather all the details of your sanctioned subscriptions and also connects to your expense report systems to suck in all those shadow IT apps flying under the radar.

Now you can easily track all your SaaS renewals in one place instead of chasing down contracts and asking employees if they’re really using all of those licenses you purchased. For free!

The long game for Productiv is to provide enterprises, for the first time, a way to measure the productivity gains introduced by SaaS software (hence the company name!). Today, we are excited to help every company take the first step on this journey. Kiss that SaaS spreadsheet goodbye!

The post Kiss the SaaS Spreadsheet Goodbye appeared first on Norwest Venture Partners.

Here at Norwest, we are optimistic that 2019 will usher in a new class of startups and emerging technologies that will continue to shake up the playing field and iron out problems that small and large enterprises face every day. We surveyed a few portfolio company executives and Norwest partners to see what they expect in 2019. Here’s what they said:

Matthew Howard, General Partner, Norwest Venture Partners  “Applied AI will be a focus in 2019 in areas such as security and process automation. We will see a new wave of security companies using AI and machine learning to combat the next level of breaches, spear-phishing and ransomware. Long gone are the days of implementing a secure firewall and assuming everything is protected. Enterprises need to embrace proactive vs. reactive security measures. In the back-office, mundane processes such as data entry, managing IT support tickets, and invoice processing will be automated freeing up humans for higher value work. The most successful companies will target tasks that are highly repeatable, manual, and costly.”

Rosanne Saccone, Chief Marketing Officer, BlueJeans      “I think this year will be defined by products that solve immediate challenges and provide quick and sustained returns. There are times when an organization can be more patient, but not right now. The geopolitical trade conditions have put pressure on businesses in every sector and there is no room for products or partners that don’t solve tangible business pain points. Real technology, not hyped up trends, will win the sales and contracts in 2019.”

Jerome Dubois and Rylan Hamilton, Co-CEOs and Co-Founders, 6 River Systems  “Retailers will own less of their own supply chain and look to suppliers for “physical cloud” services. Storage space will become a commodity and there will be mass optimization of where goods are stored and how they are shipped. There will be a consolidation of warehouse providers with major ‘physical cloud providers’ emerging.”

Scott Beechuk, Partner, Norwest Venture Partners           “I expect one or more major breakthroughs in blockchain network and infrastructure in 2019. Lack of performance, security, and privacy have stunted the adoption of public blockchain technologies at scale. A small number of great companies who solve these foundational challenges have the potential to become gigantic global organizations with staying power.”



Jason Schmitt, CEO, Aporeto “In the fast-moving DevOps and cloud-native enterprise, legacy security approaches are losing relevance. More organizations will adopt Zero Trust programs that assume infrastructure could be compromised at any time.  They will secure their applications, network, and data by authentication, authorization and encrypting all communication between applications. In this global whitelist model, even if a server is compromised with malware, the malware can’t talk to your applications because it’s not explicitly authorized.”



Rama Sekhar, Partner, Norwest Venture Partners  “AI and machine learning hype will cool off in 2019 as the legit AI companies rise to the top and those who’ve been faking it get exposed. The AI companies best poised to emerge as leaders in 2019 will be those that are applying AI to solve a real-world business problem, and those that can establish proprietary access to data, the critical ingredient to effective AI. Customers will continue to get savvier about AI, making next year a tough road for vendors that have simply slapped the AI bumper sticker on older goods.”



Jon Miller, CEO, Engagio  “We will see a dramatic change in how companies think about the role of marketing. 15 years ago, people thought marketing was the group that threw parties and made color brochures. Then tools like Marketo came along and helped marketing take a seat at the revenue table as a key driver of pipeline. But even today, most companies think marketing’s job ends once the opportunity is created; they don’t think marketing can or should support pipeline acceleration or post-sale expansion.  In 2019, we will start to see the role of marketing expand to include not only business pipeline creation, but also a focus on driving the cross-sell and expansion opportunities that are so critical for ‘land and expand’ businesses.


Sean Jacobsohn, Partner, Norwest Venture Partners         “Most of the innovation in software has focused on serving the salaried worker, leaving 78 million hourly workers behind.  Although it’s the largest workforce in America, hourly workers remain one of the groups most underserved by technology. Attrition with hourly workers can run as high as 100% per year and the labor market is tightening, which will lead companies to more aggressively invest in technology in 2019 that engages and retains hourly employees effectively.”


Ray Hein, CEO, Propel “The category of PLM is increasingly moving to the cloud. Being the 4th largest category of software, it has been largely unwatched and underinvested in until recently. In 2019 20% of all product companies will adopt cloud PLM systems as a competitive advantage – especially the “newcos”. Companies that are driving innovation and digital transformation programs are using the cloud to develop and commercialize new products. The key reasons for the movement to the cloud include; increased pressure to collaborate globally to improve the success of product launches, legacy, on-premise, PLM companies’ applications don’t meet the millennial user experience expectations and improved transparency across the whole value chain. The most progressive companies are including everyone in their new product introduction process from “concept-to-customer” to increase the likelihood of a commercially successful product in a highly competitive market, ridiculously faster than their competitors, and the cloud is the only way to make that a reality.”

The post What’s Next for Enterprise Tech? appeared first on Norwest Venture Partners.

According to a recent CB Insights report, the number one cause of startup failure is a lack of product/market fit. As the report further explains, “Tackling problems that are interesting to solve rather than those that serve a market need was cited as the number one reason for failure in a notable 42 percent of cases.”

These findings illustrate the importance of understanding the market and customer needs. After all, no matter how great a product is, it won’t sell if the target customer doesn’t need or want it. But, with the right strategies in place, an organization can deliver a product that will succeed in today’s dynamic and fast-paced market.

At the recent Norwest Product Summit, we gathered prominent product specialists from BlueJeans Network, ServiceNow, Veeva Systems, RingCentral, Steelbrick, and the San Francisco Giants to discuss their journey in achieving and maintaining product/market fit. During the event, the speakers touched on three specific areas startups should focus on—the customer, functionality versus user experience, and the need to be continuously flexible.

We’ve built on these focus areas and compiled three surefire strategies for achieving and maintain product/market fit.

Are you set up to deliver the best product for your target market? We’d love to hear your best practices and comments. Follow us on Twitter @NorwestVP.

The post 3 Proven Strategies Startups Can Use to Achieve and Maintain Product/Market Fit appeared first on Norwest Venture Partners.

It’s a critical topic: 42 percent of start-ups fail because of a lack of product/market fit, according to CBInsights data. Through keynotes and panel discussions, Product Summit attendees heard first-hand from industry leaders about their struggles and triumphs on the road to product/market fit.

Our lineup included product and technology executives from successful public and private companies, including ServiceNow, Veeva, RingCentral, BlueJeans Network, Steelbrick and the San Francisco Giants. They shared lessons learned on their own product/market fit journeys, including the following key takeaways.

Sell the Problem You Solve, Not the Product

While the adage takes many forms, it boils down to this (and it shouldn’t really be a surprise): buyers want products that solve real business problems.

As keynote speaker Allan Leinwand, CTO of ServiceNow, pointed out, buying decisions are often justified by specific product features or a price point. However, these factors are not actually the primary sales drivers: motivation for a purchase usually lies in achieving a competitive advantage, reducing costs, and/or resolving a top pain point.

Knowing this, startups should get to the root of the problem their product solves, and leverage what they’re hearing from current and prospective customers to create a more viable solution. During our panel discussion, Avril England, general manager of Vault at Veeva Systems, shared her company’s story. “We finally sold the first couple of deals with HTML mockups and that’s when we knew we had real product/market fit—because we did it without a product. And we’ve repeated that many times by asking, ‘Does this look good, would you buy it?’ If yes, we build it.”

“That’s when we knew we had real product/market fit—because we did it without a product. And we’ve repeated that many times by asking, ‘Does this look good, would you buy it?’ If yes, we build it.” – Avril England, Veeva Systems

Further, an efficient customer feedback loop keeps companies from going under what Allan called the “redline”— which can be calculated by taking the total number of monthly incidents (any time the customer contacts you) and dividing it by the total number of customers. The reason for contact could be anything regarding a feature or product. The point is that if you know why people are contacting you, you can quickly address the problem so that customers don’t have to contact you over the product, feature or particular functionality. The result, higher customer satisfaction and better product-market fit.

Don’t Ride the Middle: Solve for UI, Function or Both

Go-to-market timelines often force startups to sacrifice features or functionality. There is a fine line to toe in the development process—one that leads to either market success or failure. On one side, customers can hold onto products that are intuitive and easy to use as new functionality is introduced. On the other, high-impact functionality without bells and whistles can do the same as products that are fine-tuned to meet user needs. In sum, a product should look beautiful, work well or (ideally) achieve both, but it should never fall under the mediocre label in either category.

A poster child for executing on this rule effectively is Craigslist. It has not changed much in terms of UX or features since it was first expanded into a web service in 1996, but it is one of the most used websites in the world. Evidently, what is important is that it works, and works well, not that it’s aesthetically pleasing or has all the latest features.

How Do You Know You Are Making a Product That Fits the Market?

You can make an unsuitable product fit the market, but you can never make the market fit an unsuitable product. This is why large companies spend millions of R&D dollars on extensive market analysis, using methodologies ranging from surveys and online analytics platforms to analyst meetings and focus groups.

You can make an unsuitable product fit the market, but you can never make the market fit an unsuitable product.

Any organization should consider doing the same when working to better supply a given demand. For startups with smaller budgets, it may be harder to do it all, but prototypes and beta testing can be a boon for gaining industry and customer insight. The goal is to avoid having a product that doesn’t fit its intended market, because it will never succeed. Even elevated distribution or infusions of new features can’t change this without a finger on the pulse of the market.

In fact, as noted by both Mike Mansbach, president of BlueJeans Network and José Pastor, vice president of product management at RingCentral, sometimes it’s not until you step back and divest yourself from superficial, distracting features that you can truly understand and mitigate user concerns to make your product a market success. The key is simplicity and effectiveness in function or UI, not a slew of superfluous perks or features that ultimately don’t map back to user needs.

So, What Have We Learned?

These lessons share a few key themes:

• Customers come first: don’t be afraid to ask them questions and listen to them
• Focus on thoroughly executing on your product’s functionality, UI or both
• Remember your business goals and priorities while not fearing change

Ultimately, achieving and maintaining product/market fit can vary depending on the sector or the stage of your company, but these core principles are essential to adopt. Remember, poor market timing, competition or a lack of funds aren’t the main reason companies fail. Instead, it’s a lack of market for their products.

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Mist helps businesses deliver amazing Wi-Fi and Bluetooth experiences via smartphones, tablets and laptops to customers and to their employees. Mist works for businesses, which want new ways to engage their customers to enrich their experiences. And it works for customers, who want connectivity wherever they are, along with services and information custom-tailored to their preferences.

We believe in Mist’s mission and that’s why we recently invested in the company, alongside Lightspeed Venture Partners for a total of $14.4 million in Series A funding.

Delivering Better Solutions

Mist leverages wireless networking, location services and machine learning to provide a wireless network that knows who you are, where you are and automatically suggests services that will improve your experience while you’re there. So, for example, you walk into a hotel, log into Mist and it presents you with options to find coffee near you and tell your friends where you are.

The two new Mist products being announced today are the company’s Wi-Fi service and its patented Virtual Bluetooth Low Energy (vBLE) service. Mist’s products are already in use by many medium-to-large organizations around the world, including Fortune 100 organizations.

We believe that Mist’s technology provides a new type of mobile experience that fits snugly in the new era of wireless communication at the junction of wireless networking, location service and machine learning.

Listening to a 16-Year-Old

What may be more impressive than the technology is the experience and vision that Mist’s co-founders bring to the table. Mist was founded by two serial entrepreneurs and former Cisco execs, Sujai Hajela and Bob Friday, who built Cisco’s Wireless & Cloud Business Unit into a multibillion-dollar business. While at Cisco, they discussed venturing out on their own and launching a new breed of wireless network built for wireless devices. (Let’s remember that most wireless LAN technology today was designed before the smartphone even existed.)

The two had an idea. One day Hajela ran it by his 16-year-old daughter who thought it was too technical. She suggested a network that would place information about her location at her fingertips. She wanted the place (mall, amusement park or social event) to “talk to her” about the services available. This idea of a network that “tells you more” became the core idea for their funding pitch.

Looking Beyond Connectivity

Today’s Wi-Fi connectivity market is greater than $6 billion and the growing indoor location services sector is a multibillion-dollar market. Mist is currently in commercial pilots with some of the world’s largest organizations in enterprises, retail, healthcare, hospitality and more.

In addition, we think Mist and its wireless connectivity proposition will turbocharge adoption of indoor location services and drive a new era of products that go beyond simple connectivity, empowering businesses to deliver better mobile experiences than ever before as we fully enter the lower power Bluetooth era and as Wifi continues to become increasingly the primary network for the enterprise.

Mist’s founders said they want to help their customers exceed the expectations of the mobile generation. And in doing so, they envision the network becoming a business asset that delivers an experience beyond just connectivity.

The post Mist Reinvents the Wi-Fi Experience appeared first on Norwest Venture Partners.

BUT… unbeknownst to you, you’ve just been hacked by an imposter using a spear-phishing attack and POOF, the money is gone. The email from your CEO looked completely legitimate. Through social engineering, the hacker even identified a real vendor that you recently connected with on LinkedIn!  This type of targeted email attack is becoming all too common and the bad guys are getting smarter.

Today, we are thrilled to announce our investment in the good guys that will protect enterprise companies from these kinds of email phishing attacks: Agari.

These targeted email attacks are grabbing headlines all too often.  It happened to Snapchat in February and resulted in the identity theft of several employees.  In March, an email scam artist tricked an employee at Seagate into giving away W-2 tax documents on all current and past employees.  This is a popular scam during tax season: employees go to file their taxes and are shocked to see that they’ve already been filed and a refund already sent to a different address!  And phishing is big business: The FBI reported that since January 2015, business email compromise incidents rose by 270 percent and amounted to more than $2.3 billion in losses in less than two years.

Investing In a Secure Future

At Norwest, we have a long history of investing in the cybersecurity space.  Our portfolio includes security leaders such as FireEye, Bitglass, Bracket Computing, Dtex Systems, Exabeam, MobileIron,  Fireglass, Palerra, Seculert, Shape Security, TRUSTID, Morta Security (acquired by Palo Alto Networks), and 41st Parameter (acquired by Experian).

As an investor in the enterprise security space, I form my investment thesis by interviewing chief information security officers (CISOs) to understand their top security concerns. Targeted email attacks are consistently at the top of their lists because the bad guys have become smarter. While CISO’s have battened down the hatches with everything from firewalls to endpoint agents, the front door is wide open: email.

When we met Agari, it was clear from the company’s team, technology, and outstanding customer traction that they were the answer.

Outsmarting the Bad Guys

Here’s how it works.  The Agari Email Trust Platform processes some 10 billion outbound email messages a day, helping hundreds of household names like PayPal and JP Morgan Chase maintain their customer’s trust. In a world where “big data” has become a buzzword, the scale of this data source is unparalleled. The company uses insights from this data to fuel its Agari Customer Protect solution, which protects consumers from email attacks that spoof enterprise brands, and Agari Enterprise Protect solution, which helps organizations protect themselves from advanced spear-phishing attacks.

Security companies since the dawn of time have tried to model “the bad” starting with email signatures, URL blacklists, and, more recently, sandboxes.  This approach breaks down because the bad guys get smarter, change their approach, and on goes the cat and mouse game.

Agari takes a different approach to security by modeling the good, not the bad.  Enterprise Protect gains tremendous insight from the billions of outbound emails that the Agari Email Trust Platform sees every day and applies it to the inbound email coming into your company. Agari’s data science team has built robust models to understand what good email looks like, to ensure only those good emails reach your inboxes. Agari’s unique ability to tap into this volume of email through its email telemetry network provides a powerful defense against the increasing sophistication of cyber-criminals.

Agari can help us to trust our email again. We will worry less about whether an email really is from the CEO and more about getting business done.  We are proud to support Agari and excited to help them build their company and develop new products that make the cyber world a safer place. We look forward to collaborating with the Agari team and our co-investors including Alloy Ventures, Battery Ventures, First Round Capital, Greylock Partners and Scale Venture Partners.

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In this blog post, we will discuss web isolation, a new technology we think can create a paradigm shift in endpoint and application security. This technology is brought to the market by Fireglass, a recent Norwest investment which was recently nominated as a “Cool Vendor” by Gartner.

When we meet new start-ups, something we often hear is, “CISOs should assume their network is impaired by malware.” Enterprise security gateways of all kinds were designed a decade ago to protect enterprises from a different set of security threats. As attackers continue to develop more sophisticated techniques and learn to adapt faster, the inability of current incumbent gateways and other conventional security solutions to stop them widens. This leaves a majority of enterprises vulnerable to increasingly complex security breaches, as clearly demonstrated in the chart below.

In the same publication, the attacks target is also presented (in the chart below), with clear growth in user device/person targeted attacks.

Due to the growing targeted attacks on end-users coupled with the market axiom that “prevention is impossible,” hundreds of start-up companies have been founded in the last few years to create a post-breach defense line to detect, alert, decept, and improve forensics and investigations. Some CISOs augment the investment in this defense line with stringent restrictive security measures, such as URL filtering and network access permissions. Such security restrictions often impact user experience and employee productivity.

As for web applications, an array of modern deception, detection, and prevention technologies are available to defend against attackers who try to penetrate enterprise application servers and gain access to valuable user or corporate data.

Can the prevention axiom be challenged? As a global venture capital firm, we are constantly looking for product ideas which can leverage modern technologies to challenge past limitations and create new frontiers.

We have tracked the few endpoint security start-ups which emerged in the last few years, proposing to prevent security attacks by using state of the art endpoint isolation software. It is still too early to determine the long term commercial success of these technologies because any security prevention solution that relies on endpoint deployment is limited by distribution, available endpoint resources, plural operating systems and versions. All of these technical challenges are affecting scale, IT management overhead, user experience, performance and effectiveness.

We think there is finally a real solution to challenge the prevention axiom! This solution can potentially arm CISOs with an effective means to eliminate attacks breaching and spreading on their networks. More so, we think this can be done by a decade long idea – a network based software providing complete isolation between attackers and the enterprise assets (endpoints or web applications).

As a way of simple description – the Fireglass Threat Isolation Platform sits between users and applications to intercept web requests. The solution then executes these requests on behalf of the user, rendering all potentially malicious content on its isolation platform and sends a safe visual stream back to the user. By doing so, Fireglass isolates all malicious content in a secure, containerized environment instead of using risk scoring models which have proven to be ineffective. Fireglass can isolate endpoints from malicious sites, emails and documents.

In a completely different use case, Fireglass has even been used today to protect enterprise web applications (internal or cloud) from attackers seeking to gain access to organizations’ crown jewels.

If the idea is not new, and the potential of a comprehensive isolation is so large, the main question is: Why has this approach failed in the past and why it will be successful now?

We believe that several key technologies matured in the last year to enable the creation of this new technology:

• Server processing performance – a true enterprise solution requires a highly scalable approach to allow all, or most, users to browse through the platform. Current server processing capabilities coupled with smart load balancing techniques make the solution capable to support any size organization while minimizing capital and operational costs.
• Containerization and virtualization – container technology enables fast and secure micro service creation supporting many thousands of simultaneous web instances.
• JavaScript compilers – unique optimizations such as dynamic and pre-compilation of JavaScript code enables to boost performance and implement low latency transmission and display protocol.
• HTML5 – advanced capabilities have recently been introduced such as Canvas, WebSockets, History, offline storage and messaging to deliver a state of the art UX with zero software footprint on the endpoints. In addition, WebRTC and native browser support for video and audio now enable adaptive bandwidth that delivers on-demand and real-time video with no latency.

Fireglass, a Norwest portfolio company, recently came out of stealth and announced its channel partner program. With its current and roadmap technology, the company aims to offer comprehensive cyber attack isolation to enterprises without compromising on great user experience.

There is finally a solution that effectively eliminates attack vectors instead of trying to detect and prevent them – doing so before they hit the enterprise assets, thus reducing the spending and emphasis on complex kill chain products deployment.

The post Web Isolation – a Paradigm Change in Enterprise Cyber Attack Defense appeared first on Norwest Venture Partners.

With more than 20 years of security investing under our belts, we’ve seen it all (so far). We recognize that advancements in cloud/SaaS technologies combined with increased use of mobile devices and the continued influx of sophisticated cybersecurity attacks will only create more opportunities for startups and legacy companies pursuing security solutions. While this is great for innovation, the crowding of the market can be a huge challenge for aspiring entrepreneurs and investors alike.

Experts say that searching for the cause of a security threat can be like looking for a needle in a haystack. The same could be said for finding the next hot security startup.

This was precisely the focus of a panel that Norwest’s Matthew Howard was a part of earlier this month at the Structure Data conference in San Francisco. Joined by Steve Bowsher of In-Q-Tel and Dharmesh Thakker of Battery Ventures, the panel was moderated by Tom Krazit from Structure Events.

The experienced group of investors shared their thoughts on how to separate promising technologies from wishful thinking and also talked at length about data analytics and the role of machine learning and artificial intelligence in today’s security sector.

If you’re interested in hearing more, please see the video of the full 20-minute panel below (courtesy of Structure Events).

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