Oct 26, 2018 · 28m · a16z
Going to Market When No Market Exists
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this Andreessen Horowitz presentation, General Partner Martin Casado outlines go-to-market strategies for startups creating entirely new market categories, emphasizing how direct sales execution, strategic pricing, and narrative building drive enterprise valuation. He provides technical founders with a practical roadmap to navigate the unique pricing, marketing, and field sales challenges of building new software markets.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 0.0 Guest teaching 6.6 Guest disagreement 3.0 The host pushing back 0.0
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 10:45 Refusal of product bundling
Casado forcefully commands founders to never bundle new category products with mature offerings, shutting down a common founder shortcut.
Hardest push from the host ▶ 8:14 Audience interjection on ACV physicsIn a talk devoid of host participation, an audience member interjects 'Full stop' to emphasize Casado's point on pricing constraints.
Biggest teaching moment ▶ 6:30 Direct sales unit economics lessonCasado breaks down the strict mathematical unit economics of sales rep capacity ($300k OTE across 6 closed deals) to demonstrate required minimum ACVs.
The host holds their own ▶ 8:14 Audience interjection momentAs this segment is a uninterrupted monologue presentation without host involvement, no host expertise counterarguments occurred.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Enterprise Valuation and Go-To-Market Importance | 0 | 6 | 2 | 0 | Casado presents a monologue explaining how enterprise valuation relies on go-to-market execution rather than pure technical innovation. He educates the room on the cost structures of direct sales versus fixed R&D. The host does not speak. | |
| The Impact of Pricing on Company Valuation | 0 | 7 | 3 | 0 | Casado breaks down the mathematical constraints of direct sales quotas and OTE to prove why early enterprise low-pricing cannibalizes startups. An audience member briefly interjects agreement during his breakdown. | |
| Pricing Tactics and Enterprise Discounting | 0 | 6 | 4 | 0 | Casado strongly warns founders never to bundle category-defining products with existing mature products. He details procurement discounting realities and advises keeping public pricing hidden during early market creation. | |
| Strategic Marketing and Developing the Story | 0 | 6 | 2 | 0 | Casado outlines how marketing functions as the primary early currency through narrative framing. He shares reflections on his own past mistakes as a technical founder learning story positioning. | |
| Marketing to Developers vs. Building a Sales Force | 0 | 7 | 3 | 0 | Casado analyzes the shift toward developer purchasing power while warning that open-source traction alone cannot replace a direct enterprise sales force to scale beyond $100M ARR. | |
| Sales Strategies across Company Stages | 0 | 7 | 3 | 0 | Casado instructs on the sales learning curve, distinguishing early-stage sales engineers and hunters from mature-stage salespeople. He highlights the dangers of sales teams starving for oxygen and distorting product feedback. | |
| Enterprise Sales Engagement and Common Execution Mistakes | 0 | 7 | 4 | 0 | Casado directly challenges standard VC wisdom regarding professional services, explaining why early services are essential before offloading to partner channels. |
Statements from this episode (25)
Casado: Enterprise products have no intrinsic value without go-to-market execution
“And I think actually one of the biggest logical fallacies that technical founders do is the following is they think that if you create a widget, it has intrinsic value and anybody that runs across that widget will be able to not only Understand how cool it is,…”
Casado: Standard GTM tactics fail when creating a new market category
“Most material on go to market that you'll find in the general literature is around mature markets where you do things like market research and you know, how to do pricing and you know, how to do comparative analysis and all of this other stuff. And none of tha…”
Casado: Go-to-market is as important as technology in enterprise software
“So it turns out, at least in the enterprise space, pretty much all of the value of a company comes down to go to market. And this is very non-intuitive to me to begin with, but go to market is at least as important as technology.”
Casado: Category-creating enterprise startups require direct sales forces
“In most market category creation situations, in most of them, you have to have a warm body in the customer selling, just because the customer doesn't even know how to think about it. So you, in most of cases, you have a direct sales model,”
Casado: Direct sales costs dictate enterprise software margins and valuation
“That direct sales is going to by far dwarf your cost, it becomes all of your variable cost, and that will become your margin, and that will set your valuation.”
Casado: Market category creation involves selling to problem-unaware customers
“Market category creation is the customers don't even understand the technical concepts. They don't understand the approach. In many cases, they don't even know they have a problem.”
Casado: Pricing is the single most critical decision driving enterprise valuation
“I didn't understand until much, much later how true this is, that there's no single decision At least in enterprise, there's no single decision you'll make that is more important than pricing with respect to your valuation, not a single one.”
Casado: Setting low initial prices cannibalizes future market and locks in margins
“So if, for example, early on you set your price too low, you'll basically cannibalize your entire future market and it's very difficult to raise price.”
Casado: Early sales struggles stem from fit or timing, not pricing
“If you're having a hard time selling something, it's almost never priced early on. It's the market's not ready, or you actually don't have product market fit, or you don't have the right sales model.”
Casado: Category-creating enterprise startups need $150k+ ACV for viability
“If you identify, listen, we have to do direct sales because, you know, this is only applicable to the Fortune 2000, and this is a market category creation situation, so we have to have, like, kind of the deep conversation and it has to be evangelical sale. If …”
Casado: Microsoft created multi-billion-dollar shelfware businesses through product bundling
“So Microsoft is notorious for making multiple billion-dollar businesses of basically shelfware because the consumption behavior didn't change and the consumer behavior didn't change.”
Casado: Nicira waited five years before listing public software pricing
“But I don't think we ever listed pricing. I mean, I think it was probably five years in before we actually started listing pricing.”
Casado: Marketing is one of the best moats a startup can build
“What I've come to appreciate is A, marketing is incredibly technical, and it's becoming exceptionally technical as developers become a buying center. It's actually also one of the best modes you can build around your company, so I think it's something to reall…”
Casado: Nicira spent six months refining its core product narrative
“We probably spent six months just refining the story of value. I mean, six months, and it was like six months of every day.”
Casado: Direct human interaction beats written articles for market creation
“In my experience, feet on the street, whether it's you, it's your sales teams or somebody talking to customers is the primary channel for dissemination in early markets. Like you can write articles. They very rarely create concepts in people's brains and they …”
Casado: Industry analysts matter for down-market buyers, not early adopters
“Like when you're dealing with like the early adopters, like the first adopters, they don't really listen to analysts because they're often like kind of wild west and they'll engage with you directly. But as soon as you go down market, like Gartner is really im…”
Casado: Open-Source Enterprise Startups Need Direct Sales to Pass $100M
“In general, when we have seen companies come in that have open source strategies that create large top of funnels with developers, you get nice, super linear, Revenue ramps to a hundred million plus once they build direct sales.”
Casado: Early-market and mature-market sales require completely different salespeople
“Early market sales is very, very different than mature market sales. And the people that do well in early market sales are often very, very different than people that do well in mature market sales.”
Casado: A market is mature when sales reps achieve 2-3x OTE
“Until we get to about, say, two to three times OTE, you've hit a mature market.”
Casado: Cash-based sales compensation distorts early startup market feedback
“In the early days, actually doing Cash-based comp isn't always the best thing because they'll find a way to get it, and that's not always the best way to get market signaling and market feedback.”
Casado: A quota-starved sales team is worse than no sales team
“Something honestly that's worse than having no sales team and no numbers is a sales team that's starting for Oxygen, just because they can be so disruptive, not only to morale, but to internals of the organization.”
Casado: Early startups should withhold pricing discussions until technical close
“If at all possible, don't talk about pricing until here in, in early market. And the reason is, is there's no way they can actually value your solution because they've never thought about before until you get to technical close.”
Casado: Early enterprise software revenue is often 50% professional services
“It's not unusual for a pre-chasm enterprise product to have a 50% license and 50% professional services.”