Wasabi Technologies, a successful cloud storage startup, achieved rapid growth by focusing heavily on direct sales. However, founder and CEO David Friend recognized a looming challenge in scaling the business to effectively compete against established industry leaders.

The Competitive Pressure to Pivot

Major competitors, including Amazon, Google, and Microsoft, utilized multi-channel sales approaches for their cloud storage offerings. Friend worried that relying solely on direct sales would prevent Wasabi Technologies from achieving the necessary market momentum.

This potential shift necessitated dramatic overhauls in sales, marketing, and staffing strategies. The core dilemma centered on whether embracing the complexity of channel partners was essential for long-term ambition over short-term success.

A Go-to-Market Dilemma: Focus Versus Scale

The situation presented a classic trade-off: maintaining simplicity and tight customer relationships through direct sales versus achieving broader leverage via channel partners, resellers, and alliances.

This discussion was featured on the Cold Call podcast, hosted by Brian Kenny, exploring the Harvard Business School case study, “Wasabi Technologies,” with senior lecturer Lou Shipley.

Insights from Lou Shipley on Wasabi's Decision

Lou Shipley, who specializes in go-to-market strategies and sits on Wasabi’s board, noted that most startups struggle to perfect even one go-to-market motion. Wasabi was performing well directly, yet Friend felt they were missing access to certain markets.

Shipley confirmed that after market consultation, they decided to execute the change to channel sales, calling it a “very well executed change,” despite the inherent risks involved in altering a successful initial strategy.

The Founder's Background and Market Context

The case centers on David Friend, the protagonist, in 2019, just over a year after launching. Despite an “unbelievable launch” and rapidly climbing revenues, Friend was questioning the limits of their current success.

Shipley highlighted Friend’s background, noting he founded the world’s first synthesizer company, counting bands like Steely Dan as early customers. Friend, a Berklee School of Music alumnus, has partnered with technical co-founder Jeffrey Flowers on multiple ventures, identifying large market openings like object storage.

Friend’s past experience, including receiving a 3 a.m. call from an unhappy Steely Dan regarding a synthesizer, shaped his initial preference for direct customer relationships.

The Perils of Embracing Channel Sales

When a company is succeeding with direct sales, pivoting to channels presents significant challenges, often explored in HBS sales classes. Key hurdles include understanding partner economics and managing internal friction.

Shipley pointed out the difficulty in communicating the change to a high-performing direct sales team who might feel devalued when forced to work through partners.

Disintermediation and Partner Trust

The case discusses friction related to introducing intermediaries like Value Added Resellers (VARs) and Managed Service Providers (MSPs). These third parties provide IT services to smaller customers.

A major risk is the loss of direct customer relationships. The strategy must ensure a multiplier effect from partners without damaging the existing customer bond or the customer experience with the technology.

Furthermore, teaching an external company’s sales force how to effectively sell an emerging product is inherently more difficult than training an internal team.