Next NYC Spotlight: Selling an Open-Ended Product

Nov 2, 2023
Next NYC Spotlight: Selling an Open-Ended Product
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Retool was designed around the belief that software has been built the same way for the last two to three decades, requiring specialized training and expertise from developers. To modernize this process, Retool empowers developers to accelerate their workflow in hours and days, rather than the traditional timeline of weeks, as well as equips them with the means to construct applications that are more adaptable and customizable. 

First arriving on the scene in Y Combinator’s 2017 Winter batch, Retool has since grown into a dynamic unicorn. Their latest funding round in July 2022 catapulted them to a $3.2B valuation, over $141M in funding, and approximately $80M in ARR. With over 500,000 apps built on their platform, billions of queries, and notable customers including Amazon, Mercedes-Benz, Doordash, the NFL, NBC, Coinbase, Ramp, and more, Retool is scaling at hypergrowth speeds.  

Nonetheless, CEO and Co-Founder, David Hsu, has been deliberate in his approach — steering the company towards growth that’s both efficient and sustainable. In the pandemic era where many software startups sought out mega rounds and inflated valuations, Retool consciously opted for a path of “lower valuation and lower dilution [because it] is substantially better for employees.” Not only that, but Retool has reported that it is already cash flow positive, underscoring its financial stability.  

Source: Retool: the $82M ARR internal app builder

So, why is the web development app so popular?  

Retool sits at the intersection of two major trends: the rise of the developer and the growing emphasis on operational excellence. This makes for an even more unique value proposition as its technical product solves business use cases. However, due to Retool's versatile, open-ended nature (meaning it can benefit and be sold to any industry), the company has run into a series of sales challenges.

We recently talked to Eleanor Dorfman, Head of Sales at Retool to get the low down on the company’s sales process. Eleanor joined in 2020 and prior to Retool was at Segment, where she built out the company’s customer success operations team before pivoting to creating an expansion sales team, renewals team, and a new business sales team. 

Here are her top takeaways: 

Pricing & Packaging Should Align with Value

Retool started with a product-led growth, self-serve sales motion. Like many PLG companies, Retool faced headwinds to land and expand with this type of sales motion. Because they charge a fixed price per seat, it often disincentivizes expanding to other users within a company as it runs up the bill. Unlike the Figma’s or Zoom’s of the world, who offer free seats to additional users and monetize additional features.

In the last few years, Retool has expanded its sales team and built out an enterprise go-to-market motion.

Today, Retool remains both motions with pricing starting with a “free, no credit card required” tier for developers and small teams, running all the way up to enterprise-level pricing. 

Generally, the importance in defining a pricing and packaging tiered approach is to understand how and where value increases as price increases. Sounds easy, but in practice, to do this is tricky. Retool recently conducted its own pricing change and for a brief time, growth actually stalled out as customers adjusted to the pricing shift. However shortly after, growth re-accelerated, signaling it was the right move. One importantly lesson from Eleanor:

“Never let the internal process impact the customer experience.”

Working With An Open-Ended Product Is a Double Edged Sword

On one hand, Retool can sell to essentially any company. On the other hand, this broad mandate can easily create a lack of focus and derail Sales, Marketing, and Product teams into chasing specific use cases that aren’t applicable to a broader ICP. Eleanor’s advice: 

“Be clear on what problem you're trying to solve and build that discipline into your Sales process.”

For Retool, defining an ICP was a critical (yet complex) undertaking. They focus on companies hiring or with a Head of Tooling. If that sounds specific, it is. Which is why their Sales team is in charge of highly personalized research and vertical experimentation (such as hosting webinars), to identify potential customers and determine who aligns best with their offering.

Surviving Shifting Markets Means Adapting to a New Reality 

In 2020, everything about sales changed. Sales reps who were once successful and blowing past quota, were seeing flatline success. A few strategies Retool has put in place to combat the environment: 

  • Tighten qualification criteria: As an open-ended product, their qualification criteria tended to be “very loose.” But a new strategy they enacted was to tighten qualification criteria. How? Multiple discovery calls with different stakeholders – they found more time and diversity in opinion was the best way to reveal prospect’s pain and priorities. According to Eleanor, “until we have a complete picture to set tracks in a POC and defend it to buyers, we don't know if it's a compelling deal to get through budget cycles in today's environment. Test your champion to make sure you have a champion.” 
  • Redefine sales rep performance: In 2020, many of their sales reps performances declined thanks to the macro environment. When outputs aren't there, look at the inputs. Meaning, is the sales rep controlling what they can control? If they’re doing all the right things – drafting creative campaigns and outbounding, holding discovery calls, creating high-quality enterprise-grade collateral, managing pipeline, updating forecasts, cultivating champions and multithreading – but still not seeing success, it's likely you’ll want to continue investing in them. 
  • Multi-thread champions: Today, it’s not uncommon for a champion to get laid off. To avoid being in the position of losing a champion and an account all together, how do you rebuild a new champion within an existing customer? Multi-thread early! Always make sure you have at least three champions within each existing customer.

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