In the pitches we see, founders tend to sum up the main strength of their business in a single, heavily gesticulated sentence: ‘the product is just awesome’
Product is central to the success of any business, and design is in the midst of an important resurgence. All the start-ups we meet are focused on delivering the ‘magical’ experience of a new technology, and top graphic designers and UX experts now demand salaries equivalent to lead developers, something that would have been impossible a few years ago.
A major challenge with this focus on product as the alpha and omega of your business, is that it can leave the sales function completely over looked. While product design is seen as all important, and marketing (often re-branded as growth hacking) is now sexy, sales is associated with call centers and David Brent. When we ask about sales and distribution in pitches, we often get the Kevin Costner defense from Field of Dreams - ‘build it and they will come’.
Product alone has never been enough to build a great business. One of my favourite quotes from the excellent biography of Steve Jobs is from 2007: ‘Our belief is that if we keep putting great products in front of customers, they would continue to open their wallets’. Here great product is clearly the central issue – but getting in front of customers is just as important and a strong sales strategy is the best route to that. Apple has great products, but it also has a huge global network of retail outlets, direct sales teams and sales partnerships to help them to get these products in front of customers. Their sales teams may wear t-shirts, but they are subject to the same customer funnels and sales targets as other companies.
And sales teams aren’t limited to hardware. Successful consumer and B2B tech companies from Google to Twitter have sales teams in almost every major economy. Just last month Facebook hired David Lawenda from the old-media conglomerate Univision to lead their US sales team.
A strong focus on both product and distribution is what we look for in the teams we invest in. So when you start to consider raising capital and building a business, we think it’s important to consider the following:
Make sales part of your DNA: While we don’t expect founders to be cold-calling all day, if you haven’t had the experience of selling your product it can be hard to inspire the people around you to do it better. Actually selling product is also a great way of understanding your customers and it’s often the teams which have the closest connections between their development and sales teams that produce the best products.
There are lots of routes to market: For some consumer products, a lot of the distribution can be done on the back of the sales people at Apple and Google who have built global app stores for you, although access comes at a significant price. However such start-ups are in the minority (despite the disproportionate air-time they may receive) and for a majority of start-ups the initial route to market is not immediately evident. We look for businesses that have tested various routes – whether direct or indirect sales, paid for advertisement, SEO or simply attending conferences and selling on the floor. While we don’t expect every early stage company to know which route works best for them, we do expect them to have trialled and tested multiple routes and have a strong hypothesis before expecting to raise significant capital.
Be wary of resellers: The response of many start-ups to the sales problem is to look for established resellers to ship product. We are wary of this approach at the early stages of a business. Using resellers puts you further away from your customers and means you lose direct control over the brand and culture of the people representing your business. And remember, resellers have multiple products on their books, so unless your product flies off the shelf, or is at a price point which seriously contributes towards their bonus, it may be pushed to the back of the pitch.
Show your working: As Series-A investors, we don’t expect every company to approach us with a fully proven sales strategy. However we do expect people to have tried and learned from their mistakes, so don’t be afraid to explain your efforts to date and what you’ve subsequently tried differently. We like people who fail fast ( as long as they learn from it ).
So remember when it comes to your next pitch that you’re not Kevin Costner from Field of Dreams. Instead we look for teams which can tackle the difficult challenge of selling product, and like Kevin Costner in the Bodyguard, learn to love it.