Teaching startups the art of the sale
After building a product, the hardest test a startup faces is finding the first five to ten customers who are willing to bet on you when no one has heard of your company and when your product has yet to be battle-tested.
This is by far the hardest challenge for an early-stage enterprise software startup to overcome, and it takes focus, perseverance and sometimes, a bit of luck.
Salesforce B2B Sales Benchmark Research finds that the average time for conversion from lead to opportunity is 84 days with an average conversion rate of 13%, and out of that 13% less than 1% of total leads end up becoming actual customers.
Mind you, this is across all business-to-business companies so the sales funnel numbers are likely even worse for early-stage startups. As an early-stage founder, how are you going to find that initial product/market fit with your first token customer before you run out of cash? We surveyed the top 30 B2B startups within our network including some companies we have invested in at our current and prior funds to distill some of their secret sauce and here are the primary takeaways.
Get lots of early supporters
Founders and VCs (ourselves included) are often laser-focused on convincing initial customers to pay for the product. Those first few paying customers serve as validation that you have achieved product/market fit and are one step closer to those revenue targets for your next financing round. Thats why the words of one CEO of a successful B2B software company stuck out to me: Give away your product for free three times so youll have three great references.
Whats more important than those first dollars in the bank is having amazing advocates for your solution. Taking it one step further, this CEO suggested that you tell your first few customers to name their price and allow them to work alongside you to help shape future product iterations and roadmap.
The most successful companies make their customers feel like they are receiving custom product designed specifically for them without actually ending up becoming a custom shop or working for free. When you treat those beachhead customers as partners rather than customers, they will significantly increase their commitment to your success and help you refine your product with invaluable market feedback.
And where do you find your first few customers? Start with your personal, business and investor networks.
Grant Miller, CEO of Replicated said, For venture backed companies you have to think about your investor network as your companys surface area. Early teams of 3-6 people just cant reach that many perspective customers while building an initial product. Having a large pool of engaged investors gives you reach far beyond your size. Spend time with every investor to make sure they know what sort of customer profiles youre looking for so they can easily spot an opportunity and make the intro.
Another tried-and-true way to get invaluable feedback from customers is to form a customer advisory board (CAB). We found that most CIOs (Chief Information Officers) are super excited (almost to the point of being too eager) to join CABs for early-stage startups. Initially, this seemed counterintuitive to us: CIOs are the hardest people to get hold of when you are trying to sell them.
But what we began to understand was that most of them want their voices to be heard and take a real interest in supporting innovation. 70% of the top B2B startups we interviewed had CABs in place from the early days and were not shy to leverage them in outbound efforts. Many were also able to leverage CABs to provide real-world feedback on how the product is being used along with insight into its strengths and weaknesses.
As Eli Portnoy, founder at Sense360 puts it, Involve your first customers and listen very carefully. If you are going above and beyond for them, which you absolutely should, they will not only share high-value feedback and guide your product development, but they will feel personally invested in the success of your product. This will turn them into huge advocates that will drive further sales.
The lesson here: create a CAB, even if its an informal one, and offer it up as a carrot to your early customers. It will make your customers feel like their voice can be heard while also reducing the risk of over-engagement.
Find the right sales leader with the least number of tries
If you are like most startups, you are not going to find the right sales leader, be it your VP of Sales or an individual contributor on your first three tries. This is very painful as each restart leaves you having to rebuild the pipeline and relationships with customers that are further down the funnel. A common theme among the most successful startups we talked to was that they found a great sales leader much faster than average.
Tal Riesenfeld, VP of Sales at Sunbit insists that the hiring of the sales leader cannot be delegated to recruiters or external people the recruitment process must be structured and led by the CEO or founders. Down the line, the head of sales will be tasked with bringing in an amazing group of sellers that Tal likes to call purple unicorns.
These are leaders who are charismatic, smart, strategic, analytical, and persistent go-getters who can penetrate any account and build long lasting relationships with clients, all while representing a revolutionary product. And like most good things, they dont come easily, so you need to make sure you have the right leader to hunt them down.
The key to doing that, they say, was applying a rigorous vetting process when hiring. Dont rely on your gut instinct and/or an ad hoc hiring process alone. We added talent assessment surveys to our screening process to lower the risk of a bad hire suggests Hill. Specifically, its critical to do multiple performance and fit-based reference calls for each candidate and asked these three questions to unearth a great sales leader:
- Can you put me in touch with your three biggest customers?
You want to spend time understanding their big wins as a sales leader in the past and how they contributed to those deals. If possible, get on the phone with three of their biggest wins / customers and understand what the process was like, how the sales leader won the deal and what, if anything, they would have changed about the sales process.
- How much time do your leads typically spend in the pipeline?
One of the biggest traps less experienced sales teams find themselves in is spending too much time with poorly qualified leads. A quick no is the second best answer you can possibly get and you want salespeople who exhibit a history of higher conversion rates from lead to close with fewer active leads that are stuck in no mans land (>180+ days in the pipeline).One reason that leads spend too much time in the pipeline is because those leads arent the decision-makers themselves. One CEO we surveyed told us of this salesperson who was great in customer meetings, but could never close a single deal. A deeper look revealed that while this salesperson did a good job of convincing the product groups, he failed to get buy-in from the decision maker who controls the budget.
Great sales leaders are not afraid to ask tough questions and should be able to identify the right decision makers early on in the process. At the end of the day, if they cant get that elusive signature from the right person, they need to realize when to cut bait and move on.
- How do you collaborate with product teams during the sales process?
More and more companies are finding it challenging to critically evaluate startups and newer technologies and frankly, really do not want to be sold to. They want to come to a realization themselves that something is valuable, helps relieve a pain point and makes them look better for implementing it within their organization.Drew Woodcock, VP Sales at ChowNow (Karlin Ventures portfolio company) believes that companies should look for a sales leader who has proven they can envision and implement a buyer-centric sales process. Todays buyer expects the sales person to add value and prove they understand what challenges the buyer is facing. The right sales process combined with great customer success stories sets the foundation for a high performing and scalable sales team.
Almost all of the top B2B startups we spoke to echoed this perspective in that they found that potential customers were far more interested in meeting the product team to understanding the inner workings of the product and the applicability to their organizations rather than being sold to. We are not diminishing the importance of a sales leader to negotiate and close deals, but the new equilibrium is that product and technical knowledge trumps experience so plan to leverage your product and technical teams to support and optimize the sales process.
Sell a vision, but make sure you can deliver
You are way too late if youre only selling your product when it is 100% ready. Most founders are product-centric people and may struggle with this. But you need to wise up and come to grips with the fact that your product is not going to sell itself and youre not going to close a sale as soon as its ready to ship.
Your first conversation with a prospective customer should be to offer them advice and only after you have created some mutual respect and trust should you focus on the close. Even then, it is probably months before you get to the implementation phase, under a timeline that will undoubtedly be subject to your customers internal policies, roadmap and release schedules. Does that then mean that you can go out selling vaporware and assume that your product will be able to play catch-up? Of course not, but there is a delicate balance to be found that doesnt require overselling.
A common theme we heard was that the best B2B startups were able to deliver amazing product within the purchasing cycle. With the sale of any enterprise product, there are expectations of what the product can do and the results it will ultimately deliver (cost savings, increased revenues, etc).
Most renewal decisions are made 2-3 months before the 1-year mark and, at that point, you need to be able to deliver on the promises you made to your customers or risk not getting that renewal. The rule of thumb here is to sell with the understanding that what you are selling will be part of the core product within 6-9 months.
Use technology to help you be at the right place at the right time
The old adage of being in the right place at the right time couldnt hold more true for B2B software startups. With a society that is suffering from information overload, its critical to use newer techniques and technologies to ensure your story gets in front of the right decision maker, at the right time and at the right place. Sales automation solutions can help with that: 100% of the companies we spoke with had a sales automation solution in place, the most popular ones being Salesforce and HubSpot.
We heard loud and clear that a good mix of targeted social, email, and event marketing alongside clear messaging helps your voice be heard. Its also critical to attend 2-3 relevant conferences each year and always try to secure a speaking/panel slot (as conference admission is typically free for speakers).
Bizzabo maintains a great tech conference calendar as does Techmeme, but weve found that you often get more bang for your buck at smaller, more industry-focused events. Do your research, and dont be afraid to approach high profile execs on the showroom floor. They are typically much more receptive when you hunt them down, introduce yourself and clearly communicate how your business can help theirs.
Sales is not an easy job, nor is it ever meant to be. Once youre able to sign up your first few customers, hire a seasoned sales leader, and sell both a product and a vision across the enterprise, youre well on your way to securing that next round of fundraising. Clearly, there is no substitute for determination and grit but hopefully these lessons from these startups will make the journey slightly easier for you.