How do I get the biggest bang for my new investment buck?
You’ve just raised your first investment round from your favourite VC fund. You have a disruptive technology set to take the market by storm. The question arises: how do I use my funding to most effectively win customers, create references, build profile, drive traction and earn revenue?
Having worked with more than fifty early stage technology businesses over the past decade, there are some clear lessons learnt which I hope to address in a series of articles. This first one centres on the benefits of focus.
Focus makes all the difference
Once you’ve raised your funding the temptation is often to spread the net far and wide — see what sticks and let that inform your go-to-market strategy. There are however a number of potential pitfalls with this as a starting strategy: wasted time, money and resources spent trying to win accounts that don’t fit your solutions at this stage.
Far better to step back and take the time to reach some understanding. Do you fully understand the true profile of your market or enterprise? Where can you deliver overwhelming business impact today? Before you act, are you confident you can outpace your competition or anything the customer could build themselves? Does your business have the unique ability to address an acute business pain with your current capability? If you think of your total potential market as a pyramid, you should be looking to identify the companies at the very top, that have the best fit for your solution, today. There is no point trying to sell to a company if the functionality required to address their pain is a roadmap item twelve months from deliverability!
What’s the PPP?
What are the seven to ten characteristics that define your Perfect Prospect Profile (PPP)? Ideally your PPP helps you define not just a target vertical market or geography but gives you a tool to search and identify a specific sub-set of companies that fit the profile. You can then decide with a reasonable level of certainty, whether to engage these companies. You’ll know if they have a pain point you can successfully address and this then becomes your initial target market.
Having identified these characteristics they can then become the qualification criteria to help define and inform critical decisions in your go-to-market strategy. Now you know the number, location and size of your initial target accounts you can make informed decisions on how best to approach, engage and qualify these organisations:
1. Develop a compelling value proposition.
From your PPP exercise you now have a well defined and manageable number of target accounts to focus on. They are likely to be similar and share a number of common characteristics. This makes it easier to define your value proposition. What is the compelling business impact your company can effect in these target accounts. What is the acute business pain you are addressing? What could life look like with your solution implemented? Think about developing an ‘elevator pitch’ so you can succinctly summarise your offering to your target audience.
2. Is a direct or indirect sales model most appropriate?
Now you have defined who you want to focus your sales effort on, you need to decide the best way to connect with them. Can you realistically engage your targets directly or do you need the help of a partner with pre-existing relationships? For example if your initial target market is Government security, access via trusted existing suppliers is likely to save a lot of time. A direct sales model lends itself to a high value, solution-oriented sales process, typically managing multiple stakeholders over a reasonably lengthy sales process. It means you have direct control over the sales process (particularly important if you are trying to communicate the benefits of a new disruptive approach or technology), but this can be costly in terms of having to hire and operate a direct sales team. A channel or partner strategy is beneficial in that you have larger organisations selling on your behalf increasing your coverage in a cost effective manner. Don’t expect a channel to create a market for you though. The channel can be good for fulfilling demand but not always for creating it.
3. Which specific person or role should I target within my PPP to focus my sales and marketing resources?
Think about the pain point you are hoping to address. Who are the Senior Executives in your target organisation that own that pain and are empowered to act? What are the roles (between one and three) that you would want to target as your initial penetration point? If your PPP process is really rigorous and you have been able to identify specific companies to target, then completing a database of the specific individuals in a target organisation to focus your sales and marketing effort should be achievable and immensely valuable.
4. What is the right profile and experience of sales resource for most effectively selling to these targets?
This is critical and will be a topic of a subsequent blog. Suffice to say that getting this wrong can be extremely costly in terms of time, money and opportunity cost. Hire the wrong person and it will likely take three months to discover the error and a further six months to rectify, find a replacement and get them up to speed. Think about your target accounts and your solution: its complexity and the likely profile of the sales cycle. What are the implications for the profile of salesperson and what are the likely experience and capabilities you will want to search for? For example, if your target is telcos or banks it is advantageous to have some domain knowledge and an established network of trusted contacts.
5. Where should I base my resources?
By understanding the profile of your PPP target accounts and where they’re headquartered will quickly give you a guide as to where you need to base your sales resource. For example, if your initial target market is Financial Service companies you want sales people based in London not Birmingham. I am a big believer in the advantages of having a critical mass of sales resource co-located in an early stage business to cross-fertilise best practice and learn what works and what doesn’t.
The key lesson here is focus: that it is far easier to build and execute a plan that gravitates around a tighter, more impactful addressable market for your early sales and marketing activity. Success here leads to early references that add to your credibility and reduce the perceived risk of buying from a small company — both key sales blockers for an early stage business. Early, solid success also creates a strong foundation to then begin to scale out your sales focus and coverage.
Ian has over thirty years sales, operations, general management and board level experience in the Technology industry spanning Saas, direct enterprise, channel and consumer business models and is a Venture Partner with Octopus. For the past fourteen years Ian has operated as Chairman, Independent Non-Executive Director, Advisor and investor, working alongside European and US based Venture Capital firms to over 50 different early stage technology businesses both in Europe and North America.
Ian can be contacted at email@example.com.