Greylock's Jerry Chen: On Scaling Units of Value
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Transcript of Greylock's Jerry Chen: On Scaling Units of Value
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Disclaimer
Everything in this talk is my personal opinion, theory, conjecture, and probably wrong. In the event that anything is right, it is either pure coincidence or I blatantly stole the idea from someone much, much, smarter.
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Greylock Partners
Jerry Chen VMware 2003-2013 • 250 to 15k people, IPO, and $5B • Virtual Desktop Infrastructure • Cloud Application Platform
• Cloud Foundry • Spring Framework • vFabric • Data products (Gemfire,
Postgres, Hadoop)
Enterprise team focused on cloud and application infrastructure • Docker • Awake Networks
@jerrychen
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Unit of Value
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David versus Goliath
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Tech vs DistribuBon
“The race between startups & incumbents is a race between technology & distribuBon. Startups have beFer tech; incumbents have distribuBon. Can a startup build distribuBon before the incumbent builds or acquires tech?” –Aneel Bhusri, CEO Workday & Greylock
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Why Does GTM MaFer? • It’s the “hyphen” in “product-‐market fit” • Impacts how much money to raise • Determines profit margins at scale • Cost of distribuBon must match what
customer’s willingness to pay • How and who you sell to will change as
you scale
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Things to think about GTM
• Channel • Field operaBons • Pricing & Packaging • Partnerships • Awareness & Trial • UNIT OF VALUE
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Unit of Value
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Unit of Value Defined
Noun 1. Smallest measurable unit at which
your product or service delivers value.
2. Unit of scaling your product at a customer.
3. It’s what your customers pay for.
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Single Units
• DropBox, one user • VMware, one server • Docker, one container • Office Suite, one user
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Small (Teams?)
• Salesforce, 3-‐4 sales reps • Box or SharePoint, team or
department • Atlassian and GitHub, dev team
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Big Units of Value
• Hadoop, Big data e.g. terabytes • Mesos, enBre cluster of servers • Workday, Human capital management
for the enBre company • SAP, ERP for enBre company or LOB • Oracle, Financials for enBre company
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Bigger doesn’t mean BeFer
• The bigger the unit of value 1. Longer sales cycles & big deals 2. How to build a cost effecBve direct
sales force 3. Big deals doesn’t mean big market
• Smaller unit of value 1. Shorter sales cycle & small deals 2. How do I create cost effecBve
channel? 3. How to scale up the value?
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Developer Technologies
Small • Dev Tools • API / services Medium • CollaboraBon tools Large • Cloud Plaeorms
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Economics — Rules of Thumb for $100M
$100K+ $10-‐20K+ $100
outside self-‐serve,
assisted inside
<$10K
1,000
Pricing
Model
Sales
consumer service
5,000-‐10,000 >10,000 1M
dead zone
$0.10
API call
1B calls
(but what’s the distribuBon of your revenue?)
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Few Customers Can Drive $$$ • Company A: API Service • API service < $0.10 per API call • 50% of bookings are from
customer doing $25k+
• Company B: Cloud app infra service • 50k+ users • Average monthly customer < $50 • 5% of customers 50% of MRR
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Sum of units
Value
CreaBng Non-‐Linear Value
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Going Non-‐Linear
• The more your customers consume the more value they receive
• Selling addiBonal products at scale (e.g. management, monitoring, security)
• Selling to a different / addiBonal buyer (CTO, CIO, CFO)
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Ways to Increase Value
• Network effects • StandardizaBon • Plaeorms
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Network effects
• Metcalfe’s law the value of a network is proporBonal to the square of the number of connected users of the system
• CollaboraBon tools • Email • Slack • GitHub
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Standards
• Technical standards vs de facto standards • It’s why many tech market shares end up
at 60/30/10 at maturity • Reduce complexity: Languages and
frameworks, databases • Value to a single standard: NewRelic &
AppD, MS Office • De facto standards can change (e.g.
browser wars)
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Plaeorms
• System of record, data: Salesforce and Force.com, Workday and HCM & Financials
• “Glue layer” for infrastructure, storage, networking, monitoring, management
• ApplicaBon & cloud plaeorms try to be both storage (data) and glue
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Sum of units
Value
CreaBng Non-‐Linear Value
customer standard
sell addi/onal products
create pla1orm ecosystem
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Summary
• What is your Unit of Value? • How do you increase the value as
customers scale? • What go to market matches this Unit of
Value? • Can you achieve this in one product or
need mulBple products sold together?
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Thank you
www.greylock.com
@GreylockVC
medium.com/@GreylockVC
@jerrychen
Jerry Chen
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