Category Archives: Lessons Learned

Posted On January 24th, 2017 by Crowded Ocean

Walking in Another’s Shoes: Sales/Marketing Integration

Sales and Marketing may not be from Mars and Venus—or descended from the Hatfield and McCoys—but they aren’t natural allies, either. Sales carries the burden of a quota, screen-shot-2017-01-23-at-7-22-38-pmand when that quota isn’t attained, Sales will sometimes look for someone to blame. Maybe it’s the product (we’ve over-promised performance, ease of use or implementation, or we’ve mistakenly omitted key features), but more often it’s Marketing (our messaging is wrong; our claims are unsupported on the website; we don’t have enough leads—and the ones we do have are for shit).Screen Shot 2015-02-23 at 5.27.57 PM

Without sounding too much like Dr. Phil, the solution to this gap is ‘empathy.’ And the CEO has to steer Marketing towards being the one to take the first step in building an integrated sales and marketing plan. An easy first step is to have every person in Marketing listen in on an Inside Sales call. Or better yet, move their desk to the middle of the Inside Sales bullpen so that they can let these calls wash over them, even if they’re only hearing half of the conversation. And, when geography and budgets permit, have everyone in the company—nerds included—go out on a sales call.

Insist Upon Weekly Sales & Marketing Meetings

The next step is organizational: have someone from Marketing sit in on the weekly Sales meetings. Or better yet, have a regular meeting between the Sales and Marketing principals, with representatives from the lower ranks of each department participating and presenting (and listening) where appropriate. Make the content of that meeting both qualitative and quantitative. What can Sales report, fresh from their latest customer interactions and pitches, and what does the data-driven Marketing team report?

Once Marketing takes the initiative, it’s up to Sales to reciprocate. Sales needs to recognize how important, for example, reference accounts are—for the website, for PR (you can’t do a launch without customers that the press and analysts can contact) and for sales collateral (case studies). And if referenceable accounts aren’t part of a sales person’s quota and goals, they should be.

Screen Shot 2015-02-10 at 9.04.47 PMMeasuring the Cost of Customer Acquisition

Thanks to digital marketing systems like marketing automation tools, CRM, as well as a myriad of website tracking tools that help measure conversions of inbound traffic to your website , Marketing can now see both the quality of the leads it generates and what Sales is doing with them. This kind of collaboration between Marketing and Sales, fostered and modeled by the CEO, will enable your startup to answer the essential question: “what is the customer acquisition cost?”

Understanding Marketing Contribution to Sales

We’ve never met a startup that has modeled Marketing contribution to Sales. Startup CEOs will say instead that they want their Sales team to be much more productive, and that they want those productivity gains to be derived in part by having the right marketing programs and content to build market awareness for their company and customer preference for their solution.

Does all of this mean that the lion will suddenly lie down with the lamb? Nope. But it gives each party a solid understanding of the other’s jobs and pressures, which is a great start.

Posted On January 10th, 2017 by Crowded Ocean

Market traction and market momentum: are they the same?

Successful VC investors are famous for wielding the power of their intuition or gut instinct when assessing a startup founder or her company before making an investment. That little challengesvoice that speaks to the VC investor about a hot opportunity is also informed by due diligence on the market size, team and growth.

A company on the move…

A startup that can demonstrate market momentum is a positive sign for investors. But, market momentum is generally largely qualitative. It’s that quality of a company “on the move” that’s largely unsupported by any graphs on charts but is still an indicator of market opportunity.

Market traction = market adoption

Market traction, on the other hand, is quantitative and it’s based upon real indicators of growth and market adoption.

Angel List co-founder Naval Ravikant describes market traction as “quantitative evidence of market demand.” In other words, do customers want your product? When it comes to an early-stage company, VC investors will take a measure of a company’s traction using private market data that go beyond publicly available info like the track record of the team, market size and financing rounds.

Quantitative evidence of market demand

In the absence of traditional metrics like average deal size and the true cost of customer acquisition, non-traditional measurements like share of voice, website traffic and social media growth and engagement do shape market traction of an early-stage company. Take note, startup founders! A focus on growing social media engagement can favorably affect the perception of your brand, but also of your market traction.

book-cover-largeOf course, quantitative growth and trends do count. Growth in average deal size, for example, is an early meaningful signal of market traction. Showing that you understand the sales cycle of your business and that it is shrinking is another meaningful early signal of market traction.

Bottom line, demonstrating market traction is the way to de-risk the idea of “more” (investment, hiring, partnerships, office expansion, etc.) for your stakeholders and investors. You can always celebrate market momentum, but what matters more is measuring market traction.

 

Posted On January 2nd, 2017 by Crowded Ocean

The Ultimate Startup Guide: Revisiting the MVP

In our upcoming book, The Ultimate Startup Guide, we address a major consideration for many clients: how to develop and release their products. book-cover-largeThe concept of Minimal Viable Product (MVP) and its role in a startup’s early success was popularized in the last few years by tech leaders and authors like Steve Blank and Eric Ries. Adherents of MVP have strong opinions that this is the only way to go to market; others caution more restraint in the process, ironing out more of the product before pushing it out into the fast-moving stream.

Here’s what we had to say:

The decision on what you’re going to sell may be the most important one you make in the early stage of your company. This may seem like a stupid question—or at least one with an obvious answer: ‘the product we’ve been working on all this time.’ Duh.

But wait. It’s extremely rare that what a company is developing is exactly what the market wants—or thinks it wants. So what do you do with the ‘delta’, the difference between the two?

The MVP (Minimal Viable Product): Let’s start with the definition provided by one of its inventors, Eric Ries: “the version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.” Those last two words are what some people seize on, leading them to portray the MVP process as a lazy one: ‘throw shit at the wall and see what sticks.’ But that’s hardly the case: MVP is a structured approach, one that requires a lot of discipline and diligence to be effective. Once you’ve created and released a ‘minimal’ product, you have to then be in constant contact with the market and then constantly iterating the product in line with that feedback. Done right, MVP can be very effective.

ASIDE: A good friend of Crowded Ocean—and of many people featured in this book—is associated with a concept known as the “Sales Ready Product” (SRP) in the same way that Steve Blank and Eric Ries are associated with MVP. The late Don Templeton perfected not just the SRP process but a means of shortening it so that it was at least competitive with, if not superior to, the MVP. In Don’s honor the folks at Sequoia named his process “The Templeton Compression Factor”. The process, executed correctly, could shrink an enterprise-level sale (which normally takes 180 days) to 30-60 days. (To learn more about Don’s Compression Factor and SRP, please see the link at the end of this chapter.)

authors1So which approach—Minimal Viable Product (MVP) or Sales-Ready Product (SRP) is right for you? It depends on your product team and your market. The younger/newer you are as a company, the more forgiving the market—as long as your product group revs the product, quickly and accurately. But we’ve also had established companies who try to practice MVP and their Sales department complains that they’re getting killed out there—that their customers expect something more fully-baked from them. And if your product is (to use a phrase that has been done to death) mission-critical, then SRP is probably the route to go.

We saw this difference of approach play out with our most recent client—a 14 year-old open-source player moving from a professional services model to a product/service focus. Their core constituency in the past has been the open-source community, which expects its product for free and is tolerant of early product flaws. But the new targets—government agencies and enterprises—while appreciating all the benefits of open source, are not as forgiving. For the money we’re talking about here, they’re expecting a more finished product and have little interest in being part of the testing and development process.

Who’s right? If the client can convince their customers that they are now functioning as a startup (with the major shift into the product area) and inviting the customer under the tent, then the MVP approach can work. But if they get pushback, they should pivot quickly to the more traditional SRP approach.

Posted On December 20th, 2016 by Crowded Ocean

Some new, some old: the latest lingo of Silicon Valley

It’s time once again for NEW WORDS and PHRASES bubbling up in Silicon Valley…

Screen Shot 2016-04-26 at 10.47.06 AMGAFA: the rest of the world looks upon the technology giants of the left coast (Google, Apple, Facebook and Amazon) and simply refers to them as GAFA.

TAFT: the acronym for “tell them any frigging thing” was the unscrupulous sales practice at Wyndham Vacation Ownership, the nation’s largest time-share operator.

Rat-fucking: made famous in the Watergate era, ratfucking was the term for dirty tricks instigated by Republican operatives on the campaign to re-elect Richard Nixon. Yes, the term is back.

Screen Shot 2015-05-19 at 9.01.45 AMMechanical pixels: scientists are exploring a new display technology based upon graphene to build flexible, durable, energy efficient screens that are superior to LED screens.

Sexist algorithms: it turns out that there is a gender bias inherent in the data sets, called word embeddings, that are being used to train AI tools like chatbots, translation systems and recommendation engines.

culture, marketingPerfect forward secrecy: a security feature built into the end-to-end encryption of programs like WhatsApp that “future-proofs” your messages from new hacker attacks.

Posted On November 29th, 2016 by Crowded Ocean

Why would a startup hire an inside sales rep a year before product availability?

We’ve seen two successful enterprise startup teams hire inside sales reps during their stealth phase, early in the life of the company. moneySo early, in fact, that the hire preceded the general availability of product by more than a year. And the ISR was not even related to a board member or cofounder! So, why hire so early?

Two reasons.

Early traction

First, the ISR helped extend the reach and productivity of the startup team by cold-calling potential early-adopters while using the name and bona fides of the founders and investors. The ISR worked off of a list of friends-and-family targets and helped hunt critical early customers. As the mantra of company building goes, rapidly building the MVP product with fast iteration of core features that are based upon customer testing and feedback is the shortest path to establishing product/market fit. In this model, the ISR served as an indispensible wingman of the founders whose credentials are part of why the lone-survivorstartup was funded in the first place and why an early-adopter customer would take a chance on an unproven product and company.

In reality, the ISR runs an early focus group

Second, because the ISR is on the front lines of pitching the company every day by phone and email to would-be customers, they serve as a test bed or focus group of value propositions, terminology and product names. One of our past startup clients, for example, formed a three-person ISR team who A/B tested email subject lines that they used to set meetings in the year prior to the official beta release of their cloud service. The ISR team tabulated their findings which became useful data for us to consider when we worked to nail down product positioning.

So, consider the value of adding a strong Inside Sales Rep before launch to help extend the influence of the founders, accelerate sales and help test your positioning and messaging.

Posted On October 26th, 2016 by Crowded Ocean

October: 3 new words in Silicon Valley jargon

Three new terms you really need to know and use, nerds…

ideas

Volunteer computing: donate a share of your computer’s unused storage space and compute power to a scientific project (e.g. the search for signs of extraterrestrial life for SETI or research for a cure to Parkinson’s or Alzheimer’s diseases for Stanford University).

Buzzy: when a startup is growing quickly, in the media a lot and watched with envy by other startups with far less momentum, they’re buzzy. A former buzzy startup, Mixpanel, is regrouping to refocus on profitability, according to this recent news article.

Casino effect: there are a set of principles in the design of casinos that keep gamblers gambling. But can that same idea be applied to consumer software design?

Posted On September 27th, 2016 by Crowded Ocean

3 rules-of-thumb for hiring an effective startup team

Inspired by the presidential debate yesterday, here are three rules-of-thumb that we like to Screen Shot 2014-03-22 at 8.50.31 PMshare with first-time CEOs on how to build a strong team in those critical, early days of growing a startup.

  1. Stick to the no-assholes rule. You can call them jerks or idiots, but the label “asshole” seems to need no interpretation among a team of startup founders who are striving to build a company. We proclaim “no assholes” as a universal guideline for all emerging companies to follow. We would go so far as to state it as HR policy, right along side the Rooney Rule for creating meaningful interviews of minority candidates to build diversity into your team. Especially in the early days, there can be no assholes. Because assholes will often hire their own kind and your startup just can’t afford that.
  1. Dispense with bullshit new-age titles. If you’re serious about building a real company that’s going to go global, then stick with job titles that may seem “retro” to the millenials on your team. Remember that “real” titles on business cards actually mean something to the majority of your customers who aren’t headquartered in Silicon Valley.
  1. When you’re interviewing, take a candidate out to lunch and watch how they treat the waiter. This is a tried-and-true test for most candidates because they are focused on impressing the hiring manager across the lunch table. But if they are rude or dismissive when the bus boy stops to refill their water glass or they are discourteous when an over-eager waiter starts to hover, just order your lunch to go or ask for a doggie bag.

Posted On September 20th, 2016 by Crowded Ocean

5 Steps to Take Your Startup to the Next Level

  1. Write your launch press release as early as possible to unify sales and marketing messaging

As much as startups like their white boards, when it comes to their core positioning, lone-survivorproduct capabilities and supporting messaging, they don’t take anything seriously until they see it in print (or in PPT or HTML). As important as a launch is to a startup—and as important as press coverage is to the launch—you’d think they’d recognize the fundamental importance of the press release and act accordingly. And yet most startups don’t write the release until about 3 weeks prior to launch. Only then are fundamental inconsistencies and misunderstandings revealed, causing everyone to scramble, from website authors to the PR firm. Instead, draft your news release as early as possible to crystallize messaging. Start by writing your ideal headline for the launch, then write the release that will best generate that headline. Then take the components of that release and insert them into all your key marketing and sales materials.

  1. Ditch the “elevator pitch”; use a 20-second “bold claim” instead

The “elevator pitch” is a time-honored marketing exercise and tool for distilling your company’s value proposition. But we’re living in an ADHD world where your prospective customer is addicted to nonstop interruptions in multiple streams delivered on multiple screens. So forget the elevator ride: you don’t have that long. Imagine you’re on an escalator instead, with 30 seconds to make your pitch. Lead with your ‘bold claim’. It starts with: “what if I told you that…” (An example: ‘What if I told you that you could wash your car while driving it home from work?’) An effective bold claim poses a question that redeye failuregenerates this customer response: “I don’t believe you can do that, but I’ll take your card.” It’s a statement that sits at the core of your sales pitch, PPT decks and website–one provocative enough to grab your customer’s attention and initiate the sales process.

  1. Build a company “war room” around your “buyer persona”

Defining the buyer persona is a best practice supported by business books, courses, institutes and online tools. And it makes more sense than ever now because customers have more power and more options. But for so many companies creating a customer persona is just a paper exercise. The key is to develop a 3-D understanding of your persona’s personality and affinities, knowledge that you can then apply to your website, sales pitches, and white papers—and to make it a company exercise. The more advanced startups not only create these 3-D images of their customer, they name them and put an image (or imagined photo) of them on their walls, reminding everyone of what (and whom) they’re working for. This is particularly true of the Sales “war room,” where the customer persona should have equal wall space with all of your competition’s material, a constant reminder to stay focused on your customers—their needs, their options and their reasons to choose you.

  1. Bring your “chief content officer” to the leadership table

Think about it: in an enterprise product sale, the average sales process requires seven ‘touches’ (or interactions) with your prospect. So, to support their transition from prospect to buyer, you’ll need at least seven pieces of original content. And yet, for many startups, content is a last-minute addition to their launch and sales efforts.

Content needs to move to the top of a startup’s Maslow hierarchy. And it has to be everybody’s job. The problem is that every team at early-stage companies is so busy iterating on their product—both in features and possible business applications—that crafting sales content for lead nurturing and demand gen often takes a back seat. We recommend designating a “chief content officer” and giving him/her a seat at the big table for sales pipeline reviews, product planning meetings, maybe even board meetings. Make generating topics and content ideas a corporate-wide function, then recognize and reward those who generate this content—blogs, mini-white papers, etc.

  1. Set diversity goals (just like growth/revenue targets) and report on them just as frequently

Diversity is not only good for a company’s culture, it’s good for business, paying off in better decisions and improved profitability. But how to achieve it? A few innovative startups like Slack have adopted the Rooney Rule that requires that “persons of color” and women be candidates for strategic hires within an organization. Meanwhile, VC firm and startup builder Kapor Capital has taken the Rooney Rule a step further by requiring their own firm be diverse. Now, Kapor Capital partners are requiring the startups they invest in to create a culture of inclusion from the beginning. They ask their startup founders to sign a diversity pledge, then deliver a diversity report every quarter to investors.

Tech titans like Apple, Google and Salesforce have diversity initiatives that they report on publicly. Startups can build diversity in from the ground up by giving it the same status in their business plan as goals for customer acquisition, revenue and profit. And, by reporting on those goals every quarter to your board, investors and your team you’ll be able to reinforce diversity as a value and a business goal that will help set your startup apart.

 

 

Posted On August 16th, 2016 by Crowded Ocean

How Not to Get ‘Pitch-slapped’

In interviewing over 20 VC partners for our upcoming book, The Ultimate Startup Guide, one of the questions we asked was: what do you want the entrepreneurs who are pitching you to understand before they arrive? The answers came back in different forms, but they had one common component: empathy.

Screen Shot 2016-08-12 at 8.04.28 PMNote: not ‘sympathy’. VCs may not live a life of roses and champagne, as some shows and articles depict them, but they’re not eating Alpo either. They don’t want or need your sympathy: what they do want is for you to understand what their life—and daily life at that—is like, and what it means to you in terms of getting their attention (and ultimately, their money).

Here are the most common points that emerged from the interviews:

  1. VCs invest in far fewer projects than the public appreciates—usually 2-3 in a year.
  2. While the number varies from firm to firm—and VC to VC—they can have between 20 and 30 meetings similar to the one they’re having with you—in a week.
  3. ‘Fit’ is everything. Are you the right fit for the market they’re most interested in, are you coming at the right time in their investment calendar (given that they only do 2-3 in a year)? Are you the right person (passion, experience, drive, leader of a team) to make this all work?
  4. There’s a partner meeting ahead at which the VC partner that may become your sponsor has to sell your company and you. Did your pitch give them the tools to do that?
  5. A week (or less) from your meeting with them, how will they remember you (if at all)?

So what the bottom line for startup entrepreneurs? Be memorable. Be succinct (as an earlier Crowded Ocean blog noted, you really have 10 minutes at best to make your point, not a full hour). And why you and why now? What’s in it for your investor—not the ‘market’ in general. Again, put yourself in their place as you prepare the pitch, then again as you deliver it.

 

Posted On August 2nd, 2016 by Crowded Ocean

The 10-Minute Window: a guide for startup pitches

In the process of researching our book, The Ultimate Startup Guide, we interviewed a wide range of VCs—some of whom we’ve worked with before, some of whom we knew only by reputation. Screen Shot 2016-07-28 at 3.23.28 PMAs we collated our notes by topic, there were a couple of back-to-basics takeaways that stood out.

The first had to do with the nature of the relationship you’re trying to cultivate.

The second had to do with how much time you really have to pitch.

Every single startup founder and VC partner stressed the long-term nature of the VC-startup relationship and likened it to a marriage (or family in some cases). The idea is that you’re in this relationship together for the long haul, so choose selectively. Founders will mistakenly focus on valuation or the term sheet and the brand name of the firm ignoring components like the stature of the individual partner within the firm, their capacity, domain expertise, individual track record and their potential to build rapport with you. This isn’t a marriage solely for economic gain. This is a marriage you are entering “soberly and advisedly” where the capacity of the partner to build trust and to guide and mentor you, the startup founder, is hugely valuable and not to be underestimated.

surveillanceIn bed with your VC partner

And you’re going to be in bed, so to speak, with your VC investor for a long time. As this Forbes article pointed out, according to the National Venture Capital Association, the median time to IPO exit since first funding for VC-backed startups was 3.1 years in 2000, and 7.4 years in 2013.

The second takeaway has to do with how much time you really have to communicate your new idea. The reality is that even though many VCs leave their laptops and phones outside the door (to show the startup that they have their undivided attention), they have their pad of paper…and they are human. More importantly, most VCs will cop to having some form of ADHD: they’ve got all their current portfolio companies as well as the ones they’ve recently met with that they’re considering funding. And they probably have three more meetings after yours. So there are a lot of places their mind can go while they nod at Slide 28 of your presentation.

You booked an hour, but you’ve only got 10 minutes

Therefore, even though the meeting you’ve booked is 60 minutes long, you should plan on 10 minutes of attention. (Sequoia Capital partner Aaref Hilaly advises founders here to plan to hook your audience in the first 5 minutes of the meeting.) The point is that you need to engage quickly and powerfully and leave plenty of time for discussion. Pro tips:

  1. Make the meeting more a conversation than a pitch. Check in with the VC early in the presentation (as early as the 5-minute mark) to ensure engagement.
  2. Lead with the opportunity for the VC—not the dreaded ‘About Us’ or ‘Market Share’ slides. Why should they invest—what’s in it for them?
  3. Plan on bringing your product to life with visuals, screen shots, maybe a mini demo.
  4. After you’ve established that the market opportunity is Trumpian “yuge”, keep the detailed market metrics in the appendix

For more insights into the “pitch and the ask”, stay tuned for our upcoming book described here. Pre-order now!