By Ken Elefant, Partner, Sorenson Ventures
In my last blog, I wrote about the New Security Playbook and how many of the fastest-growing cybersecurity companies are combining novel strategies, such as open source, freemium, and product-led growth, to quickly establish themselves as market leaders. At Sorenson Ventures, we specifically look for early-stage security startups which employ these techniques to rapidly and cost effectively acquire new customers.
Sorenson Ventures portfolio companies like Bridgecrew (acquired by Palo Alto Networks), CloudKnox (acquired by Microsoft), and Kenna Security (acquired by Cisco) all used elements of the New Security Playbook to accelerate customer adoption and revenue growth and attract the attention of industry-leading acquirers.
In this article, I describe how Openpath, another Sorenson portfolio company that was recently acquired by Motorola Solutions, used an underappreciated and often misused New Security Playbook element–strategic channel partnerships–to establish early market momentum and achieve rapid revenue growth.
Unlike purely digital cybersecurity companies, Openpath, a Los Angeles-based building access control startup, combines hardware and software to create connected solutions to manage keyless entry for modern offices, multi-family residential buildings, and enterprise campuses. The company’s flagship product, Openpath Access, uses a flexible software architecture combined with physical security devices, such as door locks, badge readers, and video cameras, to help manage office access and simplify space management.
Because of its unified physical/digital approach, Openpath Access, for example, was able to help customers quickly adapt to Covid-19 pandemic social distancing, masking, and entrance requirements. Openpath enabled facility managers to easily configure systems to support contactless entry, capacity management, and contact tracing to ensure safe work environments and adjust to meet constantly changing local gathering and occupancy requirements.
Since Openpath’s solution requires both physical installation and software configuration, the company early on realized it could utilize a channel partnership strategy to accelerate customer acquisition and deployment, while maintaining tight focus on core product development activities. Openpath’s founders devised a “climb the channel ladder” partnership approach that started small–both geographically and functionally–and gradually grew in scale and scope as the company gained customers and market validation.
Openpath started by partnering with local locksmiths and smaller system integrators who could handle Access product installations for customers. Openpath created a product that worked with existing wiring and locking hardware and even included a power supply, removable connector blocks, and reverse polarity protection to make installation as easy as possible. This made their installers, who now had a modern, software-defined approach to building entry and management, look like geniuses in front of their customers,
Once it proved its initial channel model with local locksmiths and smaller system integrators, Openpath was able to attract interest from regional and national security system integration companies such as Security 101, ADT and Convergint. These bigger players recognized Openpath as a way to differentiate their capabilities from traditional competitors who didn’t have a comparable solution that could address rapidly changing building management requirements.
The channel approach helped Openpath scale its customer base faster with bigger customers than it could have done through an independent go-to-market strategy. Effective channel partnerships also helped validate the market for investors, while providing a real-time customer laboratory to better understand how their product and go-to-market strategy would need to evolve to support rapid growth.
To ensure resellers were successful, Openpath prescreened end customers and preconfigured the solution for easy, turnkey implementation. Resellers could now use Openpath solutions to become an integral part of ongoing facility management routines for commercial and multi-unit residential buildings. For instance, resellers could help customize management dashboards and integrate into other building management systems like elevators or Covid temperature checks. Not to mention that Openpath incented resellers by sharing ongoing SaaS recurring revenue streams with its partners and creating awareness by showcasing partner solutions at tradeshows.
Most startups make the mistake of signing up channel partners and hoping they will be successful. Hope, however, is not a channel strategy. Openpath knew that it needed to make a concerted effort to feed, support, and enable the channel to get the partner’s customer flywheel going. Just as Sorenson’s New Security Playbook says, Openpath understood that it needed to set realistic, achievable milestones–on both fully burdened costs and revenues–and expand its channel partnerships once it established success at every stage.
Some startups have a built-in “network effect”, which is another GTM and product characteristic that we always consider when evaluating investments. In Openpath’s case, it worked like a charm. When one building tenant adopted Openpath’s contactless access control setup, that office became a constant advertisement to other tenants who could see firsthand how Openpath improved efficiency, flexibility, and ease-of-use for its customers. This in-building marketing presence helped Openpath establish relationships with property managers and helped system integrator partners quickly “land and expand” from one account to others in the same building. In many cases, the system integrator could even take over an entire building with minimal sales effort and cost.
There are three KPIs that the best founders track when it comes to channel strategy and execution:
- Number of channel-produced quality leads
- % of channel-produced leads/total leads
- Cost/channel-produced lead
A startup knows it’s succeeding in a specific channel when quality leads are increasing, percentage of leads from that channel are growing relative to total leads from all sources, and, perhaps more importantly, cost per quality channel-produced lead is shrinking. When taken together, these three metrics give startups a strong sense of whether the channel is helping acquire customers cost efficiently in a scalable and repeatable manner.
This early market validation with SIs helped Openpath continue to “climb the channel ladder.” Openpath’s system integrator success attracted the attention of large property owners and managers, like Lincoln Properties, which standardized on Openpath across its building portfolio; technology companies like Cisco Meraki, which integrated its connected video cameras and video management systems with Openpath; and Envoy, which integrated its visitor management systems with Openpath. Openpath was even able to partner with traditional physical security vendors like Schlage/Allegion, parking management companies, such as Skidata, and fitness providers, like ABC Fitness.
Partnerships with leading commercial real estate firms and technology companies greatly increased Openpath’s market awareness, helping the company gain customers, such as Domino’s, Stamps.com, and University of Virginia, among many others. Openpath’s successful channel strategy also led to growing sales, which attracted Motorola’s attention. Motorola Solutions announced its intention to acquire Openpath in July, 2021.
As I noted in my previous blog, security is a hot market for all of the wrong reasons: Bad guys look for any opportunity–digital, physical, or some combination–to inflict huge damage on unprotected organizations. The world is indeed an incredibly and increasingly dangerous place.
That danger, however, equates to big opportunities for founders who can develop innovative products that pair well with New Security Playbook go-to-market approaches. There’s no doubt that security markets will expand rapidly for the foreseeable future. The challenge will be to figure out the best ways to create and sell solutions in a crowded and competitive market. Sorenson’s New Security Playbook provides a useful framework and many clues on how to get the job done well.