How Yammer cracked the code on virality, distribution and scaling sales

"Virality gets you in, but you need human salespeople to close the deal"



David Sacks raised 85 million $ for Yammer before selling it to Microsoft for about 1,2 billion $. Yammer is currently used by 85 percent of the Fortune 500 (as self reported by Yammer).

So let’s agree that Sacks knows a thing or two about getting traction for your startup. At a recent event at Google Ventures, Sacks offered these snippets (well, chunks) of wisdom.

1. Distribution is everything

According to Sacks, your pitch should tell investors how you will distribute your product. As Sacks tells it, this has been his conviction since his PayPal days.

“It needs to be kind of baked into your product from the beginning, it’s not something you tack on later.”

For Yammer specifically, the problem was that Sacks couldn’t afford a sales force, and he didn’t know anything about a real, human flesh salesforce. So tried to hack distribution, by copying Facebook’s e-mail confirmation requirement. By prohibiting people to use e-mail services like Hotmail or Gmail, he could more or less force them to use their corporate e-mail address. The early adopters would then invite other co-workers and infect the whole company with Yammer, Sacks said.

2. You’ll still need humans (sorry!)

Yammer wrongly, assumed, that this approach would lead corporations to sell Yammer to themselves. No: companies still want to see you, touch you and poke you a bit before they sign a contract.

“Virality gets you in, but doesn’t close the deal,” said Sacks.

3. Market dominance = value, but techniques for distribution age FAST

To become valuable, you need to dig an interesting, large enough trench in the market, and you have to be able to defend this market. That’s where the need for fast distribution comes in: you need to become a big player fast. The problem is that good distribution techniques (like the Facebook e-mail invite) age fast because everybody simply copies them (like Yammer) or improvises on them (Pinterest).

“The smart plays have all been kind of arbed to death and so you have to innovate.”

A technique that still works is what Sacks calls “highly transactional virality”. This means: get a distribution model that makes use of things that people do or need to do. Sacks himself invested in GrabCAD, a company that makes it possible to easily move CAD files in the cloud. When engineeers share CAD files and one of them uses GrabCAD, the other one has to use it too. (Which is similar to how Dutch startup WeTransfer operates.)

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Photo: http://www.flickr.com/photos/eneas/3471986083/sizes/z/in/photostream/

via VatorNews – David Sacks on angel investing: Distribution is key.

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About the author

Raf Weverbergh

Editor of whiteboard. Raf Weverbergh was a magazine journalist whose work appeared in magazines like Rolling Stone, Playboy, Mail on Sunday, Publico and South China Morning Post. He is the co-founder of FINN, a corporate communications agency where he advises startups and multinationals on their PR and Mustr, the easiest media database for PR professionals. You can contact him on Twitter, Linkedin or Skype (rafweverbergh).

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