When there's no gen in demand gen ??

Demand gen for most startups is not gen at all, it's demand capture. Real demand generation becomes a problem only when you outgrow the startup phase. Investing in demand generation before demand capture will kill your CAC Payback.

Sales in modern SaaS is 100% demand capture

Not sure this is surprising for anyone, but sales in a modern and specialised SaaS company is very far from generating any demand. It's all about capturing and converting people who are shopping for a solution. Lots of work and smarts goes into making this work. But the fundamental is valid: sales takes a person who somehow lands in the funnel and converts them into a customer or not. If you don't keep feeding your reps with leads they will go somewhere else – as they should – because it means there's not enough demand to be captured.

Marketing in the early days is 100% demand capture

In the early days the market is still so large that you need to make sure the people desperate for your solution can find their way to a sales rep or the "Buy Now" button. At Chili Piper we call this fixing a leaky funnel . If you don't fix it early then a lot of what you do later will be more costly than it needs to be. What about brand building and the other cool things people at Salesforce and Hubspot are doing? Not yet! Let me illustrate.

Assuming your B2B SaaS category has a 5 year lifetime, how much of your market is looking for a new solution in any given month?

A 5 year lifetime means that in any given year 20% of the market buys a new solution. Those 20% being spread over 12 months means that only 1.67% of your market is buying a new solution in any given month. It doesn't mean they are buying from you, just means they will buy something from someone.?Still, assuming your TAM is 100k companies, 1,667 companies are shopping.

First job is to capture as much of that demand as possible with testimonials, nice pricing pages, smart keywords and the best sales team possible. This is bottom of the funnel marketing (BoFu) – people who have identified a need and possible solutions. Not easy, but do it right and it might get you to Series B or C and give you a chance to claw at the unicorn status. Then growth stalls because you've grown to capture a good chuck of BoFu opportunities. You've hit a ceiling in the search inventory Google can present to you in any given month.

Marketing after series B is 20% demand gen

Show of hands, who wants to sell to private equity now? Those who raised their hands can stop reading. You've made it!

Now to the rest of us who need at least a $2bn exit to get a cool million.

The next thing you need to do when BoFu hits a ceiling is make sure to be top of mind when the buying cycle comes around. Best bet is to cover the market with content, podcasts, conference appearances plus a strong social media presence and the occasional billboard. Keep investing in product and most important keep delighting your customers to make sure they don't churn in large numbers. That should about ensure your product is on every buying cycle out there.

The buzz will start actually generating demand from people who previously were not part of your market, i.e. they had no idea what to search for in Google to find you. It takes a ton of words to get someone from ignorance to customer. Paying to get those words out in front of ignorant people too early will just kill your CAC payback metrics. 20% of the marketing budget is about right.

Marketing at scale is 60% demand gen

We're now safely in unicorn territory and you've just hired a badass CFO to get the company ready for an IPO. VCs congratulating each other on all the hard work paying off, founders start buying boats and investing in climate tech. But then some voice in your head whispers "Decacorn – go for it!"

The market has literally become too small for your demand capture machine. Content is produced at incredible pace, there's a whole portfolio of podcasts and Google's Prague office is supported entirely by your ad spend. The only way to ever maintain growth rates is to generate demand where there was none. So what's next?

Category leadership! You need to start spending on educating the general Superbowl population that your category exists and that it solves a good number of problems for many people. Some of this is literal education by going into universities and accelerators to teach people how to become proficient in your product. Some of it is less literal like putting your name on a stadium or race car. It's also the hardest trick to pull off because there is very little attribution and it takes a long time to materialise. Don't forget you still need to keep doing all the work mentioned above. Those who succeed in generating demand truly deserve high praises.

What about the outbound motion?

Outbound is a curious case because depending on the product it could generate demand where there was none. Fundamentally outbound is a form of amplification – give your message to SDRs and ask them to spread it far and wide. When they come across completely ignorant accounts they could invest the time to bring them up to speed. Realistically this works only at higher ACV. For most cases outbound is still capturing demand where it's bubbling already.

TL/DR

Imagine you are a car dealer in a small town with 200 total drivers who replace their car every 5 years. It means that about 3 people (1.67%) are in the market every month. Until you consistently sell at least 3 cars each month focus on capturing people during their buying cycle and making sure you are top of mind between cycles. To grow above that number you will have to start educating people on the benefits of driving. And voilà – demand is generated..

Learning about Demand Gen

Coming out of Investment Banking (i.e. crawling out of an Excel spreadsheet) it was initially hard for me to understand how to evaluate what marketing does. It seemed all fluff and no concrete outcomes. Over time thanks to Reforge, mentors Toni and Olafur at Growblocks, and the Lokalise angels I began to appreciate the game that is SaaS marketing. My hope is that others too can start seeing the beauty in a well executed demand gen strategy.

Limitations

The enterprise sales motion is slightly different because you can realistically map 100% of your market and keep working until they become your customers.

Forms of viral PLG can start going ToFu earlier because their inherent virality takes care of the demand capture over time. Possibly some of the education can also be done from day 1 with simple horizontal tools.

If you are really building a new category (unlikely) then you might not have any demand to capture. This is rare, but it works over time with a ton of cash. Or you burn yourself talking about it, kill the company, and then the next one around actually makes it big – you were too early ??