Entrepreneurship, Sales

Why do companies buy anything from B2B startups?

14 Comments

Yesterday I had a chance to talk with a software entrepreneur who has built a security product that’s primarily sold to mid-sized and larger companies. Over 8 months have gone into the development and he has been able to get fewer than 5 customers for the product. Surprisingly he’s been able to get enough interest from investors who have provided early funding to the tune of several hundreds of thousands of dollars. He has been able to also generate lots of interest from partners but that has not translated into customer sales. Given his developer  background, he was keen to talk about sales and how to generate some initial traction in the market.

Here is what I have learned from all my initial startup selling in the B2B space (i.e. startups selling anything – software, hardware, services, juice bars, etc. to other companies, not consumers).

There are only 2 reasons why companies buy from startups – The person buying has a very good relationship with the entrepreneur, or the person buying has a dying pain that she feels can be solved by the startup’s solution.

That’s it.

This is dramatically different from why they buy from Cisco, Office Depot or any other large company – where politics, budgets, executive management preferences or any other of over 100 factors also come into play.

Lets drill down into both those reasons.

I have personally only been able to sell the first 10 or so first customers for all my software companies through relationships that I built earlier. Which is why I always advocate digging you well before you are thirsty. Most of the software that I have built (B2B) did solve a problem, but I found that it was never an “immensely-horrible, I’ll-die-if-I-dont-fix-it” kinda pain. I avoided those because I did not have as much confidence in my ability to solve that type of problem since the scrutiny & pressure of “must-work-or-you’re-dead or this-better-work-or-you’re-out” causes buggy software.

So I focused on building relationships with key people (that usually took a few months), without me talking much about my product or service. It was purely to help the other person who I wanted to be friends with.

When you build a strong relationship, you will find people are more willing to forgive bugs, try unproven software or even give a no-name startup a chance.

Given my engineering background, I have a “formula” that I believe that will help you understand relationship building.

Relationships = Time + Trust + Mutual interest.

In this case, + is not addition, but an operator. More about this formula in a later post, but the summary is building a relationship takes time (quality not quantity) spent together, building trust by small commitments you deliver on and mutual interests you share with the other person.

The only other reason larger companies buy from small startups is that they are in a huge pain and they believe startup has a unique solution, offering or product to solve that pain in the fastest possible time. I emphasize “they believe” because they are really not sure yet since they have not built a relationship with that individual.

Relationships trump everything in sales. Everything. She who has the relationship wins.

Which is why you are better off getting a referral from one of your customers (who you have a good relationship with presumably) to another potential prospect (who they have a good relationship with).

So before you start you own B2B entrepreneurial venture, build relationships.

SaaS, Sales

Should I outsource the sales function at my technology startup?

10 Comments

I am thinking of writing a series on technology sales, given that selling is my first functional love and I enjoy it more than anything else. (There, I admit it, and yes, more than development even though I am an “engineer” by education). So the next few posts will be focused exclusively on selling for entrepreneurs.

Yesterday I had a friend who came over to get some advice on his startup. 6 years into the business he’d built a $200K+ annual consulting company and had over 30 customers for whom he’d implemented various projects. The average sale was about $20K and since the company was fairly small, (15 people) the CEO and founder was the primary sales person.

Most of their lead generation was relegated to speaking at important conferences and events, after which they’d get a few interested people who were keen to leverage their expertise for implementing a project.

His question was around a proposal he got from another company, which was founded by a big-company sales person who’d built a good network of customers and prospects. The company was offering to help my friend outsource his sales and generate customers. In exchange they were asking for 30% (starting point) of the sale as their commission.

To my friend this seemed on the high side. He’d heard numbers like 10% or even 15%, but 30% seemed large.

So his question was “Is this the right number? Or should I negotiate a lower commission”?

We had an hour to chat about it. I was most surprised he never asked me the question “Should I outsource my sales”? Since I have been running the Microsoft accelerator for the last few months, I have refrained from answering questions I think entrepreneurs should ask, instead narrowly focusing on their specific question and giving them options they should consider or a framework they should look, at to evaluate their options.

Lets do some simple math, I told him. If you are looking to make $200K a year from a sales person, given that your ASP (Average selling price) is about $20K, you will need 10 (roughly) deals for them to make their quota. Since the projects they were selling were fairly complex in nature, the sales person they needed to hire would have to be someone who understood both the customer’s industry, the value of technology to that industry and build good relationships within that industry. So, a fresh out of school grad going for $10K – $15K (in India thats what they make annually) wont cut it.

He needed to hire someone who was a consultative sales person who could not only do the lead generation and selling but also some amount of initial “scoping” of the project. In India most of these people make about $40K annually. These folks would have about 8-10 years of experience (or more) and would have implemented several projects or performed the role of “solution architect”, at their previous role. About 60% of the annual pay of the sales person would be paid as base salary and 40% of it as commission on sale.

Since most of my friend’s customers were in India and primarily in the south, customer travel was going to be fairly minimal, which would cost about $2.5K annually at the high end. Assuming that 50% of his customers were outside the city he lived in and the average customer took 2 trips to close and some trips required 2 people (including my friend who would also help with the sales), the cost of travel was about $2.5K we determined.

To generate leads in a consistent manner, the sales person would have to supplement the speaking engagements my friend was using for lead generation with some events, and a few other techniques, which we estimated would cost another $2.5K.

So in total to generate $200K in business, my friend would have to spend about $45K in hiring, managing and helping his sales person.

Now these numbers are unique to India, but the model holds for the US as well. You might have to multiply each number by 5 to get to the US equivalent, but that’s the norm. Approximately 22.5% of his target or sales was going towards the sales person.

Realistically, the outsourced sales person asking for 30% seemed fairly reasonable.

Of course, I warned that my friend would still have to be deeply involved in the process so the “transparent costs” of the sale would increase the paid commission.

There are a few numbers that can change this equation dramatically. One is the average selling price, second the annual salary the sales person makes and third the target (quota), but by and large this is in the ballpark.

Entrepreneurship

“Wasted nearly a year evaluating different markets” for a billion $ outcome at Meraki

Today Meraki announced its acquisition by Cisco. Doug Leone has a great post up. You have to read it in its entirety, but here’s the money quote.

The biggest challenge came early on in deciding where to aim the product. We wasted nearly a year evaluating different markets: entrepreneurial building owners, ad-supported Wi-Fi, retail, SMEs, large corporations, even the developing world. We eventually settled on SME, for product fit and speed of revenues. From there Meraki took off.\

They built a world class product, with a crack team from MIT and still “wasted” a year on getting to the right market. For a $Billion+ exit.

Entrepreneurship, India, Marketing, Sales

Always be an individual contributor as well

9 Comments

Most of the entrepreneurs I meet and share thoughts with, tend not to be engineers. Or at least not practicing developers, marketers, sales people or business development individuals. This is consistent with the anatomy of the Indian technology entrepreneur, who is typically male, between the ages of 29 and 40, has about 2-10+ years of experience and had been an individual contributor “several years ago”.

I read the quotes by multiple folks in the piece shelf life of an engineer in technology . They consistent theme is one of constant learning, which most of us are probably aware of. Ignore the age bias that’s blatantly obvious in the piece for a few minutes, which is what most of the 250+ comments are focused on.

Two things stand out: (1) Ferose’s quote on “I can’t be just a manager, I have to be technically hands-on.” and

Ravi ” In the first five years, the employee is a technical contributor. In the next five, he or she moves on to become a team leader or an architect , understanding the P&L (profit & loss) requirements of the company. Subsequently , the employee takes on much stronger leadership responsibilities”.

From what I have learned, there’ no choice but for every level of individual to be “hands-on” and play the role of an individual contributor as well at a startup.

If you are an engineer, you cant just be focused on hiring and managing your engineering team (however small or large it is). You have to pick up a few pieces of the puzzle and solve them yourself. Which might mean deploying, developing and shipping parts of your software.

If you are a marketer, then not copy writing or doing your own SEO, or running your ad campaigns is a disaster in the making.

If you are a sales person, and if you are not doing cold calls or opening new doors to customers each week, you will find it extremely hard to direct and motivate the team.

Most founders who come from larger companies have not been been doing any individual contributor roles for several years. So the reorientation is very hard on them. They find it hard to do things they did a few years ago and since in most every area the specifics have changed so dramatically over the last few years, the adjustments are hard.

The best way to do this is to keep 30% of your time each week to have a personal accomplishment.

What I have found is the the FIRST thing I do each Monday on my weekly to-do list is to identify one deliverable that I will work on to complete without anyone else’s help.

Over the last few weeks  it was working on website copy and mockups for the new design. Over the next few weeks it is cold calling multiple prospects for making some inroads for a few of our startups. The weeks of Dec 15-30 is mostly going to be spent on writing new pieces of our Borg’s UI using Twitter bootstrap (which is surprisingly easy to pickup).

So on your quest to be a leader and entrepreneur dont forget to be a doer as well.

Other

3 examples of startups that are doing well focused on one marketing technique

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Here are some examples of startups that did very well focusing on one marketing technique (and some who are still doing it). While I am not privy to why they chose the technique they did, they are all consistently improving over time.

First is Priceonomics. I am a huge fan of any company using their network data to create content that helps their prospects understand the market better. I am personally not sure why more companies dont do it. Priceonomics essentially uses data about prices for used items that it indexes on the web and shares it both on their blog and with key bloggers. The data that capture is turned into both blog posts and informative content. For example  how to avoid getting your bike stolen or the Used TV price.

Second is Admob (now acquired by Google). For the longest time the only marketing they would do was research reports on how their ad network was being used. The AdMob mobile metrics report was as highly regarded as the quarterly research report put together by investment banks on specific companies or sectors.  These research reports were initially emailed to subscribers quarterly and then they moved to hosting them on Slideshare.

Finally in the initial days of Buzzlogic (now acquired by Twelvefold Media) would put together Vino diaries (video interviews with top influential people in social media). These videos would focus on specific questions and were fairly short.

Bonus tip. How guest blogging propelled one site from 0 to 100,000 users.

Closer to home, I have heard from Krish of Chargbee mentioning that their primary marketing is helping answer questions on key online discussion forums and my own previous company BuzzGain which only focused on guest blogging for large well known marketing influencers as the only technique to gain awareness.

Learning, Marketing

The liberating power of focus on the one thing for Marketing

9 Comments

Most startup founders who are looking to launch their product or are figuring out ways to grow their usage / customer traction come with a plan that includes “a little bit of everything”. The assumption is that since they dont know which technique works best, (or in other words – gets the most customers with the least amount of effort or money) so, they tend to spread their bets among many techniques.

Typically this means, do some SEO, some Google ads, some blogging, and some outreach to the press.

I used to tell folks to make a list and focus on the top 3 techniques to market their product.

I was wrong.

You need to be awesome at one, rather than good at three.

Here’s the simple math (the irony that the math is easier than reality is not lost on me) to get to 10,000+ B2B users (not all paying) in < 12 months (which is a great metric to focus on)  for a SaaS company.

You try to double your users each month. So if you start with 5 users at the end of the first month, you will get to 10,000+ at the end of the 12th month.

If I were marketing a SaaS product and I need to get users there are multiple mechanisms I can use to generate awareness for my company / product without any out-of-pocket costs for advertising.

1. Guest blogging

2. Content marketing with blog posts / infographics

3. Engaging potential users on twitter

4. Search engine optimization

5. PR outreach with bloggers and key websites

6. You tube videos

7. Presentations on Slideshare

etc.

Now, my recommendation is to NOT do the top 3, but pick just one and be the best at it.

For most entrepreneurial teams that are comprised more of engineers, than marketing professionals, this is a very liberating process.

They no longer need to track multiple techniques and try to optimize them all. Their focus should be on experimenting within the one technique and be the best at it alone.

While focusing on the one technique you will discover more things you need to do better and be great at.

Lets take an example of guest blogging.

To the outsider, guest blogging might just be make a list of 10-20 top blogs, then write posts that are relevant about your company and that blog, find the blog writer’s email address and submit your post.

There is a more nuanced process than that.

Coming up with unique and interesting posts is hard. Very hard. Especially hard if you are trying to learn SEO at the same time, or experimenting on Google adwords at the same time.

So, free your mind.

Focus on the one thing that you believe will add value to your potential customers.

I know its hard to know which is the “one thing”.

Truth is being awesome at any one of these things is very hard and I have seen enough examples of companies meeting their customer acquisition goals picking ANY ONE of these techniques, without trying to experiment on several.

So go ahead and focus on the ONE thing.

Other

The best Silicon valley startup events you should evaluate in 2013

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Here is the list of the best startup & launch events that I’d like to attend in 2013. Practically I may attend only YC and 500 demo days , but if you are looking to build your 2013 list of silicon valley startup events  to attend, here’s a good place to start.

The format of this post is hard to get right on the blog, so here’s a handy Google doc of the 2013 Silicon Valley startup event list.

 

# Conference URL Dates Location
1 Crunchies http://techcrunch.com/events/crunchies-2012/ Jan 2013 San Francisco
2 CES http://www.cesweb.org/ Jan 8-11 Las Vegas
3 MacWorld http://www.macworldiworld.com/# Feb 1-3 San Francisco
4 Mobile W Cong http://www.mobileworldcongress.com/ Feb 25-28 Barcelona
5 Launch http://conference.launch.co/ Mar 4-6 San Francisco
6 CeBIT http://www.cebit.de/home Mar 5-9 Hannover
7 SXSW I http://sxsw.com/interactive Mar 8-12 Austin
8 YC Sum Demo http://ycombinator.com/dday.html Mar 25 Mountain View
9 Demo Apr https://www.eiseverywhere.com/ehome/50633 Apr 17-19 San Francisco
10 TC Disrupt http://techcrunch.com/events/disrupt-ny-hackathon-2012/ May New York
11 Startup Conf http://thestartupconference.com/silicon-valley/silicon-valley-2012/ May Mountain View
12 All things D http://allthingsd.com/conferences/d/d11/about/ May 28-30 Los Angeles
13 Google IO https://developers.google.com/events/io/ Jun 26-28 Mountain View
14 Giga Om Structure http://event.gigaom.com/structure/ Jun 19-20 San Francisco
15 YC Fall demo http://ycombinator.com/dday.html Aug 21 Mountain View
16 TC Disrupt http://techcrunch.com/events/disrupt-sf-2012/ Sep 8-12 San Francisco
17 Demo Oct http://www.demo.com/ehome/34444/DEMOFall2012/overview Oct 1-3 San Jose
18 Failcon http://thefailcon.com/ Oct 22 San Francisco
19 AWS reinvent https://reinvent.awsevents.com/ Nov 27-29 Las Vegas
20 LeWeb http://www.leweb.co/ Dec 4-6 Paris
21 Pando Monthly http://pandodaily.com/events/ 2 week mon San Francisco
Marketing

The best marketing conferences that I’d like to attend in 2013 (Marketing conference list)

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Here is the list of the best digital marketing conferences that I’d like to attend in 2013. Practically I may attend 1 or 2 at the most as a speaker, but if you are looking to build your 2013 list of marketing conferences to attend, here’s a good place to start.

The format of this post is hard to get right on the blog, so here’s a handy Google doc of the 2013 Marketing Conference list.

There’s also a neat infographic from Marketo that is worth the eye-candy showing a smaller list by map of the United States.

# Conference URL Dates Location
1 Blogworld & NMX http://nmxlive.com/2013-lv/ Jan 6-8 :as Vegas
2 Ad Tech http://www.ad-tech.com/newdelhi/adtech_new_delhi.aspx Feb 2013 New Delhi
3 Email Summit http://blog.marketo.com/blog/2011/07/infographic-must-attend-marketing-events-a-guide-to-marketing-conferences-in-the-us.html Feb 19-22 Las Vegas
4 Mobile Marketing http://www.mmaglobal.com/events/forums/sanfrancisco2013/overview Jan 29-30 San Francisco
5 Adobe Digital Marketing Summit http://summit.adobe.com/digital-marketing-summit.html Mar 4-8 2013 Salt Lake City
6 SMX West http://searchmarketingexpo.com/west/ Mar 11-13 San Jose
7 Blogwell http://www.socialmedia.org/blogwell/ April 17 New York
8 Sirius Decisions http://www.siriusdecisions.com/live/home/document.php?dA=ConfAnnSummit2013 May 8-10 San Diego
9 Mirren Live (Agencies) http://newbusinessconference.com/home/ May 2013 New York
10 BMA http://www.marketing.org/i4a/pages/index.cfm?pageid=5681#.UJ6o-ofqkaw May 29-31 Chicago
11 Inbound Marketing http://www.inboundconference.com/ Aug 19-22 Boston
12 http://www.ad-tech.com/bangalore/adtech_bangalore.aspx# Sep 2013 Bangalore
13 SES http://sesconference.com/sanfrancisco/ Sep 10-13 San Francisco
14 Content Marketing World http://contentmarketingworld.com/ Sep 9-12 2013 Cleveland
15 Mobile Marketing http://www.mmaglobal.com/events/forums/india2012/overview Sep 2013 Delhi
16 SMX East http://searchmarketingexpo.com/east/ Oct 1-3 New York
17 Pubcon http://www.pubcon.com/ Oct 2013 Las Vegas
18 DMA 2013 http://www.dma13.org/ Oct 12-17 Chicago
19 Future M http://futurem.org/about.aspx Oct 2013 Boston
20 Marketing Profs http://events.marketingprofs.com/b2bsite/speakers-321CF-18808U.html Oct 2013 Boston
21 Distilled SEO http://www.distilled.net/events/searchlove-boston/ Nov 2013 Boston
22 Ad Tech http://www.ad-tech.com/ Nov 2013 Delhi
23 WOMMA http://womma.org/summit/agenda/ Nov 24-26 Las Vegas
24 SES http://sesconference.com/delhi/ Dec 2012 New Delhi
Community, India, Learning

What makes a great conference? Thoughts on NASSCOM product conclave

4 Comments

Fresh from the recently concluded NASSCOM product conclave, I was giving some thought to what makes a great conference. Having been at many over the years both at the US and India, there’s just one word that differentiates the approach and type of conference.

Production.

American conferences are produced.

Indian conferences (and events) are curated.

What is production?

The ability to define a delegate, speaker and sponsor experience that seeks to maximize the benefit to them all by defining a purpose of how they should feel post the event.

What is curation?

Putting together good content with great speakers, having enough attendees that are interested in the topic with sponsors that are willing to pay for their logo to be attached to the event.

NPC 2012 was a good event by most measures. Top notch ratings for over 50% of the session (80%+ Net promoter score), great camaraderie and networking and finally a packed set of sessions that were curated by a dedicated set of volunteers.

We need more produced events.

1. Production means getting speakers to have rehearsals before the event. If Steve Jobs can rehearse a presentation, everyone else can. No exceptions.

No rehearsals means people that take 45 minutes when they were allotted 15, non-engaging & dry content.

2. Production means understanding & setting aside enough time for both ad hoc and managed networking and fostering a “we’re all in this together” feeling.

No networking focus means many people trying to get some time with key speakers after and before the event, only to find that they (speakers) had allocated only 2 hours to be at the event.

3. Production means ensuring sponsors are actively adding value by looking to build content and engaging demos which benefits the attendees.

No engaging experiences means a 2 minute ad at the beginning of the event that 90% of people forget after day 1 of the session.

I think we need production quality experience so people feel wowed, get energized, learn lots, network to grow their business. Here’s looking forward to more produced events in India.

Angel investing, Entrepreneurship, Mentors, Venture Capital

Commitment delivery percentage – an indicator of future success of startups?

5 Comments

Here’s an interesting new term for entrepreneurs to be aware of – Commitment delivery percentage. I dont know for sure but I think in a year from now, most startups will start to follow this metric more seriously than others. Some investors are already claiming this metric to be the #1 indicator of future success of startups.

At the Microsoft Accelerator in Bangalore, there are 11 companies in our current batch (Sep to Dec). Every week I send our reports to all our mentors with the weekly commitments that startups have signed up for and how many of them have met their commitments.

Since startup discipline is something I am very passionate about, it goes without saying that I track everything at the accelerator.

Commitments fall into 2 buckets – product and customer. Overall we focus on 3 areas in the accelerator – Product development, Customer development and Revenue development, but initially revenue development is largely ignored since most folks are building MVP and getting early adopters.

Each of these 2 buckets of commitments is not something the startup comes up with alone in a vacuum.  I typically discuss the commitments at our weekly all hands and it is a fairly public affair. While some teams try to lower the bar for their commitments, most are aggressive with what they commit to.

Product commitments are delivery of new set of features, versions or changes per a customer / early adopters requirement. Since many companies have mobile or web applications, most startups at the accelerator become customers of other startups so the feedback loop is quick and immediate.

Customer commitments are a combination of # downloads (if mobile app), or active users, engaged users or user feedback. Since I fundamentally believe that nothing’s possible without customer’s (who have a problem) at a startup, most companies have customer commitments from the first week. During the early days it was mostly meeting customers to get feedback and showing mockups, wireframes, etc.

The weekly report I send out to all mentors (currently over 70 folks) are to people who are committed to helping these startups and are engaged with them every week, either making introductions or reviewing progress and trying their product.

As with most reports, I can tell quickly who has read the report and who has not. On average 30 mentors (less than 50%) read the reports each week. They dont take more than 5 min to read and review.

Most of the investor mentors were reading the reports (of the 13 investor mentors, 8 were diligent and even asking questions every week to clarify certain points).

Over breakfast and a few lunch meetings I had a chance to get & give some feedback to some of our mentors. One question most people asked me was:

What % of commitments were being met and which companies were best at meeting commitments?

The answer is a surprising 70% of commitments were being met consistently and 63% of companies were consistently (with 1-2 exceptions per company max) exceeding their commitments on both product and customer traction.

Most seed-stage investors in India have a revenue requirement (not all, but most) so I was surprised they were the most aggressive in asking me questions about commitments. Seems to me, thanks to the early visibility, investors, were willing to make earlier bets, but needed some sense of the team’s performance.

What better way to judge performance than see the team making commitments weekly and delivering on them?

Investors have mentioned to me the in their experience the #1 indicator of a venture funded startups’ success is crisp execution and if they are going after a large market, then fantastic execution makes a good team great.

So how can we help more companies get on this instead of just Microsoft Accelerator companies?

We plan to release a version of our startup connection system (internally called The Borg) to all Indian companies by mid January 2013. With this solution all companies (who opt to do so) can make their commitments and report them to over 250 seed and early stage investors, mentors and advisers. And yes, its free to all startups.

The next experiment is to see in June of 2013 if the improved visibility into a startup’s execution increases the chances of funding for entrepreneurs. We are currently tracking that as well, and will be able to report in an automated fashion.

The personal blog of Mukund Mohan