IIDF Expert on 4 Typical Startup Problems
I took this excerpt about typical startup problems that are solved in accelerators from interview with Eugene Kalinin — startup mentor and tracker at IIDF accelerator. Eugene is also founder of Startup Magic consulting company. You can read full interview here (in Russian).
Translation by Valentin Dombrovsky — head of market relations at Excursiopedia.
What typical problems do startups have?
The most typical problem, which we see among the startups that enter IIDF Accelerator, is obsession with product building instead of sales. I have a story to tell about it. Once a team, which was working on video analytics solution for retailers, joined accelerator. They had technology that allowed to analyze video from security cameras and to see how many people pass in front of them. However, they didn’t have product that could be installed in the shop for managers to use it themselves. Founder said: “We will be working on the product for one more year. Meanwhile we want to understand how we can make sales to sell it effectively when it’s ready”. I stop her: “Just go to the nearest supermarket and sell your solution”. She resisted a bit, but then decided to go. And she made a sale.
As the company didn’t have product yet, she sold 2 sheets of paper with a report which was composed by a startup team using Microsoft Word.
She has recorded video on USB drive, sent it to the team, they’ve made some calculations and sent her the report. She printed the report and sold this to pieces of paper. And she got money for that. That’s how team understood that the product that they’re making is really needed and understood how to sell it. Therefore, the founder was able to make sales on a few hundred thousand of rubles (several thousands of dollars) in a month before the product was ready to scale. And after that she understood what part needs to be automatized and to whom it’s better to sell the product. But first she understood and launched the process.
I work with teams in different countries and there are the same problems everywhere. I have a team in Tel Aviv that makes a service for mobile developers. I’ve started working with them basically in the same state — they were working on the product instead of talking to clients. I “pushed” them towards sales for a long time. And not so long ago they’ve got into Junction — big accelerator in Tel Aviv. They’ve talked to mentors and investors there and then called and told me: “Yeah, now we understand what you were talking about and what you were making us to do”.
Too often teams stop sales when they can’t do something right. It’s very hard to launch sales fly-wheel — and if you stop it, it’s not easier to make a relaunch. And what’s most important — you can only optimize the process that is going already. For example, one team started making sales and saw a problem in leads processing. They’ve stopped PPC campaign and started to remake the process. After that, when it seemed that they’ve made everything right, they’ve launched the campaign again. But the situation has changed already and the advertising didn’t work. So, they spend another week to launch the campaign. During that period the leads processing becomes broken again. Finally, they’re losing several weeks to relaunch the fly-wheel, to let it work for a while and to find next bottleneck.
And there’s another team. They’ve also launched PPC campaign. And on the first day everything was bad — nothing worked, they’ve lost about five thousand rubles (about 100 dollars). But they didn’t stop. They got loss on the second day, but it was already smaller. And they worked with zero margin on the 3rd day. By the end of the week they got profits that covered the loss of the first days.
So, if you don’t stop the sales fly-wheel you can optimize it pretty fast and got profits in the end.
The 3rd typical problem is premature automatization. Teams start their attempts to sell in scalable channels to early, start to buy traffic for landing pages instead of talking to client and making several sales manually. The more you sell manually, higher are the chances that your process will work after automatization and you’ll grow sales. If you’re starting to make landing pages to early, most likely they will have low conversion rate and you won’t be able to scale using them. Usually it turns out that company can’t be profitable if it attempts to scale such channels. And the problem is not with landing page itself — the problem is that it was made to early: without understanding main clients’ pain points you can’t make landing page with good conversion rate. Landing pages that are made after talking to clients and making personal sales work better. First, you need to fine tune the machine in manual regime and only then you can automatize it.
One more typical startup problem: they don’t understand their client segments. This is due to unfinished customer development when company doesn’t understood client’s problems and motivations.
Too often the 1st description of customer segments sounds like “women aged at 25–35 having income above average living in Moscow”. Or if we speak about b2b, then it’s “small companies, medium companies, big companies working in such industry”. But these are not segments!
Segments differ not by socio-demographical characteristics or by companies’ size, but by types of problems that clients have.
One of the companies that were making lead generation in certain sphere came to accelerator with such understanding of customer segments that I’ve described before. We asked a simple question: why do you have no sales? And noticed that all the companies that have become their customers are the companies that have call center. Those who didn’t want to buy didn’t have call center. So, we found one of the main differentiators for customer segments. For companies, which don’t have call centers, it’s harder to accept and to process leads — it’s another segment. So, they’ve made segmentation, fine-tuned the product and value proposition for those who don’t have call center and didn’t have problems of selling to them 2 weeks later. But they still sell to those who have call centers — they’ve focused on this segment because it brings more profit at this moment.
This is excerpt from interview with Eugene Kalinin — startup mentor and tracker at IIDF accelerator. You can read full interview here (in Russian).
Translation by Valentin Dombrovsky — head of market relations at Excursiopedia.
