Chapter 2
Growth and the Cheat Code

Josh Wagner

Up, up, down, down, left, right, left, right, B, A, start. If you grew up in the 1980s, you remember this sequence as the 30 lives Cheat Code for the game Contra on the original Nintendo Entertainment System. For those who didn't . Google it!

If digital is no longer the cheat it was in the early 2000s and relationships are the new prospector, what's the new Cheat Code? It might be counterintuitive to think of relationship building as a cheat, but that is the premise of this chapter.

The Partnership Ecosystem

McKinsey1 predicts that within the next two or three years, partnership ecosystems will represent 30% of the global economy. That's up from 1-2% today. There were also some impressive stats that came out of the first Partnership Leader Catalyst conference in Miami in 2022. According to partner-led growth champion and industry pioneer Allan Adler,2 who you will hear more from in this book,

The conference was amazing, as are some of the data that is coming out on Partner Ecosystem performance. Their data suggests that account mapping and other tools help B2B SaaS [Software-as-a-Service] partnership teams crush it with their tech partnerships by:

• Boosting their win rate by 41%
• Increasing their average deal size by 43%
• Generating two times the revenue

Even so, partnerships can mean a lot of things in Business-to-Business (B2B) SaaS. Ask 10 "partner people" how they define partnerships and you'll get 10 different answers. Some might consider channel partnerships the primary kind of partner, and others might think of partnerships in terms of relationships with suppliers or technology providers.

We host a podcast called The Cheat Code, on which we interview the best and brightest Go-to-Market (GTM) leaders. What we've learned is that, when it comes to partnerships, the definition is consistently inconsistent.

We define a partner broadly as another organization whose people hold trusted relationships with the customers we want to acquire. It's as simple as that, and the key word is relationship.

According to Jay McBain and Forrester, 76% of world trade is indirect,3 meaning it happens through partnerships. The food you eat, the car you drive, and the clothes you wear all happen through manufacturing, distribution, and sales channel partnerships.

But in the B2B SaaS world, that isn't the norm, except for a few companies like Salesforce, HubSpot, and Shopify, which have grown through the partner ecosystems they have built around them. That's changing. SaaS companies are recognizing that the strategies of the past digitized sales and marketing automations aren't delivering the cheap customer acquisition of the past. Can the Cheat Code be the pivot?

Consider this hypothetical situation. Imagine that the Microsoft of today was selling its products directly, not through the partner ecosystem of more than 400 000 partners who employ 22 million people and deliver more than $10 in economic value for every dollar of Microsoft revenue, worldwide.4

What if that partner ecosystem didn't exist? Envision instead that Microsoft had a massive team of salespeople, and an equally massive marketing effort designed to drive direct leads to those salespeople who called on customers. The impact is not the same. The reason the partner ecosystem at Microsoft is so successful is that Microsoft leverages the most powerful thing their partner has: the relationship with the customer.

That relationship provides the partner proximity to the customers' problems and the trust required to provide a solution. Microsoft provides a host of products, all of which can be molded by the partner to meet the needs of the customer. Creating that level of trust at scale is untenable without a robust partner network.

According to Jared Fuller, one of the leading voices in the partner ecosystem movement and founder of PartnerHacker, "Bessemer Venture Partners was quoted as saying in 2021, 'Do not invest in a partner program until you're past $100 million in revenue.' Then, the very next year - 2022 - their number one recommendation in the Bessemer State of the Cloud annual report was partner-led growth, calling it table stakes from day one."5 How quickly things change.

Changing the Narrative

Folks like us at In Revenue Capital, Jared, and many others you'll meet throughout this book are leading the movement behind the Partnership Cheat Code and are catalysts for changing the narrative of the traditional partner program.

Digital has failed to deliver, inbound and outbound are failing, yet expectations from investors continue to rise. Account Executive quota attainment is at an all-time low. Sellers who once lived on inbound during the golden age of content marketing have gone the way of the dodo bird due the oversaturation of mediocre and flat-out bad content put into the market by B2B marketing teams.

The response to the lack of inbound has been a flood of outbound. Armies of sales development representatives are being hired to pound phones like a scene from the film Boiler Room. It doesn't stop there. The rise of sales technology, which looks remarkably like marketing technology, has given this eager bunch license to blast automated email sequences to the masses. And marketing is not the only department responsible for spam.

Giving to Get Mindset

The Partnership Cheat Code is one that adds value to all who are involved. It's a give-to-get mentality focused on leveraging existing relationships to accelerate growth. This thinking can be applied to our Venture capital (VC) firm as well as the early-stage companies like those in our portfolio.

• "When I got an opportunity to run partnerships in one of my earlier roles, it was my lightbulb moment. I liked sales, but sales always felt very transactional to me. I enjoyed creating genuine connections and relationships rather than transactional sales. Partnerships were the best of both worlds. I saw that it was sales but also building long-term, genuine strategic relationships with people. And because it resonated with who I am, I excelled at it."

  - Greg Portnoy, cofounder and CEO, EULER

Here are the three main ingredients a startup needs to be successful:

• Capital: This is money, usually from investors, that you get to keep the ball rolling when money from operations isn't yet enough to fuel growth.
• Strategy: This is where you decide what that ball is, how to roll it, where to roll it, and when.
• Execution: Put simply, this is the part where you work your tail off to keep that ball rolling faster and faster to drive revenue.

Then apply our Cheat Code and you will quickly see a divergence from the traditional VC model, which is focused on deploying capital. The founders are left to find their way with strategy and execution. The way traditional VC firms look at their portfolio is centered on fund dynamics, a concept we take a deep dive into in Chapter 14 of this book. For now, let's focus on strategy and execution.

When a founder closes a round of funding, it's a big deal. It could mean critical hires, it could mean product upgrades and, frankly, it could mean they live to fight another day. The one thing it means without question is that the company is expected to GROW! Seed stage companies that take on VC financing are typically expected to grow between 100% and 300% year over year.

Figure 2.1 Perceived impact of a VC.

Source: Copyright In Revenue Capital.

That's no small feat, especially given the state of traditional GTM functions like inbound and outbound. Founders typically expect their new capital partners will support them in that growth, be it referrals, recruiting, or potentially operational support, only to find that they are ill-equipped to do so (see Figure 2.1).

Here's why. At Stanford, UC Berkeley, or any number of Ivy League universities, where venture capitalists tend to get their finance degrees, company operations are not a focus. So, for the most part, these investors "know" operations theoretically, maybe from textbooks or, for the more seasoned, by watching from the sidelines.

They might have some answers, but they don't have the actual experience to back up those answers or provide any real business wisdom that comes from doing the work. At the end of the day, the job of a venture capitalist is to finance businesses to generate a return, not to operate them.

The other factor at play is what we call the blockbuster movie model. The one mega-million-dollar box office smash pays for all the other box office losers. Unfortunately, this is very similar to the way a traditional VC fund operates. In fact, these funds evaluate companies based on their ability to "return the fund."

This is a dynamic that does not incentivize investors to help founders operate; rather, it encourages a focus on placing more bets to increase their odds. If the key to growth is more than capital, where do we turn? This is the core tenet of the operator immersive model, which Justin and I created based on our experience building...