Go-To-Market

Leveraging Channel Partnerships to Reignite Growth

Leveraging Channel Partnerships to Reignite Growth

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https://www.iconiqcapital.com/growth/insights/leveraging-channel-partnerships-to-reignite-growth

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As we enter the second half of 2024, technology companies continue to focus on recovering from a prolonged period of deceleration in both new logo and customer expansion velocity, aiming to re-build pipeline while technology budgets remain under scrutiny. Remarkably, within the span of a single year, many of these companies have rapidly and significantly transformed their operating models and go-to-market strategies to reignite their recovery and remain competitive.

For many companies, one key component of this transformation lies in indirect sales strategies via alliances and channel partnerships. We expect channel strategy to remain a focus across the software landscape in the coming years and are excited to share insights and learnings from channel development leaders across the ICONIQ Growth portfolio5 as well as continue to monitor the impact increased adoption of these motions have on long-term growth and scalability.  

We invite you to read more about the latest go-to-market trends here, where you’ll find our report on The State of Go-to-Market in 2024.

Software companies are embracing more hybrid sales motions

Software companies are increasingly adapting their sales motions to find more efficient alternatives to the traditional outbound, sales-led growth strategy.1 Year over year, our study shows that a similar cohort of companies shifted away from a top-down customer acquisition method, wherein sales primarily targets executive buyers, and towards a more efficient bottom-up or hybrid customer acquisition approach wherein sales targets end-users. Notably, more and more companies are finding that it is imperative to develop the ability to land the end-user and successfully sell to executives in order to capture the sale.

More companies have built out product-led growth capabilities within the last twelve months, and shifted the mix of their sales teams away from field sales, which tend to have more prolonged pre- and post-sales cycles, and towards more hybrid and inside sales models. While this shift towards hybrid sales aligns with companies’ desires to drive growth with increased efficiency, it is important to emphasize that despite the allure of the relative efficiency of bottom-up sales and product-led growth, it is imperative that companies do not over-rely on these motions. While a bottom-up model allows teams to cast a wider net and achieve more immediate results, we believe that a mature, healthy enterprise field sales motion developed over time is critical to long-term growth for most companies. This is particularly important in order to continue to drive new logo velocity and control pipeline quality in a market where budgets remain under scrutiny.

The rise of channel partnerships

As companies adjust their direct sales strategies towards hybrid sales motions, they are also turning their attention towards indirect sales strategies via alliances and channel partnerships - especially with the rise of hyperscaler cloud marketplaces like Amazon Web Services (AWS), Google Cloud Platform (GCP), and Microsoft Azure.

"Partnerships have become our largest source of net new ARR in the last few months, surpassing marketing and sales. We’ve really evolved our indirect paths to market and are continuing to add more."
- Head of Business Development, ICONIQ Growth Portfolio Company (Infrastructure & Security)1

Looking at the same software companies year over year, channel revenue has increased as a percent of total revenue – most notably for infrastructure companies (up 5%), followed by horizontal SaaS and vertical SaaS companies (both up 2%).

In this macroeconomic context, go-to-market leaders have also been focused on channel sales as a relatively efficient sales motion relative to direct sales. Companies with a significant channel motion4 decreased their average sales cycle by 25% between 2023 and 2024, while companies with no significant channel motion experienced a 10% increase in average sales cycle in the same period.1

"Our partnerships have been an incredible source of lead generation for us. Both partner-involved and partner-sourced deals have shorter sales cycles than direct sales, and we see higher win rates for partner deals as well."
- Head of Finance, ICONIQ Growth Portfolio Company (Infrastructure & Security)3

When do companies start to build out a channel motion?

Relative to direct sales, there tends to be a long lead time between when companies establish a channel sales motion and when they see it contribute meaningfully to growth. While companies start landing channel revenue in the $5M-$25M ARR stage, channel revenue only begins to increase as a percentage of total revenue around the $100M ARR scale on average.

With this lead time in mind, it’s important for companies to start investing in partnerships early on; however, there is such a thing as “too early.” Partnerships, like marketing, fuel the fire of a well-run go-to-market motion. Early-stage companies should see evidence of strong product market fit and sustained new logo velocity in their direct sales motion before investing significantly in channel partnerships, just as they should before investing significantly in demand and lead generation.

Please see footnotes 3 & 5

Key partnership models to consider

It’s important to invest in the partnership models that are right for the company, the buyers, and the product - companies often leverage multiple models and there is no “one-size fits all” approach. Some of the most common partnership models include:

There are many important inputs to consider when selecting the right partnership models for a software business including product complexity, ideal customer profile, deployment model, and sales motion. While acknowledging that every company has a unique business model and partnership goals, there are some trends we’ve observed as to which companies might prioritize different types of partnerships.

For example, companies with a relatively complex product that requires significant professional services to deploy and maintain tend to prioritize an MSP model, wherein a partner owns all or a portion of the implementation process and ongoing professional services. By sharing deployment responsibilities with partners – or outsourcing them entirely in some cases - these companies can operate leaner go-to-market teams and streamline the post-sale organization. MSP models are also often leveraged as software companies expand internationally as they often have existing relationships in these new markets and language and cultural nuances introduce complexity in the deployment cycle.

In the enterprise space, many software companies believe a referral model through a large consulting firm is the “holy grail” of channel partnerships. Consulting firms act as a kind of middleman between the software company and the buyer; by already understanding the complex needs of the buyer and their broader initiatives, consulting firms can reduce barrier to entry for the seller. At the same time, buying through the consulting firm reduces risk for the customer and simplifies the procurement process.

While reseller, system integrator, and referral models have been historically common across the SaaS ecosystem, channel leaders are turning their attention to cloud marketplaces as the future of partnerships. These hyperscaler marketplace ecosystems can be challenging to navigate, so we’ve compiled the six key lessons below informed by channel development leaders across the ICONIQ Growth portfolio to help companies understand this landscape.

Six lessons for establishing partnerships with cloud marketplaces

Lesson #1: Consider sector and buyer personas

While it can be easy for companies to default to the cloud provider they use for hosting, channel leaders should consider sector and buyer personas when choosing the best marketplace partner as certain companies may have better access to ideal customers. For example, many infrastructure and security enterprises prioritize AWS marketplace because they have a strong subset of CIO and CISO buyers. Many application software companies—especially those with CFO offices or revenue buyers —prioritize the Microsoft Azure marketplace given strong relationships with those buyer profiles.

Lesson #2: Start with one and expand from there

Channel development leaders across the ICONIQ Growth portfolio agree that focusing on one marketplace partnership to start, and truly doing it right, is better than spreading partnership efforts across multiple marketplaces and co-sells. Once the first marketplace partnership is established, is contributing meaningfully and predictably to revenue, and a scalable partnership enablement program is in place, companies tend to move towards a multi-marketplace approach by selling through two or three marketplaces at the same time.

Lesson #3: Leverage strategic connections

It can sometimes be difficult for startups to get attention from large hyperscalers without an established relationship, but strategic connections such as venture capital partners can help clear a direct path into these channels. Channel leaders also recommend leveraging other companies and operators that have navigated these marketplaces before to share learnings and best practices. We invite ICONIQ Growth portfolio companies to reach out to us on the topic to see if there is any way we can support.

Lesson #4: Become an insider

Just like in a direct sales cycle, landing and retaining a marketplace partnership requires an understanding of the key decision-makers within these hyperscaler organizations. As some of the largest global companies, in can be difficult to gain access to or even identify these decision-makers and gatekeepers. Channel leaders recommend becoming “insiders” in these organizations—spend time building relationships with partner reps, hire employees that have experience working with these teams, and multi-thread within the organization to establish the right connections.

Please see footnotes 3 & 5
Lesson #5: Prepare operationally

As companies build the partnerships function by investing in people and alliances, it’s also important to establish the back-end systems and infrastructure to support this type of growth. Channel leaders across the ICONIQ Growth portfolio recommend having one or two employees dedicated early on to everything from channel operations and billing support—marketplaces have nuanced billing requirements that often warrant separate systems and processes—to marketplace research. It’s also important to set up a CRM to make is as easy as possible for partners to hand over new accounts or leads, and to measure revenue impact coming from partners, whether it’s fully partner sourced or only partner-involved.

Lesson #6: Enable partners for long-term success

Partners should be enabled to sell and use a product just as a direct sales rep would. That said, partner enablement programs don’t need to reinvent the wheel—many companies find success in leveraging existing sales, customer, and onboarding resources. Partner reps should know a company’s ideal customer profile, understand the features and various use cases, and be trained on new product functionality and messaging. While partner enablement is often a distributed effort within a channel development team, it can be helpful for companies with complex and technical products to leverage solutions architects and solutions engineers for more hands-on partner enablement.

Please see footnotes 3 & 5

Upcoming Content

As companies continue to invest in channel partnerships and build out indirect paths to market as a way to support growth in the current environment, our upcoming posts will address common challenges companies face when building out these motions. We’ll share benchmarks and learnings related to incentivizing partners as well as building and incentivizing channel development teams internally. In the coming weeks, we’ll also look more deeply into how marketing budgets have shifted year over year, and where marketing teams are investing in 2024.

We invite you to subscribe here to receive updates on ICONIQ Growth’s latest go-to-market content.

Notes

1. ICONIQ Growth Proprietary, Annual Survey of Go-to-Market leaders at B2B SaaS Companies (March 2023 and March 2024)

2. ICONIQ Growth Analytics Quarterly Recap; Q1 2024, based on quarterly operating and financial data from the ICONIQ Growth B2B SaaS portfolio and 109 public SaaS companies where data was available

3. Select quotes collected from the ICONIQ network are anonymized to protect private company information. Quotes were collected through interviews and roundtables of GTM executives. Quotes were selected based on their relevance to the above post, and were not selected based on the performance of portfolio companies.

4. Significant channel sales was defined as>30% of revenue coming from channel sales, a threshold chosen based on the average and distribution of the dataset

5. Please find a full list of ICONIQ Growth portfolio companies here: https://www.iconiqcapital.com/growth/companies

6. Product-led growth self-reported by survey respondents (ICONIQ Growth Proprietary, Annual Survey of Go-to-Market leaders at B2B SaaS Companies)

Notes

Disclaimer:

Unless otherwise indicated, the views expressed in this presentation are those of ICONIQ Growth (“ICONIQ" or the “Firm"), are the result of proprietary research, may be subjective, and may not be relied upon in making an investment decision. Information used in this presentation was obtained from numerous sources. Certain of these companies are portfolio companies of ICONIQ Growth. ICONIQ Growth does not make any representations or warranties as to the accuracy of the information obtained from these sources. 

This presentation is for general information purposes only and does not constitute investment advice. This presentation must not be relied upon in connection with any investment decision. The information in this presentation is not intended to and does not constitute financial, accounting, tax, legal, investment, consulting or other professional advice or services.  Nothing in this presentation is or should be construed as an offer, invitation or solicitation to engage in any investment activity or transaction, including an offer to sell or a solicitation of an offer to buy any securities which should only be made pursuant to definitive offering documents and subscription agreements, including without limitation, any investment fund or investment product referenced herein. 

Any reproduction or distribution of this presentation in whole or in part, or the disclosure of any of its contents, without the prior consent of ICONIQ, is strictly unauthorized.

This presentation may contain forward-looking statements based on current plans, estimates and projections. The recipient of this presentation ("you") are cautioned that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements. The numbers, figures and case studies included in this presentation have been included for purposes of illustration only, and no assurance can be given that the actual results of ICONIQ or any of its partners and affiliates will correspond with the results contemplated in the presentation. No information is contained herein with respect to conflicts of interest, which may be significant. The portfolio companies and other parties mentioned herein may reflect a selective list of the prior investments made by ICONIQ.

Certain of the economic and market information contained herein may have been obtained from published sources and/or prepared by other parties. While such sources are believed to be reliable, none of ICONIQ or any of its affiliates and partners, employees and representatives assume any responsibility for the accuracy of such information.

All of the information in the presentation is presented as of the date made available to you (except as otherwise specified), and is subject to change without notice, and may not be current or may have changed (possibly materially) between the date made available to you and the date actually received or reviewed by you. ICONIQ assumes no obligation to update or otherwise revise any information, projections, forecasts or estimates contained in the presentation, including any revisions to reflect changes in economic or market conditions or other circumstances arising after the date the items were made available to you or to reflect the occurrence of unanticipated events. Numbers or amounts herein may increase or decrease as a result of currency fluctuations.

Disclaimer

The views expressed in this presentation are those of ICONIQ Growth ("ICONIQ" or the "firm"), are the result of proprietary research, may be subjective, and may not be relied upon in making an investment decision.  This presentation is for general information purposes only and does not constitute investment advice. This presentation must not be relied upon in connection with any investment decision. The information in this presentation is not intended to and does not constitute financial, accounting, tax, legal, investment, consulting or other professional advice or services. Nothing in this presentation is or should be construed as an offer, invitation or solicitation to engage in any investment activity or transaction, including an offer to sell or a solicitation of an offer to buy any securities which should only be made pursuant to definitive offering documents and subscription agreements, including without limitation, any investment fund or investment product referenced herein.  Any reproduction or distribution of this presentation in whole or in part, or the disclosure of any of its contents, without the prior consent of ICONIQ, is strictly unauthorized. This presentation may contain forward-looking statements based on current plans, estimates and projections. The recipient of this presentation ("you") are cautioned that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements. The numbers, figures and case studies included in this presentation have been included for purposes of illustration only, and no assurance can be given that the actual results of ICONIQ or any of its partners and affiliates will correspond with the results contemplated in the presentation. No information is contained herein with respect to conflicts of interest, which may be significant. The portfolio companies and other parties mentioned herein may reflect a selective list of the prior investments made by ICONIQ. Certain of the economic and market information contained herein may have been obtained from published sources and/or prepared by other parties. While such sources are believed to be reliable, none of ICONIQ or any of its affiliates and partners, employees and representatives assume any responsibility for the accuracy of such information. All of the information in the presentation is presented as of the date made available to you (except as otherwise specified), and is subject to change without notice, and may not be current or may have changed (possibly materially) between the date made available to you and the date actually received or reviewed by you. ICONIQ assumes no obligation to update or otherwise revise any information, projections, forecasts or estimates contained in the presentation, including any revisions to reflect changes in economic or market conditions or other circumstances arising after the date the items were made available to you or to reflect the occurrence of unanticipated events. For avoidance of doubt, ICONIQ is not acting as an adviser or fiduciary in any respect in connection with providing this presentation and no relationship shall arise between you and ICONIQ as a result of this presentation being made available to you. ICONIQ is a diversified financial services firm and has direct client relationships with persons that may become limited partners of ICONIQ funds. Notwithstanding that a person may be referred to herein as a "client" of the firm, no limited partner of any fund will, in its capacity as such, be a client of ICONIQ. There can be no assurance that the investments made by any ICONIQ fund will be profitable or will equal the performance of prior investments made by persons described in this presentation. Any information in this presentation is directed at, and intended for, only persons who are experienced institutional or professional investors (“professional investors”) as defined by applicable law and regulation. Any person that is not a professional investor is not an intended recipient of this presentation and the matters discussed herein.

For avoidance of doubt, ICONIQ is not acting as an adviser or fiduciary in any respect in connection with providing this presentation and no relationship shall arise between you and ICONIQ as a result of this presentation being made available to you.

ICONIQ is a diversified financial services firm and has direct client relationships with persons that may become limited partners of ICONIQ funds. Notwithstanding that a person may be referred to herein as a "client" of the firm, no limited partner of any fund will, in its capacity as such, be a client of ICONIQ. There can be no assurance that the investments made by any ICONIQ fund will be profitable or will equal the performance of prior investments made by persons described in this presentation.

Any information in this presentation is directed at, and intended for, only persons who are experienced institutional or professional investors (“professional investors”) as defined by applicable law and regulation. Any person that is not a professional investor is not an intended recipient of this presentation and the matters discussed herein.

Copyright © 2024 ICONIQ Capital, LLC. All rights reserved.

Disclaimer

The views expressed in this presentation are those of ICONIQ Growth ("ICONIQ" or the "firm"), are the result of proprietary research, may be subjective, and may not be relied upon in making an investment decision.  This presentation is for general information purposes only and does not constitute investment advice. This presentation must not be relied upon in connection with any investment decision. The information in this presentation is not intended to and does not constitute financial, accounting, tax, legal, investment, consulting or other professional advice or services. Nothing in this presentation is or should be construed as an offer, invitation or solicitation to engage in any investment activity or transaction, including an offer to sell or a solicitation of an offer to buy any securities which should only be made pursuant to definitive offering documents and subscription agreements, including without limitation, any investment fund or investment product referenced herein.  Any reproduction or distribution of this presentation in whole or in part, or the disclosure of any of its contents, without the prior consent of ICONIQ, is strictly unauthorized. This presentation may contain forward-looking statements based on current plans, estimates and projections. The recipient of this presentation ("you") are cautioned that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements. The numbers, figures and case studies included in this presentation have been included for purposes of illustration only, and no assurance can be given that the actual results of ICONIQ or any of its partners and affiliates will correspond with the results contemplated in the presentation. No information is contained herein with respect to conflicts of interest, which may be significant. The portfolio companies and other parties mentioned herein may reflect a selective list of the prior investments made by ICONIQ. Certain of the economic and market information contained herein may have been obtained from published sources and/or prepared by other parties. While such sources are believed to be reliable, none of ICONIQ or any of its affiliates and partners, employees and representatives assume any responsibility for the accuracy of such information. All of the information in the presentation is presented as of the date made available to you (except as otherwise specified), and is subject to change without notice, and may not be current or may have changed (possibly materially) between the date made available to you and the date actually received or reviewed by you. ICONIQ assumes no obligation to update or otherwise revise any information, projections, forecasts or estimates contained in the presentation, including any revisions to reflect changes in economic or market conditions or other circumstances arising after the date the items were made available to you or to reflect the occurrence of unanticipated events. For avoidance of doubt, ICONIQ is not acting as an adviser or fiduciary in any respect in connection with providing this presentation and no relationship shall arise between you and ICONIQ as a result of this presentation being made available to you. ICONIQ is a diversified financial services firm and has direct client relationships with persons that may become limited partners of ICONIQ funds. Notwithstanding that a person may be referred to herein as a "client" of the firm, no limited partner of any fund will, in its capacity as such, be a client of ICONIQ. There can be no assurance that the investments made by any ICONIQ fund will be profitable or will equal the performance of prior investments made by persons described in this presentation. Any information in this presentation is directed at, and intended for, only persons who are experienced institutional or professional investors (“professional investors”) as defined by applicable law and regulation. Any person that is not a professional investor is not an intended recipient of this presentation and the matters discussed herein.

For avoidance of doubt, ICONIQ is not acting as an adviser or fiduciary in any respect in connection with providing this presentation and no relationship shall arise between you and ICONIQ as a result of this presentation being made available to you.

ICONIQ is a diversified financial services firm and has direct client relationships with persons that may become limited partners of ICONIQ funds. Notwithstanding that a person may be referred to herein as a "client" of the firm, no limited partner of any fund will, in its capacity as such, be a client of ICONIQ. There can be no assurance that the investments made by any ICONIQ fund will be profitable or will equal the performance of prior investments made by persons described in this presentation.

Any information in this presentation is directed at, and intended for, only persons who are experienced institutional or professional investors (“professional investors”) as defined by applicable law and regulation. Any person that is not a professional investor is not an intended recipient of this presentation and the matters discussed herein.

Copyright © 2024 ICONIQ Capital, LLC. All rights reserved.

The ICONIQ Growth website does not present information relating to ICONIQ Capital, its investment funds, or its advisory business and should not be consulted for any advisory purposes. The ICONIQ Growth content is intended for the use of company founders and executives.