Decoding Digital

Product-Led Growth, Entrepreneurship, and Enterprise with Mark Suster

By Ideas @ AppDirect / October 12, 2021

With a successful entrepreneurial career behind him, Mark Suster knows what it takes to win over investors. Now he’s standing on the other side of the table to help rising entrepreneurs realize their dreams.

Mark is the Managing Partner of Upfront Ventures, one of the largest VC firms in Los Angeles. Previously, he founded, built, and sold two companies but chose to move away from entrepreneurship and into investing in 2007, when he joined Upfront Ventures.

In this Decoding Digital episode, Mark discusses how entrepreneurs use product-led growth to enter the consumer and enterprise markets, the challenges with both, and what VC investors look for in businesses looking to do just that.

Hit play to listen to the podcast episode or read on to find out more.

Leaving entrepreneurship and joining “the dark side”

Mark began his career as an entrepreneur, launching two companies that were both eventually acquired. Then, he took the leap into VC investing and became Managing Partner at Upfront Ventures. But why did he join the “dark side”?

An entrepreneur at heart, Mark wanted to help fund like-minded entrepreneurs so they could realize their dreams—which is why he pursued an investment role over anything else. However, he knew that if it didn’t work out, he could always return to entrepreneurship.

“I can always fall back on 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. And I'm stupid enough to believe in myself and work for free for a period of time.”

Mark says his basketball analogy describes it best: Even if you love being on the court, one day you just won’t be as fast as the next guy. At which point, you may realize you’ve got more potential as a coach than a player. Now, he’s enjoying every minute on the coaching side.

How to shift from an entrepreneur mindset to an investor mindset

As a former entrepreneur, Mark has a keen insight into what’s needed from investors, and what isn’t. He notes that one thing investors should stay away from is making decisions for the company and knowing that it’s not your job to run it.

What is helpful is to think about the psychology of the founder and CEO, and understand what motivates them, so you can improve the team’s overall performance. Mark returns to his basketball analogy to point out that it’s the investor’s job to read the court and call the game, but ultimately you have to let the players play. Then be there for them at their most critical moments, like their highest highs and their lowest lows, when you can support them the most.

How to coach with compassion

When it comes to coaching, Mark subscribes to the idea that you should “praise publicly and coach privately.” He notes that praise often isn’t given as much or as openly as it perhaps should be, especially to entrepreneurs who get wrapped up in tackling the next thing rather than taking a moment to recognize their success.

In terms of improving performance, Mark believes in direct feedback. He suggests that consistently giving direct yet compassionate feedback is how he works with team members to make sure everyone’s performing as well as they can.

Mark says that a key part of coaching with compassion is managing different people’s personalities. This starts from the hiring stage. He notes that it’s important to work out where you can spend a startup’s limited resources to bring in the right people and get them what they want. From there, you can build out a team and figure out the best way to get them to all work together.

The cross-over between consumer and enterprise

Mark grew up as a programmer and is passionate about consumer tech. His career began in enterprise software development and continues to be a central focus in his VC experience, but what can consumer tech learn from the enterprise space?

To fully understand consumer tech from an enterprise perspective, Mark says the best way is to get involved. This is why he’s an early adopter of new technologies; he plays with them to understand their potential and what he can do with it. This means he has a much better feel for the products in the space and where they’re going, so he can rely on his research-led “intuition” when making investment decisions.

Mark first entered the enterprise space when it was all “top-down selling.” Decision makers held the budgets, signed the deals, and got groups of people to use that product. But today, most enterprise sales happen through product-led growth. The idea here is to get the masses using your product first, then find ways to mobilize groups of people to build using that product into an enterprise sale.

The first big company that Mark remembers using product-led growth successfully was Skype. He recalls the enterprise space initially trying to quash Skype’s attempt to break into the market. However, with so many people championing the product, businesses decided to find a way to make it work for them.

“I think there's a lot of power to [product-led growth], which is, what about if we had tools that masses of people wanted to use because they were so well-designed that they actually made people more productive, rather than a senior top-down person imposing them? That's where I think the crossover between enterprise and consumer is.”

How to approach product-led growth as an entrepreneur

From an entrepreneurial perspective, which space do you decide to go after first, consumer or enterprise? Mark suggests that in his experience, it’s best to tackle enterprise first and look at consumer success second. He believes there’s a lot of truth to the idea that consumers will either love your product or they won’t. Whereas with enterprise, you can get in touch with CTOs and CIOs and turn the wheel of adoption.

Mark has one crucial piece of advice for entrepreneurs looking to hype up their product for the consumer market: Understand how it helps solve a fundamental need first. Without knowing this, you’ll only be setting yourself up for failure.

“I would rather you raise less capital and obsess about 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?”

To get this understanding, Mark says you need to look at how people are using your product, what features they like, and what they use those for specifically. Next, you can use this insight to package it into an enterprise sale.

This is the key to product-led growth: figuring out what throttles to pull and how to use these to market your product correctly to the right audience.

“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.”

Mark says for those entrepreneurs looking for investment, knowing how you’re going to market your product is vital to securing funding. This all ties into the three things Mark looks for when deciding whether or not to invest in a new product: product-market fit, founder-market fit, and founder-Upfront fit.

How entrepreneurs secure investment with Upfront Ventures

With seed-stage investment, there’s often not much data or traction to show a product-market fit. But Mark won’t sign on the dotted line unless he can or will believe that the product-market fit is there. So how can entrepreneurs convince him?

Companies have to show that their products solve a real pain point and will add significant value to a person’s job. From this, they should be able to indicate how and why that’s going to make an economic difference. Once they’ve shown this, Mark then evaluates whether there’s a founder-market fit.

At this stage, Mark considers why the founder has chosen to enter the market. He wants to know what drives them, why they’ve created a startup, and what intuition they have about the market that others don’t.

Finally, Mark looks for commitment from entrepreneurs to Upfront Ventures. From his past experience as an entrepreneur, he understands that businesses pivot and change over time, but he needs to know that everyone has the right intentions going in.

“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.”

To hear more from Mark and find out his thoughts on product-led go to market vs. sales-first go to market, how entrepreneurs can use accurate data, and why start-ups shouldn’t chase big enterprise sales first, listen to his conversation with Daniel Saks on the Decoding Digital podcast.

Check out the Decoding Digital podcast series for more insights from inspirational thought leaders and digital innovators. You can listen to the podcast on all the major podcasting apps, including Apple Podcasts and Spotify.