David Sacks: Sorry startups, but going viral isn't enough in the enterprise

Yammer cofounder David Sacks has one of the great success stories in recent enterprise startups. In 2008, he introduced Yammer, a social networking and collaboration service for businesses, on stage at the TechCrunch 50 conference in San Francisco. Less than four years later, he sold it to Microsoft for around $1.2 billion.

Today, Sacks was on stage at Launch -- one of two conferences that has succeeded the original TechCrunch 50 -- and he had some advice for other entrepreneurs hoping to follow his path. 

First and foremost: you have to know how to sell to enterprises.

How Humana Got 26,000 Employees To Use An Internal Social Network
Stay on top of CITE: Subscribe to the InCITE newsletter.

He said, "When we started the company, we had this somewhat naive view that if we just went viral, companies would pull out their credit card and pay. That works for small businesses, that works for individuals, it does not work for enterprises."

Ironically, the largest enterprises were the ones who responded to Yammer most enthusiastically, as they had the largest user bases -- a business social network seems a lot more appealing when there are 1,000 people in a company than when there are only 10 or 15.

Yammer learned the ropes, but his comments suggest that companies who are focused on consumers first -- like Dropbox, YouSendIt, and Evernote -- will not win simply by adding enterprise-oriented features later. They'll have to figure out enterprise sales as well. That probably means hiring an enterprise sales force like Box has done.

Sacks also talked about a comment he made on Facebook last fall, where he said the big Internet companies would make it harder than ever for startups to compete. 

"No entrepreneur wants to create a product that's just a feature of something else. You want to create a product that can become a company. The difference I see now [versus the 1990s] is you do have these huge Internet companies," such as Google, Amazon, Apple, Facebook, and Microsoft. "They have so much surface area in their products, it's easier than ever before for them to feature-ize you."

The only way to avoid that fate is to improve your original product at breakneck speed. 

"The reality is, when you first launch your product is easy to copy....A big company, if they moved fast enough, could have crushed us. We moved as quickly as possible to add depth to the product, surface area to the product. Two years later, when Salesforce was trying to do those SuperBowl commercials, that wasn't our product anymore.... They were trying to copy Yammer circa 2008."

Matt Rosoff is the editorial director of CITEworld. Read Matt's bio