What every SaaS and Tech founder can learn from the data analytics powerhouse
Whether you’re a start-up founder or you work for a start-up in SaaS, you’ve likely heard of Snowflake’s rapid rise to success. If you’re like everybody else in software, you likely question how Snowflake grew its product revenue by 300 % in under 15 months starting in 2018, prior to the pandemic.
Was it due to an excellent product-market fit? A full-fledged enterprise salesforce ready to take the product to market? Brilliant differentiation strategy? Maybe they have a secret sales formula.
While Snowflake checks every box, the key to its rapid growth before and during the COVID-19 pandemic was due to a strategy called Account-Based Marketing (ABM).
What follows is a high-level account of Snowflake’s Account-Based Marketing (ABM) execution. In order to keep this article both educational and simple, we’ve highlighted what made Snowflake’s ABM strategy successful at a high level.
Snowflake was founded in 2012, it is a cloud-based data warehouse with the goal of helping businesses safely and efficiently store, transform and analyze business data so anyone in the organization – whether technical or not – can easily and quickly gain insights from one central location.
In less than a decade, Snowflake reached a market capitalization of $43.7B (as of Nov. 29, 2022), and grossed $1.219B in revenue in FY22 with roughly 4,000 full-time employees globally. These numbers alone imply a 36X revenue multiple, which is 18X the industry median.
Taking a deeper look, Snowflake’s valuation can be justified by the insane growth it witnessed in the last 3 fiscal years.
Since 2019, Snowflake’s revenue has grown 173%, 123%, and 106% year-over-year. With these numbers, the 36X revenue multiple is much more palatable; investors are paying $36 for every $1 of sales, but Snowflake doubles its sales every year, in essence returning $36 for every dollar of sales to investors.
Sure, Snowflake’s valuation makes sense, but how are they generating this unprecedented sales growth? Are they hiring the most efficient people in the world?
Well, yes, but not quite.
From an employee productivity perspective, it’s safe to say that the numbers aren’t exceedingly that much higher than the SaaS average.
An essential rule of thumb in SaaS is that an efficiently run company produces ~$250K revenue per employee. At the time of writing, quick back-of-the-envelope math suggests that Snowflake operates at ~$300K revenue per employee, 20% better than the average.
Still, the productivity metrics for Snowflake don’t explain how in under 15 months they were able to raise massive amounts of capital and fuel their global expansion as a dominant analytics powerhouse.
According to ITSMA Marketing Excellence Award Summary 2018, the answer lies in excellent sales-marketing alignment using the powerful B2B marketing strategy known as Account-Based Marketing (ABM).
What is Account-Based Marketing?
Account-Based Marketing (ABM) is a B2B marketing strategy that focuses sales and marketing on a select number of companies that match a firm’s Ideal Customer Profile (ICP). Moreover, at the core of ABM is the ability to align sales and marketing resources to maximize the conversion potential of best-fit customers.
How did Snowflake incorporate Account-Based Marketing?
Snowflake’s use of ABM is fairly well documented across numerous company resources, including Momentum ITSMA. In this article, our aim is to decipher the strategy in one comprehensive overview for you to replicate on your own.
1) Gather Market Research (Data)
It’s unacceptable for any sales or marketing organization to not leverage up-to-date market research. Without proper context as to what is happening in your industry or target customer base, you forfeit your ability to make your value proposition relevant to prospects’ needs, leading to stagnant or slow-moving sales pipelines, unqualified sales opportunities, and frustration across the organization.
When Snowflake started its ABM strategy, they conducted extensive market research that identified a large addressable market for cloud-based data warehousing solutions.
According to Bev Burgess, author of A Practitioner’s Guide to Account-Based Marketing, Snowflake recognized the implicit demand from the market of customers needing to shift away from their “on-premise legacy deployments to a more modern data infrastructure”.
Snowflake’s incredible market timing suggests that its exhaustive market research on the competitive landscape, trends, and patterns in the market were crucial to kicking off their ABM strategy.
2) Narrow the Ideal Customer Profile (ICP)
Following step 1, Snowflake’s marketing team needed to hone in on the ideal customer profile; what type of organization was ready to adopt a cloud-data warehousing solution?
Requirements to fit in Snowflake’s ICP were as follows:
a. Technographics: companies using legacy analytics software
b. Culturally: companies had a strategic imperative to move to the cloud
c. Intent: companies started adopting other cloud solutions (i.e., Tableau)
Using 3 simple criteria, Snowflake was able to narrow its addressable market to a prospect pool that was most likely to buy (now) using sales intelligence platforms.
To best position your ICP and coordinate your timing, try to find companies that have the following in common:
- Behavior Change: The prospect pool is changing its methods of working (hybrid/remote work environments led to a need to have data readily accessible via the cloud)
- Technological Change: The prospect pool is exploring ways to modernize their technological capabilities to remain competitive (with a distributed workforce, every employee is technical or not required to have access to business insights immediately).
Before we move onto phase 3 of Snowflake’s ABM strategy, it’s important to share some how-tos for you to implement ABM on your own. What follows is a list of frequently asked questions on ABM:
a. How do I find technographic data?
There are a number of sales intelligence and go-to-market platforms for you to get this information, but they are pricey. For simplicity, you can refer to Zoom Info or HG Data Insights. Their data is the most accurate we’ve seen in the space, however, this does not guarantee success.
We see many companies using such intelligence tools but fail at implementing, and integrating them with their entire sales and marketing stack, and more importantly, use them efficiently.
b. How the heck do I find out what is happening culturally with our target prospects?
So many strategies can address this, but for simplicity, we recommend following all LinkedIn accounts of your target prospects to keep up-to-date information on what is happening at the company. From there, to understand key imperatives happening at the target companies (are they moving to the cloud?), look for job postings using a Boolean search on LinkedIn.
c. How do I get my hands on Intent Data?
The go-to-market tools mentioned previously provide such information, however, the data is only as good as the people you put in charge to use it.
3) Sales and Marketing Alignment
For ABM to work, sales and marketing need to be aligned on the strategy. ABM is not an overnight success but requires sales and marketing resources to commit to a specific long-term goal (i.e., Net New ARR).
This is important because often Sales and Marketing have diverging interests with their quotas. In sales, Sales Development Reps (SDRs) are focused on booking demos for Account Executives (AEs), AEs have a target new MRR to book by the end of the quarter, and Marketing has a target number of Marketing Qualified Leads (MQLs) to hand to SDRs for them to quality into Sales Qualified Leads (SQLs).
How did Snowflake align its sales and marketing resources?
a. Marketing transitioned from a broad demand generation strategy (typical in SaaS) to full account-based marketing.
b. Each ABM Marketing manager was assigned 30 sales representatives.
c. Sales development reps were assigned 100 target companies to deliver to four account executives each, so the total targeted companies per rep was no more than 400.
Two reasons for limiting your pool of prospects and focusing sales:
1. ABM targets prospects with high intent (i.e., exploring topics in your market right now).
2. It’s easier to manage a small number of companies and their respective decision-makers than to go wide.
For the average software company, it might not be realistic to target 400 companies per SDR, so don’t be afraid to tailor your strategy to the current resources you have. The idea is to prioritize the highest revenue-producing accounts for your company.
4) Aligning the Message
With Sales and Marketing now working closely, Snowflake’s marketing team was better positioned to understand the lay of the land from the perspective of Sales, which helped tailor messaging that was the most relevant to targeted companies. There are many ways to go about creating targeted messaging for account based marketing, including doing strategic one-to-one ABM, one-to-few ABM Light, and one-to-many ABM.
Snowflake provided their ABM marketing managers with 10 accounts to hyper-personalize messaging, and their remaining 90 to segment using ABM light.
Moreover, the close relationship between Sales and Marketing enabled better A/B testing of campaigns (subject lines, value propositions, CTAs) which provided Snowflake with improved opportunities to convert as the ABM strategy scaled across more target companies.
5) Win and Repeat
The results for Snowflake were incredibly successful; in 15 months starting from 2018, Burgess and ITSMA reported that Snowflake grew its revenue by 300 percent and quadrupled its salesforce which enabled the company to raise $500M in new funding to expand globally.
To summarize, Snowflake’s valuation seems reasonably justified given its impressive growth. Account-Based Marketing improved the alignment between Sales and Marketing, which helped the company take advantage of the COVID-19 wave of companies that decided to migrate their infrastructure to the cloud. For more information on account-based marketing, learn more here.