From Ground Zero to Rocketship
Growing an idea into a successful startup is a bit like hunting for the Holy Grail. Before you can build towards success, you need to fill your Round Table with supporters you trust. With an average tenure of seven years, your relationship with your investors is an essential part of your company’s success. But how do you convince investors or corporate partners to take that first leap of faith?
On October 1st, experienced venture capitalists and corporate executives came together for the Rocketship Summit, a day-long virtual webinar series led by Aakriti Srikanth and sponsored by Google, SVB, and Salesforce. Keynote speakers discussed the relationship between industries, tech vendors, and venture capitalists, and how to guide your product on the quest from ground zero to rocketship success.
Morning Panels
The morning kicked off with a seminar from Yael Karov, Engineering Director at Google AI. Yael discussed how foundational elements of Conversational AI can be broken further into four product categories depending on four elements, including:
- Who is speaking (bot or human)
- What’s the goal (to complete a task, for education, or fun),
- What topics do they discuss (specific topics with deep knowledge or unlimited topics with general knowledge)
- How they talk (speech-to-text, text-to-text, speech to speech, or with UX)
While popular AI products such as Google Assistant, Alexa, Cortana, and Siri are human-to-bot products, another type of conversational AI centers around bot-to-human products which makes calls and sets appointments for you with a human voice (such as Google Duplex).
There are also plenty of human-to-human products that use AI to augment your existing conversations by offering text predictions or automatic translation. Karov also discussed two types of Conversational AI products that share a goal of having a conversation, but differ in whether they focus on specific conversations with rich knowledge or open-ended conversations with general knowledge.
The next panel discussed the process of building complex products from the ground up, and what corporate companies look for when they evaluate startups for potential acquisitions. Sarah Clatterbuck (Engineering Director at YouTube) and Tasneem Minadakis (Director of Engineering at Google) highlighted the importance of gathering quantifiable market research with an MVP to determine if your product has value in the market.
“What’s the simplest complete product that I can deliver to the market? This can be measured in terms of critical user journeys or complete user flow,” said Sarah Clatterbuck.
‘Sometimes, this testing can be done in creative ways that may not mean building a product around it,” said Minadakis. For example, back when Minadakis worked at Uber, their first iteration of UberPass was a message popup that prompted users to call a phone number that would lead to a human agent who would sell the pass over the phone. They discovered that the amount of interest in the past was so high that they couldn’t keep up with the call volume, which encouraged them to build a product offering around it.
Scenario-focused engineering is defining the scenarios of critical user journeys and building the product around those scenarios. “It’s easy to boil the ocean and target all the customers segments at once,” said Tasneem Minadakis, “really think about the customer segment you want to target and set clear metrics for the business and the customer. It’s important to learn from the market.”
In her role as Technical Mergers & Acquisitions at Salesforce, Idit Vachtel examines many other companies to determine the quality of their products and whether they’d be a good match with Salesforce’s business objectives, such as growing technical innovation, increasing market share, or enabling financial profit. Generally, Salesforce focused on companies that can help them innovate, either by allowing them to enter into a new market or by adding new capabilities to their existing functionality that they wouldn’t otherwise have been able to develop in-house.
Salesforce looks at five key factors when identifying whether a company is a good fit:
- People: What are their roles? Skills? Gaps in knowledge?
- Architecture & Infrastructure: Can it scale? How do they make decisions?
- Process & Tools: What are the resources/costs? What’s the path to release? Does it fit with ours?
- Product Operations: What’s the product? How is it licensed & priced?
- Roadmap: How do you see your product evolving in the future?
Bill Wright (Red Hat) continued this conversation as the moderator for the third panel, which featured experienced investors Ken Elefant (Sorenson Ventures), Alex Salazar (Khosla Ventures), Dan Nguyen-Huu (Decibel Ventures), and Abhi Tiwari (Owl Capital) as well as Mohit Garg, the CEO of Oloid AI.
“It starts with an anchor problem statement, either from domain expertise or the founder’s personal journey. This statement is not universal, but it’s a pocket of desperate customers for whom the problem exists,” says Mohit Garg. Once you’ve identified the problem, you need to create a thesis on why this company could be a long-term solution based on the founder’s experiences.
Investors are trying to give founders the resources and the insight to position them to achieve success over time. “It’s difficult to think about an exit when you’re investing in an early-stage startup,” said Elefant. Venture capital’s goal is to unlock the potential of the team and help them stay focused.
There’s a lot of value in putting concepts in front of a diverse set of potential customers to see if there’s interest in the market. Salazar discussed how they especially prefer to invest in startups that have already done this legwork themselves and have identified interest in the market. Another important consideration is whether there’s urgency in the market, says Nguyen-Huu, “it’s not about ‘if’ you run into adversity, it’s ‘when’ you run into adversity. When you found a company, adversity is going to be a traveling companion for a while.”
During the lunch hour, Forbes Contributor Annie Brown led a group of venture capital investors, corporate executives, and startup founders to discuss the importance of building a culture where you’re allowed to show your authentic self. Rashida Hodge, Christine Heckart, and Justin Norman talked about companies should reevaluate their focus on consensus to create a stronger sense of belonging and enable constructive conflict with a diverse range of voices. You can read more about that panel here:
Afternoon Panels
After lunch, Asheem Chandna (Greylock Partners) discussed some of the conditions that have led to successful startups. Many of today’s most successful enterprise companies were actually spun off from existing companies when the founders decided to leave to pursue their own projects while leveraging their expertise. In general, intellect, self-awareness, and persistence are key. Failure shouldn’t be the end of the road. Once you’ve proven yourself, investors may be willing to see past your first failure and encourage you to pursue a new project.
“Ideas and trends are cheap, but the ability to execute and navigate in a quality way is the difference between success and failure,” said Chandna.
Most venture-backed companies don’t find true product-market fit and will fail when it comes to go-to-market consistency. A lot of this consistency hinges on getting the right people in the right places at your organization to ensure your path to success. You need to understand how to scale your operation fast, and once you’ve started down the path to scale, you need to continue to make hard decisions to create stage-appropriate teams.
Next, Kate Bullis led a discussion with chief marketing officers Michelle Draper (SVB), Carol Carpenter (Salesforce), Joyce Kim (Genesys), and Karen Page (Intel) around how founders can navigate through the hurdles of positioning their products to transform the market on the journey from idea to product-market fit, and from product-market fit on the path of growth towards IPO.
Michelle Draper shared her insight around the intense pressure to find product-market fit as early as possible. “There are two points in a startup’s life. One is when you have your idea and your dream, and the second is when you have product-market fit. Everything in-between is death valley,” she said. The way you position your product can even have a direct impact on the type of talent you attract as you begin to grow your company. As companies have learned in 2020, there will often be unexpected hurdles in your path, and the key is being adaptable enough to evolve as the market shifts.
The next moment in a startup’s life is “reaching escape velocity,” or the moment in time where a startup goes from growing to scaling organically. “If you’re just looking for someone to run up the stairs, I’m not your person. If you’re looking for someone to build high-speed elevators to get to the 100th floor faster, I’m your person,” said Carol Carpenter. Early on, startup growth is fueled through passion and grit, but to scale a startup, you need to create a consistent, predictable process to ensure repeated success over time. This process will continue to require product-market fit as the core of your business but requires your team to get even closer to the customer’s needs and find a solution that fills the gaps in the market and enables category creation.
The next moment in a company’s growth comes from acquisition and mergers. A lot of this inorganic growth comes with a change in team dynamics, and there’s often a lot of risks involved with integrating your startup within a larger corporate structure. “It’s a degree of transformation, whether it’s a small pond or your entire ecosystem. How do you maximize that? You have to do it culturally. You can’t fake the heart of your marketing,” said Joyce Kim.
The final moment in a company’s journey is the initial public offering. Karen Walker sits on the Board of Directors for SproutSocial, a Chicago-based social media management platform that recently filed for IPO. As a software-as-a-service company, 80% of SproutSocial’s customer acquisition comes from marketing, so it was important to keep the team focused while preparing for an IPO.
As a close-knit, transparent company, it was important to understand the need for confidentiality around the company’s filing and the importance of external and internal storytelling leading into your public offering. Most marketing teams aren’t accustomed to speaking to the investment community, so they need to align their messaging to be consistent with what they tell their customers and employees.
After the CMO discussion, founder Jacob Cole gave a brief presentation on Ideaflow, a StartX company that improves personal productivity through augmented intelligence.
Following Cole’s presentation, Christine Heckart (Founder of Scalyr, former NetApp) led a panel of security tech executives featuring Anthony Lye (NetApp), Jean English (CMO of Palo Alto Networks), Vasu Jakkal (CVP, CMO at Microsoft Security), and Shruthi Rao (Vendia Founder, formerly AWS). The panel echoed many of the day’s earlier discussions around the importance of understanding the customer’s problems and defining your ability to provide value for them.
Category creation can be like creating a new music genre. It can be a big risk, so sometimes it’s best to join an existing market and find a way to differentiate yourself from competitors instead. New categories will often get created when it’s difficult to label you as anything else. “There are two types of category creation,” says Christine Heckart. “Capital C is when you create a category that’s different from everyone else and you get acknowledged for breaking new ground. The other kind is when you don’t neatly fit into any existing category and you want people to better understand what you do.”
“With category creation, there’s always hope,” said Vasu Jakkal, “Through category creation, we can reimagine what we want the world to be. Category creation is redefining markets in new ways that fundamentally drive new value to customers and communities.” When you’re in a category by yourself, it gets exciting when others start to join, as that shows that you’ve identified a large need in the market. From there, you must continue to differentiate or risk losing to competitors in the market.
“There isn’t any free money lying around,” said Anthony Lye, “it’s important to understand the unlike statement: who loses when you win? It’s important to take something people have an understanding of, and do it better for them.” There are a lot of external disruptions that can often result in the need for a new category, including new standards, new legal regulations, new forms of distribution, and new inventions. Category creation happens when you can capitalize on these moments and solve problems for the customers who are most affected by the change.
“When you’re starting a new category, there’s an intense feeling of being uncomfortable for a long time, being misunderstood,” said Shruthi Rao, “what are they using today, and how can they switch over in the most pain-free way? We can’t be way ahead of the market, we can’t chase the market. We have to meet them where they are, and guide our customers to get there.”
The next panel featured a group of venture capitalists who discussed how they perform due diligence and evaluate which companies to invest. While there may be few investments in a smaller share of companies, much of the tech industry has been unaffected by this year’s pandemic, according to David Weiden, Managing Director at Khosla Ventures. If anything, things are faster, according to Quentin Clark, Managing Director at General Catalyst. Before COVID, capital investment would typically involve a drawn-out courting phase, but this process has been streamlined so much that it can happen in mere days, as meetings that would once require weeks of coordinating can happen over phone or video chat.
“I find that being on the phone helps with focus because your brain is used to paying attention to what’s being said, but our brains aren’t trained to evaluate people’s body language through a computer window,” said Quentin Clark, “it’s a challenge, but it’s possible to build those relationships with people.”
Part of this process involves evaluating whether founders have the grit to see their ideas through to the end. Building connections with people you don’t know is hard, and there are always going to be situations where you can’t get a good read on a person, or you misread them, but there’s no substitute for spending the time to get to know them. “it’s important that founders are stubborn enough to succeed, but not so stubborn that they can’t take in relevant feedback,” said Ben Ling, founder of Bling Capital, “that’s how all companies grow; when you’re able to learn new things together.”
Keynote Panel
Forbes VC Senior Editor Alex Konrad moderated the day’s final panel, with 500 Startups CEO Christine Tsai, Salesforce Ventures Managing Director Matt Garratt, Decibel Ventures founder Jon Sakoda, and Anne Dwane discussing how they’ve been communicating with founders during the pandemic. Christine Tsai believes that some fantastic companies will come out of this year, and venture investors need to get comfortable with the new constraints or they’re going to miss out on some great investments.
“Adaption is a good trait for early-stage founders. It’s fun to see people gravitating to the current context and making the most of it. Selling in 2D versus 3D is very different,” said Anne Dwane, “we’re getting to know founders through a mix of video and a series of back and forth, whether it’s text or email, to get a richness of signal.”
“The world is full of weapons of mass communication,” said Jon Sakoda, “we have automated communication and collaboration and networking. You may be accused of liking an article you haven’t read. But we also have to go back to how we create authenticity and break unconscious bias.”
“There’s a lot more pressure to show people who you are,” said Jon Sakoda, “social media is playing a much more important role now. In the software world, there’s a lot more focus on the products speaking for themselves, and the customers speaking for the product.”
Being able to do real-time research during a video meeting can also help investors feel more equipped, and evaluating strategy can often happen while sharing a Google Doc or directly into one of the startup’s analytics tools. This makes the discussion feel more authentic and cuts through directly to the sources of truth that can allow the investor to understand the products better.
“There are plenty of amazing founders that build great products that you wouldn’t put in front of a sales pitch,” said Christine Tsai, “those presentations cater to certain personalities. If we’re trying to invest in great companies whether you have that personality or not, this environment helps level things out.”
Alex closed out the panel by asking each of the investors for a piece of advice to share with founders:
“Manage with empathy,” said Matt Garratt, “some of these companies have had layoffs. Everyone’s going through a lot right now, with kids at home, lots of stress. It’s sharing best practices and helping them through that.”
“Pressure creates diamonds,” said Anne Dwane, “don’t wish it were easier, make yourself stronger by asking for help. Adversity reveals character, it’s an opportunity.”
“Companies need to make the most of what the world is going through,” said Jon Sakoda, “there’s never been a better time to be a digitally driven entrepreneur building software. Make the most of the moment.”
Christine closed things out with Bruce’s Lee’s famous idea, “Be like water. Be formless, be adaptable to change. Don’t get trapped in a certain mindset. The better you’re able to adapt, the better off you’ll be. If you’re able to get through COVID and throw your 2020 plans out the window, then you need to keep going. Adversity is part of being a founder, and it’s not like those problems will ever go away. The more that you can be water and be formless and adapt, the better off you’ll be.”
