(1/10) There’s a lot of focus on high-level financial metrics in SaaS right now

I want to zoom in on the unit economics and the go-to-market strategy that I look for in a SaaS investments. Those don’t get discussed enough.

Let’s talk about “bimodal go-to-markets”

(2/10) A Bimodal Go-To-Market strategy is when a business runs both a freemium and an enterprise GTM strategy at the same time.

This is hard to do, because they are two entirely different “muscles.” But if you can get these both humming, if you can thread this needle…look out

(3/10) On one end, Enterprise sales is a people-heavy endeavor with incredibly high Customer Acquisition Cost (CAC), but high Life Time Value (LTV) b/c the accounts are bigger

Freemium, is a product-led motion, with low CAC and…here’s the kicker, potential for high LTV

(4/10) Freemium products are simple in functionality to facilitate low-friction adoption

The Q, then, is how do you move people up to enterprise? If you can pull that off, you’ll have low CAC and high LTV

You can put a dollar into the machine and get 8 out. Pretty legit.

(5/10) With no Enterprise tier though, you’re stuck in a purely scale strategy. Acquiring millions of cheap users with no way to monetize them like DropBox.

The key is the have both, the Freemium door in, and the Enterprise hook.

(6/10) There are two types of Freemium, rivers and pools.

Rivers are a flow through of users you hope to monetize with Premium.

Pools are Freemium users who you can monetize in their own right, with premium as a cherry on top.

Classic example is Pandora vs Spotify

(7/10) The reason pools are better than rivers is that pools keep users around, where as river users churn - up or out, so to speak.

Pools can be monetized, and the company has an incentive to continue improving the product instead of gating features to drive upgrades.

(8/10) Another benefit of having both Freemium and Enterprise is that you can defend against disruption on the low end.

All of those VC funded start-up are going to try to eat your lunch, and Freemium allows you to provide a simple, easy-to-adopt, offering to the market.

(9/10) The way to make this work is the build Enterprise features that are differentiated and worth paying for.

As they become commoditized by the market, treadmill them down into the Freemium tier.

And from the bottom, build strong product and human motions to upgrade.

(10/10) TL;DR Bimodal GTM creates low CAC, high LTV, high retention, expansion opps, defense against disruption, and more. Basically the holy grail.

But it’s really fucking hard. Two separate competencies. Two different motions with different unit economics. Divided focus.