From Zero to $3.7 Billion: Jyoti Bansal’s Textbook Case Study of Building AppDynamics (Part 6)

Sramana Mitra: Let me double-click down on a couple of things before we go much beyond. First and foremost, talk a little bit about your business model. The price point that you described – $25,000 per customer – indicates that you need to sell this product by telesales. Is that correct or did your average deal size increase significantly?

Jyoti Bansal: Average deal size increased. From zero to $1 million, it was about $25,000. By the time we hit $10 million, it was about $60,000 to $70,000.

Sramana Mitra: Even that is a telesales price point though.

Jyoti Bansal: It depends. We had telesales. We had both telesales and field sales. Our model was built on three stages. The first one was more freemium. Freemium was really just web marketing. That was the first level, which was almost no-touch web marketing. Then the second stage from there was, some engineers were using our free product. Then we’d have a telesales team for them. The first deal would be anywhere from $20,000 to $50,000.

Then we built a pretty good field sales team. They’d take from that first deal and start to expand into these companies. When we started, our biggest deal was $50,000. In the second year, the biggest was $100,000. By the fourth year, we had a million dollar deal. Right now, we do multiple $10 million deals every year. The model that we built is we give end users low-touch access to our product.

Then we had a very strong enterprise field sales team that’d take that and make the right business case to expand for enterprise-wide usage. A lot of times, people think you don’t need field sales to sell into larger companies. Especially when I was doing this in 2010, there was a bit of this trend where traditional enterprise selling is not needed anymore. I soon realized that it’s not the case.

Sramana Mitra: That has never been the case.

Jyoti Bansal: You have to have the right kind of enterprise sales process.

Sramana Mitra: When you started discovering that, on the same account, you could go from $50,000 to $1 million, was it selling the same product? By this time, were you already broadening the product portfolio?

Jyoti Bansal: It was a bit of both. By the time we started doing a lot of the million-dollar deals, the product portfolio was broadening. My rule was every year, we’ll put two-thirds of our R&D spend on our existing addressable market and one-third on expanding the addressable market.

Every year, we’re expanding the addressable market. Initially, we worked for software applications written in Java. We were soon the best product to do that. Every year, we picked other languages. We were always expanding the addressable market.

Another thing that we were obsessed with is taking care of our customers. We have a very strong customer focus. I always declare it to the whole company that everyone’s number job is to make customers successful. It doesn’t matter what function you are in. The whole company took it seriously. Customers were happy. They were evangelizing us internally in their organizations. We were selling more and more into the expansion.

Sramana Mitra: As you were expanding the TAM, where were the product opportunities coming out of? Was it customers telling you that they had other problems to solve?

Jyoti Bansal: The one rule that we had was, we didn’t want to build capabilities that needed a different set of buyers because then, your sales process becomes very different. The same buyer that was buying our first product, what are the other problems that they have that we can help them with.

We would ask them. They’d tell us things like, “Application monitoring is very integrated with database monitoring.” People will talk about the problems. We would go and have a lot of customer conversation. We would encourage our engineers and product managers to spend a lot of time talking to customers. We would understand those. We’ll start building our product prototypes and we’ll work with these customers.

This segment is part 6 in the series : From Zero to $3.7 Billion: Jyoti Bansal’s Textbook Case Study of Building AppDynamics
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