Good morning and welcome back to For Starters today. Let's talk about distribution, go-to-market, and the fabled channel, which, for channel, I'm defining as mostly sales agents, technology distributors—aka referral agents. First, as any company coming to market, one of the key things you absolutely have solved for is distribution—getting to market in a repeatable, scalable fashion.
Whether that's knocking door to door, sending your cold emails, or finding partners that can accelerate your growth, some ways that happens is going into ISV marketplaces—pretty common with AWS or Google or the cloud providers. Also, CCaaS providers, specifically in our space, tend to have app exchanges. Some of those you can be resold on their paper, and you're going to give up, you know, 10 to 20% of a deal, or they're just simply kind of a pass, or they hand off a customer to you. Either of those is okay. Each of them requires a distinctive go-to-market investment, regardless of the partner.
The other route to market, which is kind of in style these days, is going through distributors and sales agencies, where there's a bunch of these little referral companies out there that help companies select vendors—primarily in CCaaS these days. But now, with the proliferation of AI, there are some folks helping with that. The question, then, is: as a vendor, should you go to market that way?
We chose to. We actually started that way, and in 2025 have ended all of our channel distribution partnerships and will no longer be working through sales agencies. And there are a lot of reasons for that. But primarily, you know, when you go to market through a sales agency—call it Avant, or AppDirect, or Intelisys—they're all great companies. They tend to work well when there are a bunch of companies that are substitutes for each other. So, CCaaS—there's a half a dozen CCaaS providers that if you're looking for that type of solution, you know, you're gonna look at NICE, or Zoom, or Talkdesk, or UJET, or whatever—Genesys. Those guys need to get the mind share, right? They're in competitive, pretty high-margins-still markets. And what happens is that sales agent, that expert advisor, whatever they want to go by, is gonna sit down, pull out a spreadsheet, ask discovery questions, and compare your solution to four or five others. Then they help that customer, you know, make a selection, and you're gonna pay 20% of your deal forever on that.
Which means that every deal you're in, you're automatically going to have competitors, and your customer acquisition cost is going to be fucking crazy because you're giving up 20% in perpetuity. So try to calculate a CAC on that and then sell that to an investor. The other thing that happens in that model is that your margins are going to be super compressed because they're not taking 20% of an EBITDA or even gross margins. They're taking 20% off the top, which means that's just 20%. As you walk down your P&L statement, that is just gone—20% commission forever. So imagine now trying to value your company on exit.
My sense is that those are going to be discounted cash flows by whoever's buying you, because they're not going to want to take over and assume all of that liability—again, 20% on your book of business in perpetuity—unless they're an acquirer that's used to making those kinds of deals. You're going to be in pain, is my sense. I mean, there was one year that we wrote almost a half a million dollars in checks and commissions, and so those partners were making a heck of a lot more money than we were on the same revenue, and we were delivering it, right?
The other side of that coin, too, or the thing to consider, is that every distribution channel you go through is going to require another level of investment for you. So do you want to invest in going to market where you know your competitors already are? Or do you want to invest in going to market in areas where there's still a lot of white space, where you can stand alone? Take that 20% that you would have spent handing off to some dude with a spreadsheet and invest that somewhere else. That's what we're doing.
We're investing in more strategic levels of scale and different routes to market, so that we can break through that noise. Some of those will continue to be strategic app marketplaces where we have strategic alignment—places like Zoom, frankly, where you can get to scale with a “better together” narrative and attach to some velocity. Otherwise, you're just swimming in a contingency of noise, and that's not free revenue either. So it's easy to step back and say, “Well, if I do this, I don't have to hire a bunch of salespeople,” but you do, because you still have to hire people that can manage the channel for you.
What you'll find—and I'm not dissing on the sales agents folks. There are some great ones out there, and I've got some friends that do this. And for clarity, we're a sales agency as well. We've got an advisory arm that helps customers, you know, select tech—primarily Zoom. You know, we're not shy to double down in the areas that we value and believe in. But we're creating mutual value in those cases, and we're very transparent with that. We're also adding additional differentiated services and applications around those services. So there's nothing against the model; it just tends to be value-extractive instead of value-creation, and it creates some lopsided revenue. You're going to end up with different folks that either are going to try to be a gatekeeper between you and your customer—which is a place I'm never a fan of—or they refer a deal in, they bounce to the next deal, and you never see them again, and you're writing a check every month.
So it's a tough topic, and it's different for everyone. But I want you, before you get all excited about going to market through sales agents or different distribution channels, to really think about the opportunity cost of that. You know, what level of effort are you going to have to invest to do it right and to gain the mindshare that you need? And what's it going to cost you in the long run? And I think you'll probably come to a different set of conclusions—that maybe, if you do have something that stands out in the market, there's probably better ways for you to get your message out than to be in a competitive situation every single day.
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