Moving into the Enterprise: Fireside with Postman's Founder and CEO
- Enterprise Sales
In this DevGuild: Developer-First Go-To-Market finale fireside, Adam Gross is joined by Abhinav Asthana for an honest and open conversation about the challenges founders overcome when making their leap into the enterprise.
In this DevGuild: Developer-First Go-To-Market finale fireside, Adam Gross is joined by Abhinav Asthana for an honest and open conversation about the challenges founders overcome when making their leap into the enterprise.
Adam Gross: Welcome everybody. I am delighted to host this fireside chat. My name is Adam Gross. You might know me from some of the other Heavybit videos I've done on topics around go-to-market for developer-facing companies, and wanted to extend some of those slide format presentations into something hopefully you'll find more engaging, which is an actual discussion and interview with somebody who's doing this for real, as opposed to me just talking about that.
And so I wanted to offer that today, and we're really, really, really grateful to have Abhinav Asthana today here, the CEO and Founder of Postman, which I'm sure you've heard about. And Abhinav and I have been able to chat over the past couple years. He may not know this, but a lot of the ideas that, if you've seen my presentations, have come from the opportunity I've had to chat with him about how he's built his business, and thought it would be a great opportunity to bring the source straight here.
So thank you so much for taking the time to chat with everybody and chat with me today.
Abhinav Asthana: Thanks for having me here, Adam. It's great to talk with you here and I've enjoyed our conversations over the years.
Adam: I'm certainly familiar with Postman. I think maybe most of our listeners are too, just as users of the product. Maybe you could just give us a quick overview and update about Postman, where you are at, and what you have been working on.
Abhinav: Sure. So, Postman today is an API platform for building and using APIs. We are now used by more than 18 million users across more than half a million organizations around the world. But, we started as a side project of mine back in 2012. We incorporated as a company in late 2014, so that's when we formally started. But really we started with the pain point of solving developer problems and that's still our DNA. We are very developer-focused. We want to make them successful.
Fast-forward to now, we are delivering enterprise-class benefits to organizations who are building APIs, which is a lot of organizations in the world. We are, from three people who started the company, now we are close to 500 across more than 13 countries.
Adam: That's amazing. Remarkable progress. Congratulations. And one of the things I love about your story is you are-- It's the classic developer-first model in the fullest of bloom, now with 18 million developers and I assume, and you tell me, a majority of those using the product for free in some capacity.
And then I think you then have a self-serve product you have on top of that, and now more recently have added enterprise later. And so really that full spectrum of product and go-to-market decisions that I think a lot of the folks in the audience are wrestling with.
Maybe to start, you can talk about the commercialization journey. When did you start? I assume you did self-serve first. When did that start and how did that go? How did you think then about expanding beyond that?
Abhinav: Yeah, so I would qualify that journey into I'd say probably three distinct eras for Postman, short eras, not big ones. But I think the first one was just trying to survive in the very early days. And, we tried a lot of things. I came from a mobile app background, so I tried to use the same ideas. That was the only way I knew how to monetize.
So Postman used to have an in-app purchase. We made it free. And when we formally sought funding, then we gave away more of the product for free. And I'll talk about this, like that's been a recurring theme for us. How do we actually give more to developers over time?
What we discovered, I think in the second phase was this notion of collaboration, which combined developer problems with business problems, which is where businesses were willing to pay for developer productivity, for quality gains, for all these sort of things that businesses valued. And that became our first product. We started with one plan, just $5, or I would say $60 per-user, per-year plan with probably just a couple of features, and we saw huge adoption of that.
And then over time, what we saw was people were expanding on that plan pretty rapidly and as Postman usage on the free tier, as well as the pay tier grew across the organization, we soon had requests for enterprise.
So, I mean, even the enterprise journey has been pretty interesting for us. There were people who would just come in and say, "We want to buy an enterprise tier. Do we have support? Do you have something?" And, we just started with very little feature differentiation, but primarily support. And over time, I think after 2017, we started honing on the self-serve motion and the enterprise motion every year.
Adam: If we break down that story a little bit, one of the things that has always fascinated me about the Postman story is, you've got this developer productivity tool, which is virtually ubiquitous, is really great, and really an essential part of individual developer workflow. But, monetizing an individual developer on a productivity tool tends not to be a really great economic opportunity. And you then discovered this collaboration benefit that was really team-centric, and had a lot of higher level business value.
Just curious, how did that happen was like, were you surprised, did you anticipate it? Was it one day you had this epiphany? And it was like, "Oh, my God, this is amazing." Or did it happen a little more slowly?
Abhinav: Yeah. So, I think that's a very interesting question. So, I would say the first thing that we observed was over time, we saw... I think I would actually reference one of your talks. I don't know which one Adam, but you mentioned as that shifts happening in the industry, that one can catch on.
I think what we observed from developers was that they were spending more and more time with APIs, and that was the primary set of problems that they were experiencing. And we saw that the development model is shifting from this code-first to this, what we call now this API-first model. And, we knew that as developers would shift towards this API-first model, businesses would also have certain challenges as they adopted more and more API.
So, that was the more general observation we had from qualitative data. The quantitative data was then very useful to validate this hypothesis. So, Postman used to have a sharing feature through which you could share a link, or you could export a file. And what we saw was that these developers were sharing within the product, and they were forming these networks within an organization, outside an organization.
But then we used some analysis on the data to see what these networks were looking like. And we saw there was private collaboration, there was public collaboration, there was partner collaboration. And we could-- When we visualized that, then it was this product journey to map what we saw qualitatively, like this shift towards API-first and this notion of collaboration.
And, over time, what we saw was that with a bottoms-up product, developers were consistently telling us that, if you had the right ear, you could see there were business problems in there. I think the challenge for us was how not to do too much. And then we built a very fast a creative model of product development, where we would try out things. We would bring it in front of developers and their feedback then would help us hone it in.
I think the other thing that we were very particular about was charging and making sure that people know that a certain set of benefits would be priced and it's not a free-for-all from the very beginning. So we were able to segment customers into people who we knew they were not going to pay yet. And then customers who started giving us valuable feedback on the paid tier too.
Adam: So now you've got lightning in a bottle. You've got an amazing base of free users that's growing really rapidly. You've got a clear delineated, collaborative value proposition that you've created commercial intentionality around and said, "We're going to charge for this thing, and we know we feel confident about the values going there."
I'm sure at this point, I'm guessing the cash register starts to ring customers are coming in. I'm just curious how you then approach that. You're building out you go to market function for the first time. I'm sure your people are calling you up and being like, "Hey, go hire some salespeople." Just even within the product that you were selling then, how do you think about building that from an internal point of view?
Abhinav: Yeah, so I think we were very deliberate for the first product. We ran a beta program. We said that it's going to be priced and we actually had about 500 companies in the program. And I think the inflection point was pretty much each in the first day we had our first five customers on the first day of turning on the payment page. And we saw that, okay, we've crossed that pretty, pretty quickly. I think the journey after that was very interesting because this notion of like, what is called product-led growth was not there then. I think it was all termed organic and---
Adam: Which era was this, this is 2017 or?
Abhinav: This is 2015, '16, in that timeframe, right. So, 2016 is when we launched our first product.
So, I think our inspiration was GitHub and Slack and Atlassian's products because I think, as developers, those were the things that we bought very quickly. Right? And we had this thing that we'd want to get started quickly. I don't want to talk to multiple salespeople to get to use the product. And we had experience with charging for those in-app purchases. So we knew that customers are willing to buy.
I think the most interesting insight that we got was that we had a belief that smaller companies would buy on credit cards. But what we saw was that credit card purchases were prevalent, whether it was a large company or it was a small company, it was the need that drove a decision to buy the higher priced product. And over time we saw that actually it was a much more predictable funnel with users coming in, going into collaboration, and then converting to paid. And then we honed that gate over time.
So initially we used to have a trial so you could use the free bit, but the shiny thing, the nice thing was behind a trial. And again, then we gave away more of the product for free. We said that, "Okay, you can use it for 30 days without charging." And we actually saw more conversions. Then we gave away a tier of up to 25 requests that you could collaborate upon and we saw more conversions.
So as we started hitting those points, it became apparent that we actually knew, what we were doing. And, then the question was like, at what point is a salesperson needed? What is the value a sales motion would add? And when we saw we were growing triple digit, year over year, I think people were pretty confident.
I wouldn't speak for my investors, I don't know. Maybe they were thinking about when it would happen. But I think from running the company perspective, I think we were very methodical about it. Eventually we layered on a customer success team and that's when we started seeing that, "Okay what is the value of a sales process?"
Adam: I could talk to you for days about even that part of the journey, and maybe we'll have a chance to explore that more. Today I want to really focus in on the enterprise piece. So, you've got this now self-serve business, that's really humming, you're optimizing it. And I'm guessing you're getting some pressure from your customers, from the market, from your employees, from your investors, time to go enterprise time to go big. Sell deals at 50k, 100k. Hire reps, maybe build an on-prem product.
I think that's really the core question that a lot of folks here are struggling with is how do they think about their investment? How do they think about "when"? How did you approach that? I know you can't offer specific numbers, but in broad strokes, what did you learn?
Abhinav: Yeah. I think the guiding philosophy for Postman was, "Yes, we want to do all those things, but do customers want it or not?" Right?
Just by having a product and layering on enterprise does not mean that customers actually want the enterprise product.
So we really communicated that intent within the company to our investors, to future investors, to people we were hiring, that this is the part of the journey we are in. We see huge potential here because the world is shifting to API-first, but we have to discover things along the way. And we really have been guided by what customers want in their journey for adoption.
Adam: Do you feel like you were actively saying no to your investors or at least when? So you felt you were getting pressure from the market or your different stakeholders. They're like, "Come on, get to it, hire a bunch of reps. We gave you a bunch of cash get on it. Get on it."
Abhinav: Yeah, so there were two parts to it. One was, I think, "Is this company going to go enterprise or not?" And I think the simple answer I would give is we actually just put that enterprise plan out there. We were like, "Okay, we'll see what that plan will eventually have."
The interesting thing was that that plan started selling because customers... There is a class of customers who only want to buy enterprise. It's just written down in procurement that "do not buy a self-serve product." And we were like, "They want more support. They want all these things."
So, I think the ratio of that over time and the price point of that changed. I think as this notion of sales reps, we looked at... At 5 million in ARR, typically there is this recommendation that you should have had your first head of sales, you should have tried out a few things.
And honestly, we did try hiring reps, but the organic motion was faster, right? Generally the organic motion or the product-led motion was faster, or our reps were too productive. They were closing every deal. So we were like, "What exactly are we doing? Are we doing auto-processing versus actually selling?" So we determined that initial days we were just doing auto-processing and we would ramp that up.
And what I insisted on was that we need to get to the right price point before we decide to go enterprise, because you could not get to the right value as a product and really reduce by time by five x or 10 x, in the opposite direction, if you price very low. So while we could have sold at 2 x the price point to an enterprise, we knew there was a lot more value in the product.
Adam: I know the question that a lot of folks are asking themselves is, "How do I think about that timing for my business?" And while not for Postman per se, and I know you can only offer so much detail-- How do you think about when from a metrics-driven point of view, from size of business or a number of employees, or what guidance would you give just generically? Like "If you're around this number and you aren't thinking about enterprise you're too late, or you're too early." How do you approach that one?
Abhinav: So I would say, in my mind, like hitting this 10 million ARR number and the mechanics of that are very critical. I think even at that number, we knew generally which segments that the platform will fall in. We have startups and small customers. We have companies which are growing really fast and then we have really large customers. So I think around at the 10 million ARR number, you should...
I would segment companies into two parts: companies that have a product led-motion and companies that have a purely enterprise motion. If you have a purely enterprise motion, then you would probably be thinking about it pretty much since product launch. But if you have a product led-motion and you are building that funnel, then if... I think between $1MM to $10MM, the product funnel characteristics do not change.
And if you hone that in, then actually it'll just continue through the life of the company and around the 10 million ARR number, I think you can start thinking about for a product-led business, the enterprise value prop. "Am I at the right price point? Am I talking to the right buyer inside the company? What are the expansion rates of existing customers?"
Adam: It's interesting, the world has changed even since you went through that shift. There's a lot more money out there, there are more expectations. My sense is the companies I talk to start to think about it closer these days to $5MM or $6MM, and I get nervous for them. Do you think that's still the case or does $5MM or $6MM still feel early?
You're a CEO, you're looking at $5MM or $6MM and you have to do $20MM next year, and doing that without the enterprise deal size can be a little intimidating. I don't know. What guidance would you give to a CEO looking at that business point?
Abhinav: I think depending on the market you are, I think if you study top of the funnel metrics, I think you can build a pretty good projection for your future plans. We really looked at how many users we were signing up and that number itself was growing 100%. And that number gave us a lot of confidence.
Adam: My favorite Postman demo I've ever gotten, as much as I love your product which I do deeply, is not of the Postman product, but is basically of your analytic system. And which is a CRM system too, that you built that at least to me showed a lot of intentionality and data-drivenness and ability to understand what was going on with the customers. I'm just curious, any thoughts to share about that? Was that something that came from? Culturally, did you know to just invest in data from early on? Or did you learn that the hard way?
Abhinav: Yeah, so we had an interesting problem that we were... Our product had consumer like characteristics in a B2B business, and we learned that analytics solutions were not really designed for that. Either they were consumer-only, or they were B2B-only. And we were like, "We want to connect all the data points across the customer journey in one place."
And, because of developers being very privacy sensitive, we wanted to make sure that we treat that data appropriately. So, we built an analytics stack pretty much from day one. And, initially we started with just user data. I think, as we have talked about before we then layered on this notion of teams, how these users are collaborating into teams. And then we layered on this idea of organizations. So if we are, let's say looking at a company like... I'll not name a company, because I don't know whose approval I have.
If you're looking at a large Fortune 500 company, you have thousands of users in that company, you have a few hundred teams and there is one organization. And then we made sure that every single system that we buy, whether it is a CRM, whether it is marketing automation, whether it is... Every single thing should have an API and that API should feed data into our data stack. And we dump that data and--
Adam: Inside of your data warehouse, you have a model, even if the users are arrayed across many different accounts or instances that's unified by company name, or the actual organization, you have a full company view that encompasses all the users, all the products they're buying that even if that's come from a whole bunch of different touch points.
Abhinav: Yep, yep. Every single thing.
Adam: And how important has that been in being able to having all that data, being able to feed your enterprise business, being able to qualify those accounts? Is it... Because I can imagine it's really useful. I can imagine also like, hey, we just put a form up there and people, who are pretty far along, raise their hand and that's enough to feed the reps.
Abhinav: So it allows us to be intentional with every aspect of the business. And sometimes even talking to customers, right? So when we go to customers, and they're curious about the scale of adoption, that Postman has in their accounts, we actually use this data to tell them. And it really helps us.
Typically when you're going into enterprise, you have a lot of these unknowns, and we do a very hypothesis-based planning exercise we look at,
"Okay, this is our hypothesis. This is the data supporting it. And what is the data that is not supporting it?" And then we are able to just have much more conviction. So it touches every aspect of the business.
Adam: Are you using it to literally create leads to feed reps, say, "Here's the list of your accounts based on here's what's happening in the actual product and activity data from the data warehouse?"
Abhinav: Yeah. So, our challenge was that there were so many companies it's like, how do you prioritize? That was the challenge I think. Over time, I think we've gotten better at it, but we know which customers-- In a way we are watching customers and in some cases, customers raise their hand. In some cases we can go out and tap someone within a large account, knowing that there's a large option to that.
Adam: So, you're in market now with an enterprise product, you are pretty far along comparatively in the journey. You've done this transition now from building a self-serve business now building enterprise business. I'm curious, looking back lessons learned, what would you double down on and what would you call maybe a mistake that you'd avoid in the future?
Abhinav: Yeah, That's hard to answer. I mean, I think our number one mistakes were around... I think figuring out marketing and I would say all aspects of marketing, which was very hard to really reason about. We were like, "Okay, we have this massive growth, there's a huge word of mouth, where do we put in marketing dollars to work?" And we ended up doing too many things. I would have focused very, very specifically on a few things.
I think enterprise product marketing packaging was something that I wish we had started thinking a little earlier about. It worked out, but yeah, I think that was one thing that I really feel like... I mean, we are still learning and I think the culture of the company is "How can we do better than ourselves?" So there were no templates out there and even the template that we picked didn't really work well. So, that's one thing I wish we had done earlier.
Adam: There's a pattern I've seen a couple times, or I should say even reasonably frequently is when you bring a marketing function into especially a developer-centric, developer-first organization, you just start doing all the marketing. And there are a lot of really great leaders who know how to do that and that's kind of-- You bring somebody and then you're just engaged in everything from conferences to who knows what, and it's hard to understand.
It's one of the reasons why sometimes I advise folks to build marketing functions a little more bottoms-up than top-down. So you can get some chance to get an opportunity to explore. On the maybe things you would double down on. If there was here's a little bit of secret sauce you think you had in your going enterprise journey, what would that be?
Abhinav: I think I would have been more aggressive in giving away more of the product for free, which is--
Adam: You're going to make all of the conversations I need to have in the future harder by saying that, but...
Abhinav: So, I'll tell you where I'm coming from. I think the thing that we discovered for our audience, right? And this is our audience, it's like sample size of one.
We learned that product engagement is really the true value that we would create for our customers, right? So, we can say, if there is engagement, there is value. If there's no engagement, there is no point in.
What we discovered was if you are very thoughtful about which experiences you want your end users to have, they actually become better champions. They understand the product much faster. They are really huge proponents of wider scale learning inside an organization.
So essentially any gate that we have put, and you need to be strategic about it. So I'm not saying, give away the enterprise product for free, but I think if you really care about end users of your product, then really creating the right experience for them, so they can get to one unit of value and maybe then the hundred other units of value is what you charge for.
Adam: Okay. I hope that comment isn't used against me too many times as I push folks to raise their prices. Last question for you for now. One thing that, I have heard a million times in my enterprise journeys as somebody who's work exclusively in cloud. "We'll give you a million bucks if you give it to us on prem." How did you handle that? Did you end up going on prem? What was your approach? And, did you get that question?
Abhinav: Yeah, pretty much. I think very, very early on and we still get it. I think Postman right now is, all of our tiers are on the cloud. We have components that run on your desktop. It can run on your server but the "control plane" or the main platform is on the cloud. And, we got better at the security process, running that playbook, we got compliant with SOC 2 Type 2, all those things that we've done over time. But I think what we feel is that it's better for customers, when they are on the cloud there, we are trading fast with them and, their end users see better benefits.
I think, I wouldn't predict the future that everything is going to be on the cloud. I think there are some regulated industries where there are more requirements around compliance that we have to always think about. But I think from a value proposition perspective, we were able to convince customers that they need to be on the cloud.
Adam: I appreciate that. And that only partly contradicts what I said in my presentation. So hopefully that won't be used against me either. Another maybe last question to wrap it up for you. Even though I said the last one was the last one. I think the typical person watching this presentation is at a developer-first startup, probably in the $5 million ARR, somewhere in the zero to $10MM range ARR. You're sitting on the other side at least of having built a really successful business. Just what broad feedback and guidance and advice, or words of wisdom would you have for folks in those shoes?
Abhinav: I mean, I feel like we're still getting started in a lot of ways. There's so many new things to do, but I think if I look back at the journey where I was between 0 to $10MM, I think as a founder CEO, I really had to build that muscle of hiring good executive talent. I think that was the number one thing that I felt I had to think about.
In the early days, people with pedigrees and resumes look extremely exciting, and it just feels like if I had this one person, then they would just change the trajectory of the business. And yes, the right person does change it. But I think you have to build that muscle where, people still have to be aligned with the mission and vision of the company, they have to think about customers. And I think I would really have--
I mean, my advice to founders is you think about that a lot. Also value I think what talent you have inside the company. Postman likes to promote people internally a lot. And we have seen that people who have that context inside the company who are really culturally, in line with the company, I think they become huge assets down the road. So balancing that I think can help really with the trajectory when you are at that $5MM mark.
Adam: Great. You've been really generous with your time. I appreciate our chats. Always look forward to continuing them, and congratulations again to you and your team on all the success.
Abhinav: Thanks so much.