Should start-ups target consumer or enterprise markets first? Former entrepreneur turned investor and Managing Partner of Upfront Ventures, Mark Suster, joins this episode to give his guidance to entrepreneurs looking for investment and growth. He discusses how to engineer product-led growth for your market, how to secure investment, and the dos and don’ts for start-up entrepreneurs.

Press play to hear Mark’s thoughts on…

Understanding Product-Market Fit 

“I would rather you have no influencers. I would rather you have no hype. I would rather you raise less capital and obsess with what is the product feature that's really going to resonate with a group of people, like the raison d’etre. What is it that they're waking up every day to use your product, to do and why your product and not other stuff?”

The Value of Sales and Marketing

“At the end of the day, sales and marketing really matter. And it turns out that people buy products for reasons other than, this is the absolute best product in the market. They buy products for the perception that this is going to help them improve.”

 Committing to Being an Entrepreneur

“We're looking for people who want to go on a 10- or 12-year journey with us. We're not looking for people to go on a two-year journey. So you've got to want to do this. This is your career. This is your livelihood, your life, and your mission. And if you're successful at it, you're going to be hugely financially and emotionally rewarded for doing it.”

I would rather you have no

influencers. I would rather you

have no hype. I would rather you

raise less capital and obsess

with what is the product feature

that's really going to resonate

with a group of people like the

. What is it that

they are waking up every day to

use your product to do? Why your

product and not other stuff?

That's Mark Suster, Managing

Partner at Upfront Ventures, a

leading venture capital firm

based in Los Angeles, California.

As part of Upfront, Mark has led

investment rounds in a range of

both business and consumer-

focused startups, including Bird

Scooters, ChowNow, Inovcar, and

thredUP, which went public in

March of 2021 at a $1.3 billion

valuation. Before entering

venture capital, Mark was the

founder and CEO of two

successful business enterprise

software companies Build Online

and Coral, which was acquired by

Salesforce.com. Mark also has a

popular blog called "Both Sides

of the Table," where he shares

advice and relates perspectives

from both investors and startups.

In this episode, Mark talks

about why an innovative product

roadmap is so important. Why he

believes location is more

important than ever as we enter

a work-from-anywhere in the

world. This is Daniel Saks, Co-

CEO of AppDirect. It's time to

decode product-led growth.

Welcome to "Decoding Digital,"

podcast for innovators looking

to thrive in the digital economy.

I'm your host, Daniel Saks. I'll

sit down with other founders,

CEOs, and change-makers to

decode the trends that are

transforming the way we work.

Let's decode.

Mark, I'm so excited to have you

on Decoding Digital.

Thank you. I'm happy to be here.

Thanks for inviting me.

You began your career as an

entrepreneur. You launched two

companies that were acquired.

One of them by Salesforce. Then,

you moved to your current role

as Managing Partner at Upfront

Ventures, a VC firm based in LA.

How and why did you make the

jump from entrepreneur to VC

investor?

It's interesting question. You'd

like to think that everyone in

their career knew exactly what

they were doing and made very

purposeful decisions. We all

tell stories in reverse that

make it sound like that, but

it's seldom the case. Let me

tell you what actually happened

is I had sold my company to

Salesforce. I was VP of products.

I was talking with Mark Benioff

about a much more senior role at

the company in the long term. I

was seriously considering it,

but at heart, I'm an

entrepreneur. It seemed like

maybe there was one too many

Marks at Salesforce.com, and he

was the real Mark. Hats off to

him for what he's achieved and

what he's built. I just thought

I wasn't done with my journey,

so I called my VC firm that had

backed both of my startups. I

had worked with Eve Sistero at

the time for eight years. Eve is

French but has lived most of his

professional life in the United

States. He was a great mentor

to me. I said, "I want to go to

another company." He said to me, "

Have you ever considered venture

capital?" I said that I had.

Back then, most VCs didn't want

entrepreneurs. Most VCs that

were reaching out to me were

talking about EIR roles or

operating partner roles. I just

thought, "If I'm going to do VC,

I want to really be an investor."

This is 2007. My mentality at

the time was, "If I'm not great

at being a venture capitalist, I

can always fall back to being an

entrepreneur because what does

it take to be an entrepreneur?"

All it takes is a bit of

stupidity. A bit of

like stupid blind belief in

yourself and willingness to work

for free. I'm stupid enough to

believe in myself and work for

free for a period of time. I

thought that's a pretty good

fallback for me. Truthfully, I

thought I'll give it a shot for

two years, and if not, I'll go

back to being an entrepreneur.

I know you didn't ask this, and

I'm sorry for a long answer, but

just to say, what I was thinking

at the time was I was 39, and

I'm now 53. At 39, having done

two software companies. Having

started my career as a computer

programmer. Having done that, I

thought my analogy is basketball.

At some point, you're just not

as fast as the next guy. At some

point, you just can't hit the

three-point shot with time

running out. If you can, you

want to be on the court. I loved

being on the court. I loved

every minute of it, but having

played the game for more than a

decade. At some point you,

realize I might be a better

coach than player. I had that

mentality of, "Let me see if I

can coach." I've enjoyed every

minute of that.

I know that you started your

career in enterprise software

development. Then, you started

enterprise tech companies one

sold to Salesforce. I know in

your VC experience, you're very

focused on consumer tech. One

of the things I'm always

impressed with you by is that

you're also an early adopter of

a lot of products and

technologies. At one point, you

were a power user of Snapchat

and one of the most followed

Snapchatters. Wanted to get a

sense of your perspective on

what consumer tech people can

learn from the enterprise and

vice versa?

Well, let me first say why I try

to use as many tools as I can.

Stating the obvious, I grew up a

programmer from the age of 13.

It's just how I'm wired. I'm

very left-brain, and I enjoy

problem-solving, and computers

scratch that itch. What I like

to say is imagine you want to be

an artist. Let's say you want

to make pottery, and you don't

have a feel for the clay. The

only way that you can pass

judgment on what you think of

video, audio, what you think

about how to deal with creators,

creator tools, how do you get

marketing and distribution, and

what is consumer behavior look

like? You need to play with the

clay. I don't have to be the

best person in every platform. I

have to have intuition for it. I

took a call yesterday from a

talented young entrepreneur.

He's building in the audio space.

He had a good deck, and the deck

was vanilla cookie cutter. It

was total bullshit. Honestly, I

called bullshit on it. I said, "

This is exactly what the

traditional playbook will be for

a deck. I'm going to get these

followers. These people using my

product, and they've got

millions of followers. Audio is

going to look a little bit like

this is the audio version of

TikTok. TikTok then came after

Instagram, and before Instagram

was Twitter. Now, this is the

natural next extension." I said, "

I don't think that's true. I

don't think you have a true

north. Your true north has got

to be, what is unique about

audio? How and why do we use

audio? How do I discover audio?

How do I engage with audio? How

does the fact that I have an air

pod in my ear make this a

different medium?" If you're

just going to say, "Well,

Twitter worked this way, and I'm

an audio Twitter," you're not

going to win. You're not going

to win just because you get a

bunch of influencers to use your

product. I have that intuition

because I've used every audio

product and because I've

experimented with building with

some of our team's audio

products. I've watched how users

have built them. Now, I might

be wrong. I'm not always right,

but I have intuition. You only

get intuition from playing with

the clay. What I would say to

you about enterprise because I

know that was a large part of

your question. In the era I grew

up in, it was top-down selling.

You go, you get decision-makers,

they hold budgets, they sign

large deals, and then they tell

groups of people to use product.

We know most enterprise sales

these days work through what

people call PLG, product-led

growth. Their idea is simple.

One is you get masses of people

using your product. Then, you

find ways to mobilize groups of

people using your product to

build it into an enterprise sale.

The first big company that I

know of to accomplish that was

Skype. I watched Skype spread

across Europe when I lived in

Europe. I just couldn't believe

like every enterprise tried to

kill Skype. They tried to say, "

Oh, it's not secure. I don't

want to buy a license. Let's get

this out of here. How did this

get all of...?" It was like a

virus spreading across companies,

but it was just too powerful for

anyone to stop. People had to

then say, "OK, we got to find a

way to make this work." That's

how Yammer grew. That's how

Slack grew. There's a lot of

power to it, which is what about

if we had tools that masses of

people wanted to use because

they were so well-designed that

they made people more productive

rather than a senior top-down

person imposing them. That's

where we're at. That's where the

crossover between enterprises

and consumers is.

I love the concept of product-

led growth and want to decode

that for a second. I can

understand as an entrepreneur,

your plan A in the 10 slide deck

that we're sending to you is

going to say, "Hey, this is

going to spark virally. There's

a great viral coefficient.

Everyone's going to use it." As

we know, as entrepreneurs, your

first attempts often don't turn

out like the next Slack. What's

the plan B? Is it pivot to an

enterprise sale, or is it

iterate?

The reason I like enterprise is

exactly what you're saying. I

remember years ago, I had dinner

with Mark Andreessen and he said, "

I like to do enterprise A and

consumer B." I said, "Why?" He

said, "Well, look at the end of

the day, there's no way that I

can manifest success of a

consumer company. Either

consumers love the product, or

they don't. Whereas with

enterprise, I can call a bunch

of CTOs and CIOs and at least

get the initial implementations

going." There's a lot of truth

to that. With consumer products,

it's hard to manufacture success.

It's either it just lights a

fire, or it doesn't. I'll tell

you my advice to this founder

yesterday, who I'm going to

spend more time with. He's in

the right zip code, just maybe

with the wrong product. I said

to him, "I would rather you have

no influencers. I would rather

you have no hype. I would rather

you raise less capital and

obsess with what is the

product feature that's really

going to resonate with a group

of people like the .

What is it that they are waking

up every day to use your product

to do? Why your product and not

other stuff?" "Until you solve

that, no amount of hype is going

to help you. In fact, hype will

work against you because if you

get a bunch of press, and a

bunch of hype, and a bunch of

people using your product, and

then 60 days later, they don't

want to use it because it didn't

really solve the fundamental

need, you've set yourself up for

failure."

In terms of product-led growth,

what do you look for in a C or

series A investment that would

give you a sense that there is

this viral coefficient or

product-lead go-to-market?

I always say I'm looking for

three things. Number one, I'm

looking for, let's say, the

elusive product market. The

second thing I'm looking for is

founder-market fit. The third

thing is founder-upfront fit.

Product-market fit, I don't get

a wait for that. I've got to

have an assertion that I believe

there can be or will be product-

market fit. How do I decide

that? I have to believe at a

unit economic level, individual,

user, or payer that you are

going to add significant value

to their job. Unless I can

identify what real pinpoint

you're solving and why that's

going to make a huge difference

on a unit economic basis, I

probably am not writing the

check. I've got to have

intuition. Not how you're going

to charge, but why this is

fundamentally going to make a

difference for them. Let's call

it assertion of product-market

fit. In the old days, I could

wait. I can't wait. I don't

write $50 million checks on a

250 pre anymore. I never did.

When you have a product-market

fit, that's what happens. The

second thing is founder-market

fit. I need to understand why

you're doing this because

there's a lot of people who

enter the markets because they

think I should be doing a

startup, and this sounds like a

good idea. Why are you driven to

do this? What intuition do you

have about this market or these

users that other people don't

have? You got to be super

driven to make that work. I

would say that's the second.

Then, founder-upfront fit. We're

looking for people who want to

go on a 10 or 12-year journey

with us. We're not looking for

people to go on a two-year

journey. You've got to be

wanting to do this. This is your

career. This is your livelihood,

your life, and your mission. If

you're successful at it, you're

going to be hugely financially

and emotionally rewarded for

doing it. Now, along the way,

sometimes people call us, and

they say, "Hey, I got this offer.

I think I need to take it," or "

Look, I've been doing this for

two years, and I don't think

it's working. I think I need to

kind of pivot or shut it down."

We accept that that happens, but

going in, we have to believe

that you have the right

intentions

On the point of product-led

growth, I would assume that

every company, whether you're a

startup or whether you're an

enterprise wants to say that

your product development is

going to drive product-led

growth, but in reality, what

percent of products do you think

ended up being driven in a

product-led go-to-market versus

a sales-first go-to-market?

Look, you know the old saying

when you're a hammer, everything

looks like a nail? Every product

person I know believes that

product is the only thing that

matters. Of course, I don't

believe that. I believe great

product is incredibly important.

Let me just switch it to make it

less emotional. There's no

amount of killer marketing or

amazing design you can put on a

restaurant if you're shitty food.

You need to start with great

food. Does it have to be the

absolute best food in Los

Angeles? The best food in New

York? No, it needs to be great,

and it needs to speak to a

constituency. There's a

constituency in LA that wants to

eat $12 Korean food. That's very

different than Raspoutine that

was the top-rated restaurant in

Los Angeles that's currently

serving fried chicken with

caviar on it. Those are $

125 versus $12. Product can be

different. Market can be

different. Quality can be

different. At the end of the day,

sales and marketing matter. It

turns out that people buy

products for reasons other than

this is the absolute best

product in the market. They buy

product for perception that this

is going to help them improve.

How many people have Slack that

are truly getting great

productivity out of Slack?

Probably 20 percent and 80

percent have it, and they don't

know how to be the best

productive Slack user or the

best productive Notion user or

whatever. That comes down, to me,

to marketing. At the end of the

day, I've got to create a desire

and awareness for a product and

identity with people wanting to

buy it because they see other

people model behavior. It

starts with marketing. Look, I

know most people have found

businesses are either product or

finance people that are super

analytical types that think we

should abolish sales. The

reality is sales exist for a

reason. Salespeople are

incredibly important. Their job

is incredibly important.

Without a sales rep who

understands organizational

behavior, organizational design,

decision-making, budgets, how

are budgets approved? How are

they decided? How do you

navigate that? How do I leverage

relationships to get enterprise

sales done? How do I price the

value rather than lowest common

denominator? How do I do ROI

calculators? All those things

that are incredibly important to

a sales process that most of

Silicon Valley traditionally

undervalues, it's incredibly

important. You asked me a

question, and I've given you an

incredibly off-topic, long

answer, but I believe in all of

the above. I believe in having

great food, but it doesn't have

to be the best food. Has to be

great food well-marketed and

people have to enjoy their

experience. They have to

identify with coming to your

restaurant and being happy with

it and want to tell the world

the viral coefficient. You want

them telling them what a great

experience it is, even if they

are not sure why it was.

I totally agree that customer

experience is super important,

but I also think that segment is

your pick on first target super

important. For example, we sold

around an enterprise customer, a

big telecom in Canada, and we

worked a year to launch it

another six months to a year to

make it happen. We put it all in,

and in the end, they didn't get

it going the way we had

anticipated. Then, we were back

to square one pitching the next

cohort of customers. Eventually,

it took off, and we were able to

iterate. One of my lessons was

what we went single-threaded

with the business could have

gone under in many ways in that

one year just because we picked

the wrong first customer. How

do you think about that balance

of focusing on the customer

experience but also making sure

that the first cohort is

applicable to prove or not

division?

One of the talks I give a lot to

entrepreneurs is, I call

elephant, deer, and rabbit. My

analogy is this. Elephant is a

big enterprise customer. It's

the logo you want. Let me just

call it this. Say you could

serve Facebook. Let's say it's

one of your first big customers.

Is that a good idea? Well, if

you're a startup and you've

raised 3 million bucks, and you

have $300,000, ARR landing

Facebook is a curse because

their relative leverage to you

is extreme. They are going to

have huge requirements. They are

going to expect everything out

of you. You're not going to live

up to their expectation. They

are going to send InfoSec on you.

They are going to everything,

right? It's David and Goliath,

and you're set up to fail. What

you end up becoming in Facebook

and maybe you and your first

iteration with the telco -- by

the way, I learned this from

doing it myself and making the

same mistake -- is you almost

become like their in-house R&D

department. They have the

expectation that you're their in-

house R&D department. It takes

you off track from trying to

diversify your customer base and

maybe building the feature set

you should be building. Let's

call that elephant. Eventually,

you want elephants, but you want

hell offense when you're an

elephant hunter. Rabbits, to me,

is this idea of, "Well, instead

of doing all that, I'm just

going to build a tool that

everybody can use. I don't want

to have sales. I don't want to

have to deal with customers and

negotiate. I'm just going to put

it out there and whoever uses it

uses it." Sometimes that works.

For the most part, the problem

with rabbits is you go out in a

field and they are everywhere.

You're like, "Oh, there's a

million of these. Surely I can

catch one or two." Then, you go

out to catch them, and you find

they are pretty freaking hard to

catch. It's just as much effort

to get rabbits as it is to get a

bit more meat. You get them, and

you're like, "Gosh, this wasn't

really worth the effort." I

usually say startups should be

deer hunter. My analogy is

really simple, which is it's

probably mid-sized customers

that need you that never get the

attention of the big player

because the big player just

doesn't focus on them. The big

player is out serving big

elephants. You can make them be

extremely successful. Who cares

that their logo isn't Facebook

or American Express or Marriott

Hotels or whatever, or getting a

department within a bigger

company where the department is

making a big bet on you. Make

middle-sized people who need you

make them heroes. Make them

truly successful. I put all my

eggs into big accounts. One of

my biggest customers was Goldman

Sachs back in the day. I didn't

have a lot of revenue, and I

would do anything for money

because I was trying to hit my

quarterly targets every quarter.

They say, "Here's a million

dollars." I'm like, "OK. Yes,

Sir. Please, Sir, can I have

another, sir? What do you want

me to build, Sir?" It was wrong.

I just think focus on being a

deer hunter.

It's interesting because if you

look at traditional business

products. There's enterprise,

and then there's volume, and the

middle is the hardest to go to

market with. If it's product-led,

it flips it. It's an interesting

niche, if you will.

For me, it's about building

muscle because if I serve 25 mid-

sized companies, I service them

incredibly well. They need me.

They love that they get the time

and attention of the CEO because

these are companies that don't

get CEOs on the phone. I also

get to work out my product

deficiencies. I get to work out

my organizational deficiencies.

How good am I at supporting roll-

outs? How good is my integration?

How good is my 24/7 support?

With customers who are going to

be more tolerant when I'm

cutting my teeth on everything.

For me, then when you're ready

to step up and serve bigger

accounts, you've worked out all

the kinks.

Last question. I know Upfront

and yourself are based in LA. I

know you're super invested in

growing the tech ecosystem here.

As we enter a work-from-anywhere

world, how much do you think

location matters?

Location is everything. People

are fooling themselves that they

think all remote is here to stay.

I'm a big believer in

collaborative tools. I'm a big

believer in allowing people to

live and work how they want to

live and work. I'm a big

believer in flexibility. I had

a couple people say to me, "Hey,

I'm in Orange County in pandemic.

Can I stay?" "Yeah, no problem."

But, your corpus of people,

there's a certain amount of

creativity that comes from in-

person from working with other

humans. There's a reason why

there were so many people let's

say in the middle ages, as we

came out of that, and you had

the Renaissance who were all

gathered in places like Florence

rather. Why Florence succeeded

and created this movement in art

and architecture and other

fields because you had a corpus

of people who are all experts

sharing at the same time.

There's a reason why you have so

many innovative financial

products come out of New York

City, why you have so much

creative energy coming out of

Los Angeles, why Silicon Valley

has been so successful for so

long at launching startup

companies. That's going to be

way more distributed over time.

The tools are there for

successful companies to be built

in. We've already seen it. Look

at Shopify in Toronto, right?

Amazing success. You don't have

to be in Silicon Valley, but

location matters. What you need

is you need a location where you

can get a critical mass of

incredibly hardworking smart

people who are aligned on vision

to work together. Yes, you can

tolerate some people being

remote or having centers of

excellence, but you're fooling

yourself if you think you're

getting full productivity from

everybody being totally

distributed.

Mark, thank you so much. Really

appreciate the time.

Of course. It's been wonderful.

Thank you.

On the next episode of Decoding

Digital.

The true heroes in my mind are

the folks who did the quiet work

of ushering that transformation

through a company. They get no

credit. They are the note-takers

in the meetings, but they are

the people who are the lifeblood

of transformation.

Former CTO at Microsoft, US, and

principal owner of Digital

Future Consulting, Jennifer

Byrne.

Thanks for listening to Decoding

Digital. Make sure you never

miss an episode by subscribing

to the show in your favorite

podcast player. To learn more,

visit decodingdigital.com. Until