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10 Lessons from Marketo’s Growth to a Multi-Billion Dollar Exit

Have One Person Own Revenue in the Company: A Chief Revenue Officer

There needs to be a seat that understands the full big picture. It doesn’t belong in Marketing and it doesn’t belong in Sales. The CRO needs to talk strategically about life cycle revenue – across the customer journey. Sales and Marketing will never get along in my lifetime. So revenue has to exist in one place.

Hire a Chief People Officer (CPO) Early

Hire the most senior, overqualified HR executivey into your business as early as possible and have him or her report directly to the CEO. If they are empowered by the CEO and the organization, the CPO can understand and create a workplace this is welcoming, diverse and responsive  - constantly listening to people – which is really hard when you’re working really hard – and helping build your culture.

Create Corporate Social Responsibility from Day One

The day you think you’ve got to get a product release out the door and there’s no time to do anything else is the day you get out and give back in whatever way makes sense for your company and your community. It will create a spirit and energy that will give back to your team 5 times or 10 times whatever it is costing you.

Charge for Services With First Customer

I personally wrote this stupid thing on our website that said, "At Marketo, your success doesn't have a price." We didn't charge for services – that was a big mistake. There really isn't any friction about asking customers to pay for services. If you say, "Look, this product is great. It's going to transform your business but it's not easy and it will cost money." They will spend it.

Build World Class Rev Ops/Sales Enablement

You need a VP level Rev Ops/Sales Enablement executive by the time your company reaches $2-3 million in revenue. That individual must think holistically about how revenue is happening from the early lead in the door to the sale to the renewal to the up-sale to understanding full lifetime value and thinking about it in a modeling sense. She or he needs to be a storyteller – one who can look at the numbers, look at the models and then explain it in plain English to the executive team. That’s gold.

Focus on Continuous ARPU Expansion

Today, to increase ARPU (average revenue per user), you need to design feature-level packaging every bit as much as product functionally. The same people on product management ought to be thinking together with Rev-ops and Sales about how do you dish the product out, how do you launch the pieces, how do your turn on pieces, and how do you enable pieces. It becomes a part of the art of product design as much as the art of revenue design – and that’s where these two rules of thought really come together. Basically, you need to design an expansion pass.

Incubate New Product Initiatives

At Marketo, we failed completely in defining a multi-product company from when we were $30 million a year to when we were $300 million a year. If you’re going to bring a second product line into the company ­ – organic, whether it’s inorganic– it needs to be incubated. It needs to have its own dedicated sales team and its own separate quotas. If you're thinking about becoming a multi-product company, do not pass go, do not collect $20, go read Jeff Morris' Zone to Win – the one business book I've ever recommended in my entire life.

Value Constant Technology Renewal

The pace at which tech is moving and the competitive advantage that new tech is providing over old tech has never before been like this during the past 35 years. Today, you need someone that's charged with thinking not about product but about the future. You need to value technical currency. If you're three years old on your technology and a new company enters your market –- the degree of agility, pace, and performance the new entrant has in running circles around your company will win over a 5-year cycle, every time.

Always Be Seeking More TAM

No matter how good your initial tenure is, no matter how good it feels, no matter how amazing you see your company, as the CEO, as a leader, have a plan B. Know what's next, know where you're going next, and make sure you're always talking about it. Be absolutely zealous about ensuring you know the next piece of TAM you're going to go after. Think about what's going to happen if you have more money, what would you do next. Give yourself that opportunity to dream, but make it real, make it defensible.

Watch the Clock During Scale Up

Always be watching time. The tension between operating leverage and scale-up investment is really dangerous. At Marketo, we got to it late, our growth slowed a little too much. Live in the real world and focus on cash and on making the investments so you have the capacity when you need it. Have a long-range planning process and understand the day when you’ll need $2 million of ramp capacity. Don’t let the tyranny of a seductive short-range model triumph over what the real world is telling you about the dynamics of growing the business. Understand what it takes to really scale.