Enterprise is Dead

This is part of a series of posts about decisions we've made at Sentry over the last 15 years. I genuinely feel we've been through a lot with Sentry and our learnings provide value to others. More so, I believe people in this industry, most successful people, do others a disservice by not having honest conversations about the hardships and endurance it takes to succeed. This all started with Sentry: From the Beginning .

When I interview executives, or talk to go-to-market leaders, or investors, or basically anyone who thinks of themselves as a master of the business universe, I always struggle to articulate Sentry’s approach. We’re an enterprise technology company, except we have more than 50,000 paying customers. To put that in context within Sentry’s sphere of influence: when New Relic went public, they had just north of 10,000 customers [source]. Datadog? Only around 8,800 [source].

I would always describe our business model as “sort of like a consumer approach, but we sell to businesses”. Other times I’d use analogies to ecommerce, but struggle to point out why. The reality is, we’re just an enterprise company operating at a significantly larger market scale than older generations have. Most importantly, it’s my belief that the era of servicing only the fortune 500 is long since dead. Going forward I’ll simply tell people what I believe to be the truth: Sentry is an Enterprise software company, and this is the new way of building them. I want to talk a bit about what that means, and how we got here.

The scale of the internet has grown immensely, well, ever since it existed. Even a decade ago however, the entire Enterprise software industry seemed to be overly focused on only a handful of the biggest companies in the world. At the same time you always had the rebel startup trying to go after the small (SMB) and medium sized (mid-market) technology companies, often relying on traditional freemium tactics to get in the door. Many of those companies struggled to maintain relevance, either through a lack of product-market-fit, or simply their inability to monetize well enough in their space. That lack of success, or maybe more the continued success of selling to the whales, has led much of the industry to assume a pretty narrow point of view on how software sales must work.

Today some of the most iconic businesses in our industry are market share players: Salesforce, GitHub, and Atlassian are great examples. I also hope that a future me will put Sentry into that list, because we follow a very similar model in a lot of ways. That model, at least for Sentry, is pretty straight forward:

  • Build a product that every customer wants
  • Charge them a reasonable amount of money

As we like to tell people, we build for the Fortune 500,000.

The way we do that doesn’t compute to a lot of traditionalists, but my hunch is that if folks don’t adapt to the growing scale of technology businesses, they’ll quickly become irrelevant. To understand why, you have to be familiar with how go-to-market works at a lot of legacy companies. They’re hugely sales driven (sometimes as much as 80% of headcount), and that leads to a lot of behavior that alienates customers or otherwise limits their growth and efficiency.

The way Sentry works is similar, but vastly different at the same time. We do what a lot of people would say is product led growth. I don’t know if thats what it is, because the people using those words don’t actually build things. We start with the premise that there’s a large TAM available. If there’s not, you’re probably building a lifestyle business or otherwise you’ve got a very low shot at success (because you’re going to have to now create that TAM). We also assume that you’ve achieved product-market-fit, because otherwise no matter your success, you’re eventually going to fail. You may do a great job of getting adopters, but they wont expand, or worse, won’t even stick around. I’m sure there’s a word for this, but we’ll just say you’re at a point where the market opportunity is there for the product you’ve built.

From there, its all about making the right decisions to generate pipeline as they say. I don’t mean sales pipeline, I mean a generic customer funnel.

The Woes of Sales

Now the traditional company will simply staff up a sales team. You’re certainly familiar with the strategy as you’re almost always on the receiving end. You have a team that harvests email addresses and phone numbers, then hires a bunch of entry-level employees to put those contacts on blast. There’s minimal effort put into these campaigns, and surprise surprise, minimal outcomes. A broad based marketshare approach - which as a reminder I’m simply going to say is the path of future enterprise companies - is different. It requires you to educate and generate awareness of your product. I talk a bit about this in my recent post (You Suck at Marketing), but particularly in Sentry’s case it means we spend a lot of time and money on ensuring developers know we exist. That translates to passive pipeline as soon as those developers have a need for Sentry’s product. That means sales spends its time on account management and growth, rather than adding annoyance to an already overburdened market.

As a practical example, instead of investing 25% of our headcount in SDRs (the role which generally does cold outbound sales), we spend our time on community presence, on field marketing (events), on brand plays (thought leadership in some circles). We spend our time trying to help people solve problems rather than pitching them on product features (granted, we don’t always get it right). We invest into distribution channels and other similar mechanisms to improve the ecosystems value-add through partnerships and integrations. It mostly means we invest a lot more into marketing than we do into sales, and the sales team primarily focuses on ensuring the success of customers who have already opted in.

Going beyond that, we expand both the TAM as well as our ability to capture that funnel through our approach to self-hosted Sentry, as well as our free cloud offering (for hobbyists) and other sponsorships (to students and open source projects). One of the big reasons I’m a believer in commercial open source models for things like Sentry is because of how effective it is from a top of funnel point of view. You see, we’ll often get extremely large companies running Sentry self-hosted, which is the same product that powers our cloud service. We don’t actually offer any commercial services on top of it though, so those companies are simply choosing to take on that burden themselves. This isn’t a cynical bait and switch trap we’ve set; we just don’t have the bandwidth to sell services a la carte, and we’re not going to staff there because we’re not a services company. Some of them over time will decide they’d rather utilize our cloud service, but more importantly is the network effect that comes from it.

You see, developers very rarely stay at a company for more than a few years. One interesting consequence for us has been that developers who go from BigCo to SmallCo often bring Sentry with them. BigCo might have chosen to self-host Sentry, but SmallCo could care less, and simply opts for our cloud service. Eventually SmallCo becomes BigCo, and we’re able to sustain these investments, as it acts in a lot of ways like a typical funnel. This is why I’m bullish on free software models, because the ROI exists with or without restrictions on the software. Even better in this situation is the developer who brings Sentry into SmallCo is often seen as someone providing leadership, as they’re introducing a software that is generally beloved, and has a huge ROI from a value-to-cost perspective.

Accessibility is Key

People often suggest freemium is a loss leader, or that the only way to make money is off of the Global 2,000. I have two opinions about those people: they’ve not built a business before, and/or they’ve not tried hard enough at monetizing their product. You see, there’s no real reason you can’t make margins off both big and small customers, and doing so builds your moat. What I mean by that is if you choose to ignore smaller customers (which many would even describe mid-market players as small, and they’re anything but), you’re opening up a venue for a competitor to come in and unseat you. Yes, the largest customers are going to make up the largest share of your revenue, but that doesn’t mean the revenue from the smaller ones is meaningless.

While this has shifted over time, something along the lines of 70% of Sentry’s revenue comes from self-serve customers. While self-serve doesn’t mean small, it’s certainly a rare phenomenon when a JP Morgan-like company ticks your terms of service box and puts down a credit card. I’m not going to disclose our revenue numbers, but let’s just say that number is significant no matter how large your business is. The bigger point here is that its not only possible to build a business this way, but its efficient and measurable. To make this model work, you have to accept some key points:

  • The product must add value, if it’s not obvious
  • The product must be affordable (Sentry starts at $29/mo)
  • The product must be low-friction (it needs to be easy to adopt, pricing needs to be transparent)
  • The product should make compliance easy (we make SOC2 and HIPAA self-serve)

If you check these boxes, and you’ve gotten to product-market-fit, you should double down on community. Community will be the mechanism that allows you to scale your product feedback loop. That is, you’re not going to hire infinite PMs, have them sit on 1:1 customer calls, and find any rational way to assimilate that feedback. You’re instead going to look for friction - you’re going to find customer pain points, passive negative feedback - and you’re going to optimize the product around that. For us the best community channels have been Twitter (X), GitHub, and we’re now beginning invest in Discord, which is already proving to be fruitful.

I want to caveat the above. I think Sentry’s early success came from community, but it wasn’t entirely intentional. I would still make that bet going forward, and I see a lot of great up and coming companies doing it, but I’m not going to claim any expertise there. That said, our success was also possible, and possibly even more so, due to affordability and the low-friction of adopting our product. In addition to that, open source has certainly played a big part of our lives, which is one reason we’re investing into things like our software sustainability program, as well as the Functional Source License.

”But, eventually!”

The immediate counter point any arm chair expert is going to make here, is that eventually all businesses have to focus exclusively on their larger, more significant revenue generating customers.

They are wrong.

If one day Sentry goes belly up because we didn’t do that, you can come say I told you so, but so far all signs point to that not being the case. Yes, those customers matter, and yes, they should receive appropriate attention, but your business should not over rotate on the few at the cost of the many. How we think about this though is no different than how we’ve thought about the historic business: we build a great product, lots of customers pay for it, and most importantly, we generate ACV growth through additional value. Aside, thats literally how any successful Enterprise company works. They succeed in one product, and then add adjacencies, often to the same target customer.

In our case this looks a little different, and some people might say a little fucking crazy. As we project out our path to generating 10-figures in ARR (we’ve got some work ahead of us), we look at one fundamental key number: 250,000 customers. I said customers, not leads, not free accounts. We think we can achieve 250,000 paid customers - or logos - over a long period of time. That’s not an easy feat, and its certainly not a common one, but it also feels like something we can easily reason about.

The harder challenge, I believe, is nailing that additional value. Succeeding at a second, third, fourth, etc product offering. Atlassian did this amazingly well pairing Jira with Confluence, and then expanding Jira into just about every conceivable version it could possibly be, but even they struggled to really nail down a 3rd major success. GitHub has done this with their core repository hosting and GitHub Actions, and its looking like Copilot could end up being their third (albeit, not their third investment, jsut their third major success). This is where we invest all energy, because being successful at one thing is very different, and often a formula of time and opportunity, whereas N+1 requires muscle.

That’s the same problem however that any company has, so we focus on solving for that. You combine that with our approach to customer adoption and the formula becomes quite compelling. Take the simple objective of $1B in revenue @ 250,000 customers. That math is easy to understand: $4,000 ACV across your paid customer base. It’s really not that hard to reason about how you could pull that off with most B2B software, and it certainly feels a lot easier than, say, $1B revenue @ 10,000 customers, where ACV needs to hit 7-figures.

Use Your Brain

I’m going to sum up this entire thing fairly simply: people should spend more time putting actual thought into their decisions. The entire journey of Sentry there’s been someone nagging me telling me we’re doing it wrong. They didn’t know shit. Every point along the way we proved them wrong, and it wasn’t because we just randomly rolled the dice. We continuously made a set of decisions that seemed to add up to more than the sum of their parts. 1 + 1 = 3 as they say. To do that it requires you to actually spend the energy to think critically about the entire puzzle that is your business, about how your set of decisions play off each other.

You’ll find this over and over when you’re growing. People coming in, claiming expertise, saying you have to do something. My personaly anecdote here comes down to industry analysts. So, many, wasted, hours, because I didn’t know any better. Analysts don’t change anything for us, and theres no rational argument for why we should take our limited resources (time) and spend them on that channel. If this resonates, you should also hear my rant on product experimentation, and Optimizing for Taste.

Most importantly, don’t spend your time on things that don’t make sense. Do the things that click, whether they’re easy or not, and ignore the noise. Enterprise is not a one size fits all, and certainly not what it used to be.

Oh, and before I forget, Sentry is an Enterprise company, and the Fortune 500,000 can be your customers too.

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