Why your Salesforce ISV needs to be industry-specific (Trails Podcast episode #10 with David VanHeukelom)

Episode ten: David VanHeukelom, serial entrepreneur and a two-time Salesforce ISV founder

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Could you mention some highlights of your journey as an ISV founder?

I started my first ISV company in 2010, grew it, and exited that company around the end of 2013. That was an HR platform that was built natively on Salesforce. That company was acquired by another ISV called Certinia, formerly FinancialForce.

I started a second ISV company in the professional services automation space, which was also built natively on Salesforce. I grew that company and ended up exiting it in 2020. Since then, I've focused more on consulting advisory in the Salesforce ISV space.

Any lesson you wish you had learned earlier in your career that could have significantly impacted the trajectory of your businesses?

I'm a product guy. I spent about a decade in product management before my Salesforce ISV journey started. I wish I had more sales, marketing, and go-to-market expertise, especially when I started my first ISV. When I work with ISVs now, I recommend honing in on their go-to-market strategy.

They need to understand the market they're going after, what their ideal customer profile looks like, and what their messaging and positioning look like in that marketplace. That's going to help ISVs execute and scale faster than we did.

How would you describe the state of the Salesforce ISV partner ecosystem at the moment?

I think some of my predictions are not necessarily Salesforce-specific, but it's really the SaaS industry in general. The last thirteen years or so that I've been in the ecosystem, I think the number of SaaS companies has grown ten times.

When I started, there were probably a thousand AppExchange listings. There are now over 4K ISV listings on AppExchange. They are not all paid, but it's grown over the last decade. If you go to G2 and look at any quadrant or product area, there are 100, 200, or 300 vendors competing for the same space with a lot of the same product features. It's a noisier place and more challenging to stand out.

When I started my first ISV, we did a lot of AppExchange marketing programs, such as listing on the homepage of AppExchange. It was much easier to get noticed on AppExchange back then. And, of course, Salesforce as a company has matured.

Back then, Salesforce had Salesforce Service Cloud or Marketing Cloud. That's about it. The number of products that Salesforce now has and the number of products that Salesforce AEs now have to sell is so great that it can be hard to penetrate the Salesforce ecosystem.

They have such an extensive product portfolio. So, that is something that has changed over time. It's harder to stand out. You have to be specific and narrow down, at least initially, the market that you're going after.

Suppose you want to pick one industry or segment – some ISVs only go after Salesforce partners, like ISVs and SIs. If that's a market, double down and go on that market. Once you've shown success in that market, you can expand to another industry or segment within the Salesforce customer base.

As an ISV, if you are industry-specific or want to go after a specific industry, start with healthcare, financial services, or high tech, and show your success in that industry. You can then expand beyond that. You're going to have a hard time today as an ISV trying to 'boil the ocean' as far as having an app and trying to go after everybody. You'll have a hard time succeeding by not focusing.

New AppExchange listings are growing 10% year over year right now. The market has been soft for the last couple of years. It looks like it's starting out soft in 2024. I think the growth of AppExchange is going to be consistent with the overall market. So, it will grow – maybe not substantially – but there are still many vendors in the marketplace. The number of products that Salesforce is innovating and producing – organically or from acquisition – is growing yearly.

I'll give some examples. Salesforce is coming out with a new Life Sciences Cloud. Salesforce just acquired Slack. It's been a few years, but they're still innovating with Slack. If you're an ISV and want to build on top of the new Life Sciences Cloud, there are many opportunities to expand the portfolio of Salesforce's products.

Again, you just need to understand where Salesforce is going. The last thing you want to do is build a competitive product on top of Salesforce or find a slice of the market (or niche in that market) that you don't think Salesforce is going to focus on. Even if Salesforce has a competitive product, think about where you can augment that product and support Salesforce's success.

Are there any AppExchange success stories that impressed you and highlight the uniqueness of the Salesforce ecosystem?

Another example is Veeva, a multi-billion dollar company that started with CRM for life sciences and pharmaceuticals built on the Salesforce platform. Some in the ecosystem are unaware that Gainsight, a customer success platform, started off building native on the Salesforce platform for the first almost decade of its existence.

They then said, "Well, we don't want to build native anymore. We want to build our product outside of native but integrate very closely with the platform by directional integration, Lightning Web Components embedded into the product, etc." They wanted the core on AWS as an example. Gainsight made that transition, but the ecosystem is really what started their success. Veeva did the same thing.

Those are some of the companies I find unique regarding how fast and how much they've grown over the last decade. There are also smaller stories of companies – like my companies – that did not raise venture capital funding.

The ecosystem enables entrepreneurs to get started quickly with a platform that's there for them and allows them to build on top of that platform. You can expand pretty quickly with the right product and positioning. There are a lot of opportunities out there for you to grow quickly.

I did that with my two companies and what other companies do even today in specific industries. Ohanafy, they're a recent one but are growing quickly. I find them fascinating because they built a CRM for craft beverage companies. It is a unique industry-specific solution, but they're seeing a lot of success, and I follow them.

Another example is flair. I see flair as 'HR 2.0' because I built a similar product at my first ISV. I think there are many opportunities in the ecosystem, and there have been some great stories over the last decade.

Do you see Salesforce giving a full-blown HR solution another step?

Over the last decade, I've thought a lot about it. Honestly, I don't think they will. I don't think they will get into what I will call the ERP or back office space, whether it be HR or financials. The reason being is that if they wanted to enter that space, they're entering that space to win in the market.

They're entering that space to be able to offer a platform for all of their customers. Not only small customers but also enterprise customers, the largest customers in the world, which is who they're selling CRM to today.

They don't have the internal expertise to build from scratch. I think it would be an acquisition. If there was going to be an acquisition, I think it would be a company like Workday. They have an enterprise presence in HR and financials. They have a very comprehensive solution for global enterprises. But the math would need to work, and Workday has a very high market capitalization right now.

I think that's why you never saw a FinancialForce acquisition by Salesforce. A private equity firm recently bought them out. I think it's a space they don't want to get into. If they ever wanted to get into the space, I think it would be more in professional services like customer onboarding, customer success, and post-sales.

Some ISVs I speak to are constantly worried about investing in the platform because Salesforce could come in and compete with them. I think a Workday acquisition is an excellent example.

I think if Salesforce acquired Workday, there would be ample opportunities in the ecosystem for a company like flair to continue to succeed. Workday is not playing in the SMB space. If you have a great product in the SMB space, you'll still have a lot of opportunities in the ecosystem.

I spent too much time at my first company worrying about what Salesforce will do. My advice to ISVs is not to worry if Salesforce gets into your space. Look instead for a market where you can win.

Would you recommend ISVs invest in selling through Salesforce?

It depends on what stage you're at and your product's annual contract value. If it's very low, you'll have a hard time getting the attention of Salesforce AEs, who will receive nothing in quota attainment or actual dollars received from selling your product. Alternatively, if you have a low-priced product that is critical to Salesforce AEs winning business, it then makes sense.

To give you a concrete example, a couple of ISVs I've worked with have a product native to Salesforce. However, it's really integrated into Microsoft Teams, not Slack. There are still a lot of companies out there that use Microsoft Teams and want to use Salesforce, but they still want that tight integration of Microsoft Teams. If that is an opportunity that an AE is working, those ISVs are critically important to them.

That's one example where if I were one of those ISVs, you'd want to double down on those relationships with Salesforce AEs. Having said that, if you're an early-stage ISV – maybe less than one or two million ARR – I wouldn't be waiting for AEs to sell your product. At the same time, I wouldn't be waiting for partners to sell your product.

So, I would start to explore those relationships immediately. But it wouldn't be my main go-to-market channel early on. Early on, my main go-to-market channel would be figuring out whether I will do inbound or outbound and in which market.  

In my second company, as an example, we partnered with Sage after we achieved one million ARR. That ended up being a really great partner channel for us at that time, reselling our product. But again, we already had success stories and an inbound channel of opportunity. So, it was the right time for us to really double down on leverage partners.

Any other advice you can give to aspiring Salesforce ISV founders?

The first thing you need to do is have a great product. If you have a subpar product that's not solving an urgent problem for Salesforce customers, you will have a challenge no matter what. But if you have a great product that solves a unique problem, I think it's a great opportunity, and you should double down. From a go-to-market perspective, go after a particular market, show success in that market, and expand from there.

As a product founder, I made the mistake twice when I had a horizontal product that said, "My target market is going to be every single Salesforce customer with less than 500 employees." That needed to be more focused. You need to be much more focused with your ideal customer profile, the market you're going after, and your positioning and messaging.

Salesforce surveyed senior marketing industry leaders and discovered that 67% percent of marketing leaders say creating a refined customer profile across all touchpoints and channels is critical to the success of their overall GTM strategy.

The last point I'll make is that I think many product or technical founders – like myself – get enamored with the technology side of the Salesforce platform. You think you can build anything, and it will be successful.

Suppose you want to build another CPQ on Salesforce. In that case, you will have a hard time unless you have a very industry-specific CPQ solution that no other product on AppExchange or Salesforce CPQ itself is solving. That's just an example of what you need to look out for to succeed.

Be more specific

Thank you for tuning into this episode of Hutte's Trails Podcast.

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