Lighthouse or Landgrab? How to Pick Your AI Sales Strategy

Elena Burger is joined by a16z's Andy McCall and Joe Schmidt to break down two very different ways AI startups can go to market: the lighthouse and the landgrab. Should founders win a handful of marquee customers whose credibility unlocks an entire industry, or move quickly across a broad market where the ROI already speaks for itself? Drawing on Joe's Lighthouse or Landgrab framework and Andy's experience building sales organizations at Samsara and Meraki, they explore how founders can determine which strategy fits their market, when social proof matters more than math, and why the current rush to adopt AI has created a rare window for startups to sell big software again. They also get tactical on POCs, pricing and ACV, hiring early sales teams, moving from mid-market to enterprise, and why founders shouldn't spend too much time perfecting their GTM strategy before talking to customers. As Andy puts it: spend 1% of your time on strategy and 99% executing. Timestamps: 00:00 - Intro 00:58 - The Lighthouse vs Land Grab Framework 06:57 - Samsara's ELD Mandate: The Perfect Land Grab Moment 13:26 - Lighthouse in Practice: Harvey, Decagon & Further AI 17:00 - ACV Discipline: Clear the Hurdle, Then Just Go 27:14 - Every Big Company Eventually Deploys Both Strategies 33:54 - Why Now Is the Moment to Sell Big Software Again 37:49 - The Biggest Mistake Founders Make Resources: Read Joe Schmidt's "Lighthouse or Landgrab": https://a16z.com/lighthouse-or-landgrab-how-to-pick-your-ai-sales-strategy/ Follow Andy McCall on LinkedIn: https://www.linkedin.com/in/amccall/ Follow Joe Schmidt on X: https://x.com/joeschmidtiv Follow Elena Burger on X: https://x.com/VirtualElena Stay Updated: If you enjoyed this episode, be sure to like, subscribe, and share with your friends! Find a16z on X: https://twitter.com/a16z Find a16z on LinkedIn: https://www.linkedin.com/company/a16z Listen to the a16z Show on Spotify: https://open.spotify.com/show/5bC65RDvs3oxnLyqqvkUYX Listen to the a16z Show on Apple Podcasts: https://podcasts.apple.com/us/podcast/a16z-podcast/id842818711 Follow our host: https://x.com/eriktorenberg Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see http://a16z.com/disclosures.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  There's a moment right now to go sell big software again. We're now looking at a different way of doing business entirely.

• 0:06Speaker 01

  What are the Lighthouse and Land Grab sales playbook?

• 0:09Speaker 00

  Here's the framework for evaluating which playbook should you be following? There's this very obvious one. Go after the very obvious companies here in San Francisco that probably have some sort of proof or social value associated with them. Or like, go out and sell in Ohio. Find people who need your solution.

• 0:25Speaker 02

  If you think about sort of the enterprise networking world in 2009, people thought we were crazy. Like, we had no chance of getting into the largest corporations in the world, Lighthouse, because Cisco and HP had them all tied up. But what we could do is we could say, listen, we can configure, we can deploy faster, we're simpler to use. And that was very much a land grab strategy.

• 0:45Speaker 00

  Too few people are willing to pick up the phone and willing to get on the plane and willing to get in front of those customers right now because they feel like, it sounds way more sexy to sell to JP Morgan Chase than to Shmeish Shmeish Morgan Chase.

• 0:57Speaker 02

  I think the biggest mistake that I see founders make in an early stage, honestly, is just...

• 1:03Erik Torenberg?

  Today, Elena Berger sits down with A16Z's Joe Schmidt and Andy McCall to unpack two competing go-to-market strategies: Lighthouse versus Land Grab. Do you win a handful of high-profile customers and use their credibility to unlock a market? Or do you find customers with existing budgets, prove the math, and capture as much of the market as quickly as possible? Drawing on today's AI companies and lessons from building the sales organizations at Samsara and Meraki, they break down how to know which game you're playing, when to switch strategies, and why sometimes the best sales advice is simply to stop strategizing and start selling. You can read Joe's article in the show notes.

• 1:46Speaker 01

  Welcome back to the A16Z Podcast. Today, we're getting into the single most expensive question an AI founder makes: How you sell? Joe Schmidt just wrote a piece called "Lighthouse or Land Grab", which gets into the two dominant playbooks he's observed among enterprise AI startups. Joe, tell us about the piece in your own words. What are the Lighthouse and Land Grab sales playbook?

• 2:08Speaker 00

  Yeah, and this piece actually all stemmed back from an observation that I had actually driving up the 101 freeway. Maybe this is three, four, five months ago. I can't remember. And you just realized that you have the same kind of two competing companies, like one's on one side of the freeway and the other's on the other side of the freeway, and they're selling the exact same piece of software. And for some reason, they all have decided that the only relevant companies for this piece of software are in San Francisco and driving on the 101 freeway. And then this has gotten even more ridiculous. It's obviously every bus has been wrapped and every, it's like planes are flying up above and they're now towing startups. And so I think it's all very clever, but it's all targeting the same kind of sales motion. The reality is, you don't always have to do that.

• 2:46Speaker 01

  Yeah.

• 2:46Speaker 00

  You don't always have to sell to the same companies in San Francisco. And so what I wanted to try to do is tell founders, like, hey, here's the framework for evaluating. Which playbook should you be following? There's this very obvious one, which is like, go after the very obvious companies here in San Francisco, in New York City, in a major metro, that probably have some sort of proof or social value associated with them. Or, go out and sell in Ohio. Go out and sell in Chicago. Go out and sell in St. Louis. Find people who need your solution. And so that was the whole point of the piece, is you don't always have to go sell these notable logos. And we'll see how that plays out, but that's why.

• 3:18Speaker 01

  And just to get a little bit deeper, like, when does it make sense for a founder to, you know, go and buy a giant billboard that you see when you're driving from SFO into the city? When does it make sense for you to kind of do a more targeted sales activity or motion elsewhere?

• 3:36Speaker 00

  Yeah, and I think the way that we tried to make this make sense, of course, we did very consulting style with a two-by-two matrix. I did never work at a consulting firm, but I'll do my best. And so we really were thinking about, okay, what are the axes that we should be kind of mapping opportunities against? And so we decided upon the Y-axis is really what we called the buyer's exposure. And it's intentionally called exposure because there's the exposure of making a mistake with the solution that you buy. There's also the exposure of the solution inside of your company. Does this product that I'm selling to my customer end up being shipped? Is it shown to their end customers, right? Which is actually an important distinction. And really just kind of the overall risk associated with buying this piece of software. So that was like kind of the Y-axis, and it goes from high to low. And then the X-axis is whether or not proof travels in any given market.

• 4:20Speaker 00

  And so if you think about the top right would be proof travels in this market, and it's high buyer exposure and high buyer risk. And the bottom left, and that's a Lighthouse market, right? Just to be clear. And the bottom left would be low, low, low proof traveling, but also low buyer exposure. And that would be a Land Grab market. And so I think those are actually quite different. And if you think about the standard markets that fit into the Lighthouse model, it's regulated industries. Oftentimes, there's a more constricted number of logos. If you're wrong in the industry, like if the buyer buys the wrong piece of software and it ends up doing the wrong thing, it can lead to very bad things happening for your firm, including potentially getting in trouble with the regulator, even going and doing something illegal. That's very bad, of course. And then on the flip side, when you're looking at more of a Land Grab market, there's an established budget.

• 5:05Speaker 00

  People have been very used to and accustomed to paying for a type of service. And you can kind of come in there and show like, the end buyer, the math of, hey, my solution is better than whatever solution you're using today, whether that's a software-driven solution or a human-driven solution. So the kind of distinction that we drew was between like, proof on the top right of the quadrant and math on the bottom left of the quadrant. And that's how we kind of thought about the framework.

• 5:27Speaker 01

  Yeah, and Andy, we'll get into your background in a little bit, but I think first, maybe it's good to kind of categorize some of these modern-day AI startups within these two frameworks. And I know you both work with a lot of these companies. So Joe, I'm not sure if you want to call out specific examples, or Andy, if you want to call out specific examples and really just kind of like, talk through the sales strategies that you're seeing.

• 5:50Speaker 00

  Yeah, I mean, well, you're like the Land Grab, you know, mastermind. So maybe you want to talk about some of the stuff that you've seen?

• 5:55Speaker 02

  Yeah, well, I mean, I think you framed it up really well in your article, but yeah, I think that concept of like, the Lighthouse being more in industries that require regulation, a lot of social proof and so forth. And those tend to be companies that are going after like a category creation, right? It doesn't exist today, so therefore you got to go out and you got to kind of prove yourself with the big names. And obviously, we have a bunch of portfolio companies out there. There's a bunch of companies, and I think you mentioned a couple in your article, that are doing that. And then on the other side of the sort of Land Grab, less social proof. But those tend to be, especially in the AI world today, those are companies that are maybe replacing or improving workflows that already exist. And there's existing budget. And again, we have a whole bunch of portfolio companies. You named a couple in the article. They're doing that today.

• 6:37Speaker 02

  They're inserting themselves in, saying, hey, we built a better way to go after this through AI. And I think those are the great companies going after the Land Grab strategy.

• 6:44Speaker 00

  Yeah, and it's interesting. I mean, for those that aren't familiar with Andy's background, he's built some of the best sales organizations that I've ever heard of at Samsara and Meraki. And I've always found like, these stories like, really fascinating, illuminating. Like, the Samsara, you know, story around kind of the ELD mandate, is the way I understand it. Kind of basically forcing a category to happen everywhere all at one point. And it's just, who can go out there and do it fastest? Maybe just, if you could, for the audience's edification, share a little bit about what that like, big why now moment was? Because we're kind of having one right now.

• 7:15Speaker 02

  Yeah.

• 7:16Speaker 00

  And how you guys kind of went and captured it.

• 7:17Speaker 02

  Yeah. Yeah, I think if you're in the industry for long enough, and I've got the gray hair to prove that I have been...

• 7:23Speaker 00

  Blonde.

• 7:23Speaker 02

  Blonde, blonde, yeah, bordering on gray. Sure. You tend to see these big transitions. And I'm old enough to have seen the internet come about, and certainly mobile and cloud, and obviously now AI. And each of those causes this transition, and it causes new ways to think about how you go to market. Not wholesale changes, but always tools to help improve upon them. And I think the other thing I would say, I can't name too many companies that have become hugely successful without some element of timing and luck, right? And so you talk about Samsara, and the company was founded back in 2015. I joined in 2017. And the idea back then was, at the very beginning, it was like, internet-connected sensors, like all the value chains are going to become censored up. How do we get sensors out there and ingest this data, give it back to business owners

• 8:08Speaker 02

  in digestible and usable ways? And one of the first products that started gaining traction were these telematics units. And taking a step back, if you think about the world of transportation, long-haul trucking, right? Prior to like, 2016, they had these manual logbooks. If you were driving a truck and you stopped to take a break, you would write down in your logbook, I just drove for four hours, now I'm taking a 20-minute break. And then you drove for two more hours and you stopped for lunch. And if you got pulled over by highway patrol, they would ask to see your logbook. And they'd audit and make sure you weren't driving too long. It was a safety regulation. And in the US, around about 2016, they implemented this ELD mandate, right? And standard for electronic logging devices. And the idea there was, hey, we can use technology to actually track

• 8:53Speaker 02

  when the vehicle's moving and when it isn't, and are they taking enough breaks and so forth, right? Take the human and data element out of it, the human element, rather. And so over a two-year period, that was basically implemented between 2016 and 2019 with various phases of sort of compliance. But what it did is it provided this huge tailwind for anybody making these electronic logging devices. And we just happened to be one of the newer companies doing it. And there were some very, very established players, right? AT&T had a solution, Verizon had a solution. There were a number of companies that were in sort of the, you know, hundreds of millions, half a billion in revenue already doing this. And rising tide floats all boats. It helped everybody. But if you were a new entrant into the market, like we were at Samsara, it really helped because basically, the entire industry all of a sudden

• 9:38Speaker 02

  had to find budget to go out and buy these things. And a certain percentage of them clearly would say, hey, let's check out what's new out there. Are there any new entrants into the field? And so it really helped kind of give us a boost.

• 9:51Speaker 00

  How did you navigate like, the social proof side of that? Because I think the casual observer might think about that and say, okay, wow, this is regulated. We can't screw this up. So you probably have to go win, I don't know what the largest long-haul trucking company is. I'm trying to think of the ones I see on the freeway. But in any event, you probably have to go win that one. But it doesn't sound like that's what you did. From what I understand, that's not what you had to do. So how did you navigate that social proof element?

• 10:11Speaker 02

  Yeah, well, I think, you know, I would, and maybe I'm doing a little bit of disservice to the amount of strategy that went into this. But there wasn't a lot of strategy that went into like, do we chase Lighthouse accounts? Or do we go after Land Grab?

• 10:24Speaker 00

  Who's willing to pay us?

• 10:25Speaker 02

  We kind of listen to our customers, right? And it doesn't take too many cold calls into the largest trucking and transportation firms when you're a, you know, 18-month-old company

• 10:34Speaker 00

  Yeah.

• 10:34Speaker 02

  that they've never heard of, to hear, we're not buying you, click. To figure out, hey, you know, who can we sell to?

• 10:40Speaker 00

  Yeah.

• 10:41Speaker 02

  And, you know, in 2017, 2018, you know, we had minimal features.

• 10:46Speaker 00

  Yeah.

• 10:46Speaker 02

  We were just looking for, do we have something that somebody wants to buy? And so for us, at that point in time, the mid-market was the place to go. For a couple of reasons. Number one, it didn't require as much social proof, right? It was, it was more about, hey, are you satisfying my, my need for, for telematics? Do you, do you fit the requirement? And then, you know, the, the other reason was we could get really fast feedback product, right? Cause the sales cycles are short. We could get it implemented quickly. They would deploy quickly, right? The bigger the account, the longer these deployments, the longer the feedback loops. And so it really helped us with the, the sort of product innovation side as well, just to get as many deals out there, get as many wins as we could.

• 11:25Speaker 00

  Yeah. And I think this is actually really important though, like as like, you know, early stage founders evaluate this moment in time. Like what, we, we don't exactly have like, you know, the mandate from the, you know, US government saying you have to adopt AI. But like, you know, CEOs everywhere are saying, you do have to adopt AI company. There are AI boards at every enterprise right now saying like, here's what we need to buy. And we need to do it by X period of time. And, and that surely will go away, but there is this moment of like crazy, you know, kinetic energy inside of big companies. And, and so I think that like, what he just said, actually, what Andy just said is, is actually a good, a good, kind of bellwether of whether or not you're in a land grab versus a lighthouse market. Are people willing to actually buy from you is part of the land grab. You know, Matthew, it's like, are they willing to get on the phone with you? Are they willing to buy your product?

• 12:09Speaker 00

  Are you going through POCs and are you figuring out like how to get someone to use it? You know, and so if you can't get that done, then it's all about going and like, doing like very deep, you know, forward deployed, lighthouse-like arrangements and figuring out how to then get to your next customers. But I just think like too few people are willing to pick up the phone and willing to get on the plane and, and willing to get, you know, in front of those customers right now because they feel like, oh, this is like this new category moment. I have to go, I have to go to JP Morgan Chase to, to sell my deal.

• 12:39Speaker 02

  And you said a really good thing there. It's, it's, you know, do they have existing budget? Do they have, you know, is it, is it a replacement product? If it is, then you're probably going to lean more towards a land grab.

• 12:49Speaker 00

  Yeah.

• 12:49Speaker 02

  If this is a brand new product, and there's so many of those today, right? We talk to founders every day, companies are being born with brand new products and they're going after brand new markets. If you have to do a lot of education to your market, if they don't have existing budget, if you're going to have to take them to this educational journey before they can go out and justify the purchase internally, that's probably more of a lighthouse strategy.

• 13:09Speaker 00

  Yeah.

• 13:09Speaker 02

  You're taking them on this educational journey and it's a lot more missionary work than it is, hey, take that money that you're spending with vendor A and move it over to us.

• 13:17Speaker 00

  Yeah.

• 13:17Speaker 01

  So maybe it's worth getting specific about some of these companies. I know in the piece you talk about Hevia and Harvey as, as classic lighthouse examples. And then Stut and Decagon as, as land grab. So maybe, do you guys want to talk about some of those, those playbooks that you've seen? Or maybe like give other examples?

• 13:35Speaker 00

  Sure. Yeah, sure. I mean, I can go and you jump in. You know, so for example, I, I highlight Stute in the article as like the, the product typical example of, of a land grab company that we're seeing in this new age. And so Stute, this amazing business founded by, you know, two incredible entrepreneurs, Tark and Ben. And what they are going after is the accounts receivable market. And for listeners who maybe have never thought about like AR, accounts receivable, basically, you know, this is when someone owes you money, you know, in an enterprise context, and you have to go collect the money from them. This is not glamorous, but however, there has been, you know, a mechanism to do this historically, right? There are collections teams and there's big pieces of software like, you know, I won't say their names because the compliance will probably bleed them out anyway.

• 14:18Speaker 00

  So there are big companies that do lots of AR that, that sell on this market, but it's been very manual, right? These, these human teams have to interact with this piece of software and they have to go out there and they have to sell, or have to go, they have to go collect. And so what Stute said was, hey, AI is actually quite good at, you know, basically having conversations with, with people. It's very good at looking at information internally and basically doing this process end to end. And so we could reimagine this historic, you know, way of doing collections. And instead of having humans do it, we can have humans plus AI do this and do it even more effectively. And that, with that, they then saw that open up was like the rest of kind of like, you know, order to cash and basically entire kind of accounts receivable suite. And so what they basically went out and showed all of the early stage buyers was in doing this, we have the math to prove it.

• 15:00Speaker 00

  We will be more effective than your current solution and your current human teams at collecting. And this will do XYZ for, you know, improving working capital by a tremendous amount. It'll save you money. It'll actually make you more money. So they were able to go out to the mid-market and just basically show the math and be like, would you like to, you know, have this solution? Yes or no? So that's a really good example of a, of a, of a land grab market. And those entrepreneurs are just like unbelievable sellers. They hit the pavement better than anyone, just as good as anyone, as anyone I've ever seen. And, and they're doing a great job. You know, another example on, on the lighthouse side would be, you know, we, we highlight Harvey in, in our article. And they just did a fantastic job of winning the right law firms for this very new, very, you know, theoretically high risk initiative

• 15:44Speaker 00

  where you're augmenting your human workforce with, you know, AI capabilities and really automating what, you know,

• 15:52Speaker 00

  junior lawyers would be doing on a day-to-day basis. And so when they won the first kind of, you know, few critical lighthouse accounts inside of their market, like that proof traveled like big time. And, and then, you know, the buyers that had like this tremendous amount of exposure realized, hey, it's actually safe for me to buy this, this solution. So those are the two kind of counter example, or, you know, two examples in this market. I don't know if there's anything you would highlight from other companies you're working with or things you've seen.

• 16:18Speaker 02

  Yeah, I mean, those are two great examples. I'm doing a decent amount of work with a company we're investing in called Pylon. They're basically the AI native customer support. And they're a great example of, of, of land grab. They're doing a fantastic job right now, just going out and saying, hey, we've got a better way of doing this. And, you know, they have, you know, they've been climbing up the ACV ladder, but, you know, they started at pretty modest ACVs and had been working their way up just by going out and replacing. And they have a fantastic go-to-market team that's just out executing.

• 16:49Speaker 00

  This, this ACV question is actually kind of an interesting one. And I'd be curious how you thought about it at, at Meraki or Samsara.

• 16:56Speaker 00

  You know, there's, there's so much demand out there and there's so many different ways of like kind of building your go-to-market engine. Like, how much did you actually even think about what you were landing at with these like, you know, it maybe go back to when you were at like, I don't know, 10 or 50 of ARR at one of these businesses. Were you optimizing for that or was it just like, let's basically figure out how to get enough reps in and?

• 17:15Speaker 02

  Yeah. It's a good question. The answer is you think about it a lot and then you try and not think about it at all. And what I mean by that is you want to make sure that the ACV that you're going after, it, it has to, it has to top the hurdle, right? In, in other words, you look at your unit economics and is it healthy or not? You don't want to be taking deals that are, you know, negative to your unit economics.

• 17:36Speaker 00

  Yeah.

• 17:36Speaker 02

  But if it passes the threshold, then the answer is you don't think about it. You just go and you get as many of those as you can. So if you can build a go-to-market engine, just theoretically, that could live off of 15K ACV deals.

• 17:47Speaker 00

  Yeah.

• 17:47Speaker 02

  Fantastic.

• 17:48Speaker 00

  Yeah.

• 17:48Speaker 02

  Like, don't take 8K ACV deals, but go get as many 15K AC deals as you can. And you want to just build a repeatable engine and pour fuel on the fire and get as many of those as you can.

• 17:57Speaker 00

  Yeah.

• 17:57Speaker 02

  And then what happens over time is you start inching up, right? Bigger and bigger companies like what you're doing then, and you start stacking up, you know, the wins and going up the ACV ladder.

• 18:07Speaker 00

  And, and can I, one follow-up on that, because this is interesting. And I'm, I'm so much enjoying getting you talking about this stuff, but like Meraki you guys had, and maybe tell the, the audience what Meraki does, but you know, basically access points, right? For, for internet connectivity. And you guys had this really clever program where you would kind of give an access point away. Free is the way I understood it almost, but. And then of course, like you do that, that impacts gross margin, but also you then have a hardware element as a part of your gross margin calculus. Like, we don't have as many companies out there that are doing, you know, maybe AI applications with, with, with a hardware element, but there is an inference element which impacts gross margins. And so I don't know, how did you think about like these kind of trade-offs in the early days of Meraki? And, and of course you had the same thing at Samsara with, with hardware too.

• 18:48Speaker 02

  Yeah. So, so just, just for, for the audience's education, so Meraki was a, basically a cloud networking company at this point.

• 18:56Speaker 00

  It is.

• 18:56Speaker 02

  20 years ago.

• 18:57Speaker 00

  Still part of Cisco.

• 18:58Speaker 02

  Still is a very healthy business within Cisco, was acquired by Cisco back in 2012. But the, the company was actually founded back in 2006. The co-founders were working on a, a research project as PhD students at MIT and started the business. And, and what's interesting about that, the, the research project was called RoofNet. The technology they built was basically large-scale like mesh wifi. And they'd install it on the roofs in like Cambridge. And the idea was you could, you know, outfit these municipalities and, you know, parks and, you know, public areas with wifi. It was fantastic technology. Within the first couple of years, they figured out it wasn't a great business model. There wasn't a lot of revenue in municipal wifi. And so they made this pivot into enterprise.

• 19:39Speaker 02

  And the reason I say that is, you know, if you think about sort of the enterprise networking world in, you know, 2009, 2010, like people thought we were crazy. Like, why would you be trying to build an enterprise networking company in 2009? You, don't you know that market was won 10 years ago by Cisco and HP? But the reality was, and again, back to sort of the, the timing, that was right when cloud was coming about. And, and the, the big innovation around Meraki was the, the, the product and engineering folks, fantastic team there figured out how to configure and manage this networking equipment through the cloud, which sounds like, yeah, total, of course. Back then it was, it was a little bit innovative. Anyway. Our, our problem, and that was very much a land grab strategy, right?

• 20:22Speaker 02

  We had no chance of getting into the largest corporations in the world, Lighthouse, because Cisco and HP had them all tied up. But what we could do is we could say, listen, we can configure, we can deploy faster, we're simpler to use. Well, who cares about that? The mid-market, right? Where they don't have substantial IT teams that have been trained in command line code and this kind of stuff. And so, you know, our kind of firm belief at that point in time was, well, what's the best way to get them to understand that our networking equipment is simpler to use than their Cisco that they're about to buy? And the answer is get them to try it.

• 20:58Speaker 00

  Yeah.

• 20:58Speaker 02

  And so what we do is we'd run these webinars and we'd say, hey, you attend the webinar, we'll send you a free access point. You plug it in, try it out. And the idea was if they, if they try it, the light bulb goes off and they say, wow, this is just so much easier than what I'm using. Why don't I, why don't I use that? And it was, it was very, very successful for a long period of time. And even as the company matured, you know, we were very, very liberal in our trial and eval because you just fundamentally want customers to experience the technology and realize that it's better than the alternative.

• 21:30Speaker 00

  And do you think like there's, there's an element of like the people can kind of learn from that right now? It's, it's hard though, because there is a, an aspect of configurability with a lot of the new AI stuff, right? Like if you just give somebody this like, you know, Ferrari, they, they might not know exactly how to even turn it on. And, um, and so I, I don't know how, how you even think about like the delivery mechanism for some of these like trial periods, POCs with some of the AI companies you're working with right now.

• 21:56Speaker 02

  Yeah. I, I think it's become more challenging, right? In the world of AI, because number one, things are moving so fast, like things are changing daily. And if you think about like a, a proof of, of concept or a trial, you know, the whole idea, if you're on the sales side is I want the customer to experience this. I want to prove that it works for them, but I want to do it in a, in a period of time that doesn't go on forever.

• 22:16Speaker 00

  Yeah.

• 22:16Speaker 02

  Right? And so what you, what you have to stay away from, and I think one of the real dangers today is these things turn into like science projects. I'm going to deploy this, well, can it do this? Can it do this? Can you show me this? Can you show me this? And of course, things are advancing every day. So the answer is probably yes, I could. But then you run the risk of these trials or proof of concepts going on forever.

• 22:34Speaker 00

  Yeah.

• 22:34Speaker 02

  And so it just takes a lot of discipline, I think in today's day and age to, to really box that in and say, listen, here's what our solution does and we're going to, you know, define it this way. And we're both going to agree that if it, you know, has done this after 45 days, it's success and you're going to move forward with the purchase. And so there's, there is a lot of that today.

• 22:52Speaker 00

  And did you, um, like, I guess, would you recommend having like kind of auto converts on these as much as you can? Or, yeah, like, I don't know, like other like kind of learnings and lessons from this type of like 30, 45 day?

• 23:04Speaker 02

  Yeah.

• 23:05Speaker 00

  Um, and then even talking about like the time, you know, the, the right amount of time that you're giving people with a product.

• 23:09Speaker 02

  I think, I think the timing depends a little bit on the complexity of your product, right? If it's going to take, you know, two weeks to set up, then you can't make it a two week trial type thing. But, um, I think the two biggest things are make sure you have an end date, right? It's a 30 day trial, it's 45 day trial, it's a 60 day trial, period, end of story. And then the second one is you have to define the success criteria upfront. Here is what we are proving that we can do for you, right? And in some of these companies, uh, you know, you, you can't do a proof of concept because, you know, maybe it is regulatory, maybe there's, you know, too much risk in there and they're not going to let you do it. But, um, where you can, I think you want to make sure you have both an end date and you have the, the success criteria clearly defined.

• 23:47Speaker 00

  Yeah. I think this is so tricky right now where, you know, so many, you know, like you, you have to basically define the scope that you're going after and the success criteria. But oftentimes if you're like automating something that has never been automated before, there's like significant amount of configuration and that like costs money.

• 24:03Speaker 02

  Yeah.

• 24:04Speaker 00

  And then your product could, could work, but it might be deployed improperly and, and, and/or the results take longer than 30 or 45 days.

• 24:13Speaker 02

  Yeah.

• 24:13Speaker 00

  And so how do you actually kind of, there's like a, there's like a difference of, hey, the product is working and you just, and we, and basically you need to work with the customer, then optimize whatever they're doing with the product.

• 24:22Speaker 02

  Yep.

• 24:22Speaker 00

  Um, right? Like imagine you're, uh, I mean, I always go back to sales because it's easy to think about sales, but like imagine you're a, a, you know, a sales tool, like the product needs to work and then you need to use it and target the right customers for whatever you're, you're selling. And, and they're kind of like two different parts of the equation. And so if all of a sudden you're taking risk on for whether or not your product works and then whether or not it's being used correctly.

• 24:42Speaker 02

  Right.

• 24:42Speaker 00

  Very tricky. And so I think this is actually a really important topic for founders and for early stage revenue leaders today, to figure out how you're educating your customer on like, here is the thing we are signing up for.

• 24:53Speaker 02

  Yeah.

• 24:53Speaker 00

  We are not signing up for, you know, you know, maybe you are, maybe you aren't, but, um, you know, whether or not your employees are using our tool the right way.

• 25:00Speaker 01

  Who, who have you seen that does the best of evangelizing and, and kind of like taking people through the onboarding process?

• 25:06Speaker 00

  You know, I think, uh, who would I put in that bucket? I mean, I think like Decagon has done an amazing job, um, at this. Like I think they go in, they basically evangelize that they're doing customer support better than anyone else. Um, and then they're very good about saying, here are the benchmarks that we are signing up to hit. And then they hit them, um, you know, in, in their time period, right? And so I think this is, you know, I think some people might trivialize, you know, this, it's very hard to do customer support effectively. Like this is a high risk exposed market, um, you know, where like you, you don't want to screw this up. And so I think they've done a really good job of, of evangelizing. Um, I think the guys at Stute, but back to like the, the example I just, um, I just talked about.

• 25:49Speaker 00

  And then another example would be, excuse me, a company that I'm on the board of called Further, Further AI. And they, they sell into the insurance space and they're kind of, they're basically evangelizing the idea of bringing AI to insurance. Um, you know, people have been using AI in insurance, like this is not, you know, generally a first adopter of, of, of technology, but a lot of their customers are some of the biggest insurance companies in the world. And it's because they're very comfortable with like, okay, hey, here's like an AI solution that's built in a government, uh, you know, a, a, uh, secure, you know, governance first, you know, uh, form and fashion. And then they work with, with forward deployed teams, you know, uh, their customers to get it up and running. So those are a couple of examples. I don't know if you have any.

• 26:27Speaker 02

  And that's, that, that last one's a good example of like a lighthouse strategy, right?

• 26:30Speaker 00

  Very much.

• 26:30Speaker 02

  They've gone after the bigger insurance companies and you, then you get that social proof and, you know, on down the, the long tail of insurance.

• 26:37Speaker 00

  And I, and I, I think like sometimes people think that you have to be from a given market to do a lighthouse strategy. And maybe there's someone sitting in a house and they're like, oh, like if only like I worked at this company, I could go do this. And it's like, no, the reality is like, go build a relationship.

• 26:52Speaker 02

  Yeah.

• 26:52Speaker 00

  You know, I see you laughing because I know you're like, go build a relationship with your customer. Go find someone and show them like, here's, you know, I have an earned secret. This earned secret is that AI can help your business or technology can help your business in this way.

• 27:03Speaker 02

  Yeah.

• 27:04Speaker 00

  And, you know, work with us on that.

• 27:05Speaker 02

  I, I'll also say that, you know, every, every small company wants to become a big company. I don't know too many very large, successful companies that at some point in time haven't deployed both strategies. You might start off with land grab, but then you mature and you have a lighthouse strategy or you start a lighthouse and then you get big enough that you can go broad, you know, into land grab. So I think for founders, when I get this question early on, do what makes the most sense for your business right now. What does that mean? Go out and talk to customers. Find out where the earliest, earliest and easiest sales are and pursue that strategy. It doesn't mean you're completely, you know, punting on the other one. It just means come back to it. And in, in both of the last companies that I worked for, both Meraki and Samara, we

• 27:47Speaker 02

  started with land grab, but as soon as we matured and started getting up into enterprise, then what do you do? Well, you verticalize and all of a sudden like, great, who are the top five, you know, transportation companies? Who are the top five warehousing companies? Who are the top five, you know, public sector? And then you want to go take those down. And so you can morph into a land grab strategy. You just want to do what's most efficient and most effective for the stage of the company you're at.

• 28:11Speaker 00

  Talk, can you talk a little bit about like one of those like key markets that you unlocked with like, you went from land grab early to, you know, lighthouse in a given market? Like what is you, how did you set up that team? Or like, was it just you or the founders that was going into this new market? And then like, you know, maybe a little bit about some of those deals that you closed? I'm just curious how this played out.

• 28:30Speaker 02

  Yeah.

• 28:30Speaker 00

  With the sequencing.

• 28:31Speaker 02

  Well, I, I think, uh, you know, at both Meraki and Samara, uh, you know, the, the sort of earliest example of, of, um, lighthouse was when we verticalized. And in both those instances, it was basically into like public sector. And Meraki was going after like school districts.

• 28:48Speaker 00

  Oh, interesting.

• 28:49Speaker 02

  Because that was sort of low hanging fruit. And, you know, if you're, if you, if anybody, anybody's ever sold a school districts, like they all talk to each other, they all know each other. You want to find the biggest school districts in each state. And if you can take that down, every school district underneath them says, oh, what did that one buy? Great. You know, all of a sudden the social proof is there.

• 29:05Speaker 01

  Yeah.

• 29:06Speaker 02

  Now, why, why use a lighthouse strategy in say, school districts or in Samara's case, when we went into public sector, when you start selling to cities and counties and states? You know, why shift? Because the sales motion is fundamentally different, right? The sales cycles are different, the way you sell, the decision makers are different, the way they procure is different. And so asking the same sales team to shift from, you know, selling to a mid-market customer, an enterprise customer over to selling to a city or a county or a school district, it's just, it's just different. And so, you know, that's a, a point where you might want to shift and say, okay, great. You know, once we're verticalized, we want to shift to a, a lighthouse strategy.

• 29:45Speaker 00

  What, what would you say there, the differences are between great sellers in lighthouse models versus great sellers in land grab models? Are there any differences like from what you saw? Maybe when you're opening new markets, is there a profile, um, that, that was most effective?

• 29:59Speaker 02

  It's always difficult to generalize. I, I think, you know, in a true lighthouse strategy, and, and when I envision lighthouse, it's like, hey, we're going to go after whatever, the financial sector.

• 30:08Speaker 00

  Yeah.

• 30:08Speaker 02

  You know, here are the top 15 accounts in finance and, you know, here are their logos. Like how many can we get into this quarter, next quarter, next quarter, right? Like that's a lighthouse strategy. You know, generally you want more seasoned, um, you know, enterprise sellers that, you know, know how to work within those accounts. They understand the sales cycles. They understand the, the sort of procurement cycles. In, in more of a land grab strategy where you're just saying, hey, we have the best technology, we're replacing this workflow, we're replacing this product. You just want, you know, very aggressive, like hire for attitude and aptitude.

• 30:42Speaker 00

  Yeah.

• 30:43Speaker 02

  Right? You can go earlier in career, you know, you just want those people to get out there and, and hit as many of those customers as you can. Because, you know, at that point, it's like you're hitting a big market and you just want to stack wins as fast as you can.

• 30:57Speaker 00

  Yeah. And I, you know, my, my unsolicited advice to any early in career seller or potential seller right now is there's never been a better time to work at some of these companies in our portfolio.

• 31:07Speaker 02

  That's absolutely true. It's, it's a super fun time to be in the market. Yeah.

• 31:10Speaker 01

  I, I wanted to ask, um, about maybe a third kind of, of selling or, or, or product diffusion that we, that we haven't talked about, which is like the developer kind of bottoms up. Like more grassroots adoption. And is that, is that something that you guys are seeing? Like, is, is the idea of the seller sort of becoming, I wouldn't say obsolete, but like for a particular kind of product, just, just less relevant now? Like a developer saying to, you know, their CTO or their, you know, CIO or whoever, like, hey, this is great. Like, let's just get this. And like, there's less of a sales motion needed?

• 31:50Speaker 00

  You know, I guess definitely not. Like, there's a bunch of PLG that's still happening today. I think people are buying things in a prosumer fashion all the time. And I think that there's new buyer behaviors being, you know, kind of discovered. And of course, like, you know, we were a big investor in Cursor and everyone saw how that played out. And there's a bunch of other examples of this. However, like, if I take a giant step back and, and talk about where we are in this like current cycle, like I wrote this long piece called Trading Margin for Mode about a year, year and a half ago, or whatever it was, talking about like the cycle. And if you think about like, why, you know, basically the last 12 years before 2024, 10 or 15 years before 2024, you saw so much PLG is just kind of where we were in like the software, you know, innovation cycle.

• 32:32Speaker 00

  You know, and a lot of the big cloud platform businesses, if you think about like CRM, HR, ITSM, security, like a lot of those big platform businesses were founded in the, you know, call it 2000 to 2008, 2010 period. And those businesses went out and solved like the big platform opportunities. And so then the only way to really break in at the enterprise, right? And we're talking more about like enterprise, enterprise sales or mid-market enterprise sales was to build like some sort of wedge product, wedge in with this product and say, hey, I'm going to solve this part of your, of your, you know, suite for you, and then try to expand over time. And so this like land and expand model became super, you know, obviously super in vogue. But it was really based on where we were in this like adoption cycle. And there were other people, of course, that said, hey, I want to go build a new CRM.

• 33:17Speaker 00

  I want to go build a new HRIS. I want to go build a new ITSM. But like, the reality, you know, was going from, you know, on-prem to cloud was a big enough shift for people to like switch to something new. But going from like cloud to cloud for CRM, like, I don't care if the button is green or blue, I don't care if there's like one little feature difference, I'm not going to switch. And so you can, you compare that cycle where we were looking at everything for the last 15 years, which was all PLG and all the time, this is incredible, to where we are now. There's this crazy kinetic energy inside of companies where they're saying, hey, it could be even something as, you know, fundamental as CRM, right? It could be as fundamental as HR, ITSM. We're now looking at a different way of doing business entirely. This is not a skeuomorphic one-to-one replacement, green to blue.

• 34:01Speaker 00

  We're now thinking about like, humans are going to be doing something completely different, way more high value, we're going to be doing way less of the, the same kind of, you know, mundane rote work. And instead, agents are going to be doing that. And so that's, I think, the opportunity right now. And it's why, instead of talking about like, of course, you got to talk about PLG and like all these other sales models, there's a moment right now to go sell, you know, big software again, right? And, and to go sell platforms. And, and it's because of this moment. And so I think people need to be studying kind of the 15 years ago models of like, how people build this and the ecosystems around it to go and have success.

• 34:36Speaker 02

  I think that's right. I will say, I think the consistent trend, as long as I've been doing this, is that, you know, every year and with every technology transition, buyers become more and more educated.

• 34:46Speaker 00

  Yes.

• 34:46Speaker 02

  Right? So the buyer today is just fundamentally has a better idea of what they want than they did five years ago, 10 years ago, 15 years ago.

• 34:53Speaker 00

  Yeah.

• 34:53Speaker 02

  And so, you know, that does lend itself more towards, you know, if you can hit that buyer when they're in their decision mode, you're going to have a better chance. It doesn't have to necessarily be PLG, but it can be more self-serve. It can be, it should be an easier sell than, you know, 10, 15, 20 years ago, where you had to take them on this entire education journey, why you need this, how it works, here's how you're going to write. Like, they're just so much more educated now on what they want to buy, that your job is just convince them that your company is the right solution for that.

• 35:22Speaker 00

  Amen.

• 35:23Speaker 01

  Yeah. I guess the, the lighthouse kind of like definition just gets pushed ever outwards. Or you're kind of like, yeah, just have to keep on conquering new territory. I'm curious, I, I assume a company just can't stay a lighthouse forever. And you, you even alluded to this, Andy, like, what, what is kind of the average amount of time that a company kind of can just, you know, chew off those, those bigger logos? And then, you know, like, like what is that transition moment like, I guess?

• 35:54Speaker 02

  Yeah. I mean, theoretically, you could, right? If you were a company that was dedicated or committed to a, you know, multi-product strategy, you could just keep coming out with new products and keep going after, you know, more verticals, right? Like, you could theoretically do that. And I think there's probably some examples we could come up with of companies that did that. But, but yeah, in general, you know, if you start with a lighthouse strategy, you've built the social proof, you've gotten these big names, then what you want to do is you want to run the category underneath it, right? If I've gotten the top five financial companies in the world, I want to run down, you know, the list after that. And so that fundamentally becomes a little bit different of a sales motion, right? You're spending less time with, you know, the huge organization, the big logo, you know,

• 36:37Speaker 02

  selling and you're spending more time, you know, less time on the social proof and more time on, hey, here's a reference if you need it, otherwise is why my product's best buy it.

• 36:46Speaker 00

  Yeah. And I mean, I think, and to Andy's point, there are certain companies, I think, that actually do just stay lighthouse the entire time. And like, that would be like, I'm trying to think of like, the best example might be like Applied Intuition in our portfolio. Like, there's, there is a very, you know, set number of people who are, you know, buying that kind of autonomous software and a certain number of, you know, car manufacturers and so on and so forth in the world. Not to say that that's the only people they can sell to, but like, of course, these are, these are the straight markets. And so you then have to treat every one of these with immense care because they are huge ACB opportunities. And, and they've obviously, I think they're, they're arguably the best in the world at doing that. So, yeah, that's a good example of that.

• 37:22Speaker 01

  Why, why would a founder sort of misjudge what game they're playing? Or how, how have you seen founders kind of misjudge whether they're doing lighthouse or land grab?

• 37:33Speaker 00

  I mean, it sounds way more sexy to sell the JP Morgan Chase and, you know, Shmeish Shmeish Morgan Chase.

• 37:41Speaker 02

  I think, I think the biggest mistake that I see founders make at an early stage, honestly, is just spending too much time trying to figure it out, right? Like, too much time on the strategy.

• 37:51Speaker 00

  Yeah.

• 37:51Speaker 02

  And strategy is important, but you should spend like 1% of your time on the strategy. Pick it and then spend 99% of your time try to execute.

• 37:57Speaker 00

  Yeah.

• 37:58Speaker 02

  So, you know, rather than sit back and say, well, you know, should we do lighthouse or should we land grab? Get out, talk to your customers, figure out which ones, you know, are, are willing to, you know, buy your product, the features and the services that it delivers today, and then chase that path, right? There's no bonus points for hard-earned revenue, you know, you don't get extra, you know, multipliers on your revenue if you get the big logo or something. Like, go after the customers you can, you know? And then, you know, constantly be improving your product. And then, you know, you can always reassess your strategy. You, after the first year, if you've got all your, your revenue milestones, you can look at it and say, well, could we be more effective doing this? Maybe. But just don't spend too much time in analysis paralysis mode.

• 38:38Speaker 00

  Yeah, totally agree with that. I totally agree with that.

• 38:40Speaker 01

  Joe, Joe, you had some, you had some fun questions for Andy. I was some lightning round question.

• 38:45Speaker 02

  Lightning round, okay.

• 38:46Speaker 00

  I'll see what other ones I can come up off, off the top of my head. But the first one is, uh, maybe like your favorite place you ever, weirdest place you ever closed a deal?

• 38:55Speaker 02

  Yeah, I mean, we've had some customers that, you know, have, have taken, taken us to some, some funny places, right? I mean, I've closed deals on fishing trips. I've closed deals, you know, out at shooting ranges. I've closed deals at ballparks. So, yeah, I think those are all, you know, kind of unique, like anywhere that wasn't a, a meeting room.

• 39:14Speaker 00

  Air pari chilies?

• 39:16Speaker 02

  Probably, probably over, probably over the years.

• 39:19Speaker 00

  Yeah, over a couple billion dollars.

• 39:20Speaker 02

  Certainly at Sam's, we're selling to, you know, logistics and transportation companies, you know, a lot of truck yards and, and that kind of stuff, you know, sanitation sites.

• 39:30Speaker 02

  There's some, there's some.

• 39:31Speaker 00

  When you're doing land grab motions, I think this is like the, the permeating theme is just like be willing to go and, and sell wherever. Maybe, Andy, if you could go back and tell yourself one thing when you're building out these, these teams or like early in your career, what would you tell yourself?

• 39:44Speaker 02

  Early in my career? Well, I mean, this is the advice I give a lot of, uh, early in career folks. And it was a mistake I made early on. The only thing you should really be focused on when you're starting your sales career is find the best company you can possibly find to work for. I made this mistake early in my career. I was chasing, you know, where can I make the most commission? Where can I make the most money? What's the hottest technology? What, where can I go get the biggest title? At the end of the day, none of that matters. What you want to find is you want to find the, the, the great company that's going to grow. And if you do that, then it's like a career elevator, right? Like, you will grow with the company.

• 40:20Speaker 00

  Yeah, totally agree.

• 40:21Speaker 02

  You can't, you can't let your ego get in the way and I want a director title or I want this big of a base salary or I think I can get this much of a commission rate. Just go find the best company you can work for.

• 40:30Speaker 00

  Yeah, totally agree. What's one role you think companies should hire for earlier than they normally do in the sales work?

• 40:37Speaker 02

  I mean, it really depends on the company and how, you know, specifically like, how comfortable the founders are. Like, if you're a founder that's very comfortable with sales and, you know, you can wait longer to hire a sales leader and that kind of stuff. So it's a little bit of a generalized question, but I would say sales operations is, is probably one that I see companies waiting a little too long on. And I am not a proponent, I don't think you need to, to, you know, stand up a gigantic revenue operations organization. It can be literally like one person.

• 41:04Speaker 00

  Yeah.

• 41:05Speaker 02

  But you need somebody that every day is thinking through territory alignment, you know, name lists, doing, you know, commission skirmishes, setting a sales constitution, like all that kind of stuff becomes really, really, really important. Because when you get into like, you know, scale mode, you want all that stuff like largely figured out. You don't want, it becomes speed bumps otherwise.

• 41:23Speaker 00

  Yeah, totally.

• 41:24Speaker 02

  So you want somebody thinking about that. And it's, it's generally not going to be your sales leader.

• 41:27Speaker 00

  Yeah.

• 41:27Speaker 02

  Because they're thinking about, how do I hire the next person? How do I bring the next deal on? So I'd say, yeah, maybe your sales operations, sales revenue operations.

• 41:35Speaker 00

  Yeah. Maybe, you know, one sentence or two sentences on, you know, uh, how you think about what percentage of sales teams at the early-stage companies you're at should be hitting quota? And like, kind of like, you know, sales comp thinking.

• 41:49Speaker 02

  100%.

• 41:49Speaker 00

  Oh, yeah, 100%. Yeah, well, I think there's, you have some interesting comments on like, basically, you know, trying to keep them low, get everyone kind of rabid and.

• 41:56Speaker 02

  I mean, listen, I think in the early days, like, sales teams run off of momentum, right? You, you want to hire winners and give them a chance to win. So yes, you want to, you know, be able to bring people in, you want to set reasonable goals. It's got to be profitable for the company. The economics have to work, like, you can't, you know, you can't change the math. But at the end of the day, like, if you're an early-stage company and you've got a great product, you want to hire the best possible sales talent to get that product solution out to market.

• 42:23Speaker 00

  Yes.

• 42:24Speaker 02

  And the way you do that, the way you attract those people is give them a chance to hit quota.

• 42:28Speaker 00

  Totally.

• 42:28Speaker 02

  So, yeah, I think, you know, some of these companies today where, you know, 40, 50% of the teams hitting quota, I think they're probably doing themselves a disservice. Either their quotas are too high or, you know, they're hiring profiles off. But, um, yeah, I think, especially in the early stages, when, you know, cost of sales isn't as important, right? When you're a public company and, you know, you've, you've, you've gone out and you've, you've conquered your market, nobody looks back and says, yeah, gosh, you know, six years ago, your cost of sales was really terrible.

• 42:54Speaker 00

  Yeah.

• 42:55Speaker 02

  Nobody cares about that. What they care about is, you know, did you get on a path where, where you could, you know, be successful?

• 43:01Speaker 01

  Well, I, I think something that's cool about this conversation is just how like timeless a lot of the wisdom is. It, it just seems, it seems like, you know, these frameworks and, and ways of thinking about the industry are, are pretty consistent just throughout the different software cycles and, you know, eras of, that we're, that we've seen. So, anyway, Joe, Andy, thank you so much for joining us. This was great and excited to have you guys back on.

• 43:27Speaker 00

  Yeah.

• 43:28Speaker 01

  Yeah.

• 43:28Speaker 00

  God, the goat.

• 43:29Speaker 02

  Thanks for having us.

• 43:30Speaker 00

  Thanks, Andy.

• 43:31Speaker 02

  Fantastic.

• 43:34Erik Torenberg?

  Thanks for listening to this episode of the A16Z Podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review, and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and Spotify. Follow us on X at A16Z and subscribe to our Substack at A16Z.substack.com. Thanks again for listening and I'll see you in the next episode.

• 43:59Erik Torenberg?

  As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see A16Z.com/disclosures.