By far, the leading reason companies raise capital is to invest in sales and marketing. Once product-market fit is established, companies should be focused on building a great sales and marketing process.
In our experience, this requires companies to leverage the most relevant marketing channels and marketing technology in order to scale. Whether this is executed via outsourcing or by building teams and processes internally is company specific – both approaches work, though we prefer outsourcing.
Frequently Asked Questions
Most of the companies we speak to spend far too little on sales and marketing (between 0 and 5%).
Your spend will depend on the opportunity – larger markets with good opportunities and low competition demand a budget of 20% or more of revenue for sales and marketing.
The rule of thumb for established and/or smaller companies ($5mm or less in revenue) is 5-10% of revenue should be allocated to sales and marketing efforts.
For faster growing companies (30% or more YOY growth), it is not uncommon to see budgets of 30-50% of revenue.
We are major proponents of outsourcing sales & marketing for most of our portfolio companies. The complexity in a go-to-market effort for a company in today’s market is more complex than ever, and the requisite talent to execute is simply too hard to find.
Even for larger companies with substantial revenue, we have pushed out the horizon on bringing sales and marketing in house.
For marketing to be effective, it needs to be innovative and engaging, so relying on your own staff will only get you so far. Outsourcing connects you with marketing agencies who specialize in keeping on-top of new technology and trends.
In a perfect world, a company would have a clear idea of how they would allocate the capital we might provide. The level of detail in your plan will vary by industry, but here are our general views:
In 2020, after countless interviews with external agencies, we decided to create a joint venture with a leading database company and a leading paid media company to deliver services to our portfolio clients.
We now have substantially more control over the fate of our investments and can deliver best-in-class services to our companies. The specialists working with our clients have decades of marketing experience.
This joint venture is focused on delivering value in the core tasks and marketing channels as we see them – SEO & content marketing, web redesign, email marketing, paid search and social media marketing.