Category Archives: Management

Ability to sell, but need not be a #salesman 21 traits to look for in entrepreneurs

Most entrepreneurs need to be able to sell. To potential employees, to customers, investors, etc. In fact the most challenging part that most entrepreneurs realize is if they cant sell – their vision, the value proposition or the products – they dont get very far with their startup.

One of the things I always seek to understand is if the founder can sell themselves. While I believe, everyone has some ability to sell, not everyone needs to be a sales person. A sales person falls into multiple categories for me : A hustler, a process jock and a relationship master, a consultative leader or a product expert.

Types of Sales People
Types of Sales People

Most entrepreneurs who I work with are developers and more technical folks who are largely introverts. They dont enjoy “selling”, which they associate with sleazy, tactics to “con” people.

It does not have to be that way at all. The most important skill I am looking for is if the person can get other people excited and interested in what they are doing and get them to commit to their desired outcome.

Both of these aspects are required – which in sales they call “opening” an opportunity and “closing” the deal.

Some entrepreneurs struggle with “opening” opportunities. I can relate to and understand that. Opening requires you to cold call and in many cases talk to people you dont know. So, what most entrepreneurs do is talk to people they know (get referrals) or avoid it altogether.

Other entrepreneurs may be good at “opening” but have a big challenge at “closing” because they believe most of it is outside their control. They can make the initial pitch, but getting the investor to commit the funding and sign on the term sheet is a problem. Or getting the candidate to interview and be willing to join is easy, but getting them to sign and come on board is the hard part.

One of the first things I look for is how the entrepreneur got to me. If they are referred by a trusted source, I try to find out how my network got to know them. If they cold emailed me, I look and judge the pitch they made via email. Is it genuine, well researched and has a specific outcome or purpose.

Most entrepreneurs dont have the experience going from “opening” an opportunity” to “closing” the deal as well, so they end up spending a lot of time in the middle.

As with any target (potential investors, employees, customers, partners) they goals are different and I first look for clarity of thought. Do they know what they want from this person and the steps the need to get there.

Most entrepreneurs can tell you the goal, but dont understand that you can achieve that in one step. Understanding the layout of steps is critical – which we call the sales process.

Moving from one step – awareness to interest, then consideration, going to intent, and then evaluation and finally purchase, is what I am seeking to see if they have understood. It might take 2 meetings or even 10 or more, but if they know where the “target” is in this process, and how to get a target from one step to another, then you have someone who can sell, not just be a talker. 

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The difference between metrics-driven and data-driven startups

Data driven means that progress in an activity is compelled by data, rather than by intuition or personal experience. It is what scientists call evidence based decision making.

Metrics driven means that activities are driven towards a deadline and objectives pre-set, rather than organically.

I think of Metrics-driven as inherently proactive and Data-driven as reactive. I dont think being reactive is wrong, especially when you dont know what metrics you should be driving towards.

SaaS metrics drive for success
SaaS metrics drive for success

Here is an example. Most companies start by watching customer behavior and understanding what users are doing on their site. For example what do they do after they sign up, how long do they take to fill out their profile, etc. After watching users for a while, they understand clearly the on-boarding process for users. They can become proactive and set specific metrics – number of users, time for user to get setup and the date by which they want # of users on board.

Which is why it is never either-or. You need to be watchful at times (when you dont know enough) and other times set goals to drive towards them.

Another reason why it helps to be reactive is when you are willing to be open to go in directions that the data takes you. In many cases, in the drive to focus on goals and objectives, many companies miss obvious clues that might give them insights about their customers.

There is a good overview whitepaper by Joel from BlueNose on this for SaaS metrics.

So, if you dont know what to drive towards, I’d say look for clues in the data. If you do, then drive towards predetermined metrics. What do you think?

“Peak IT”: Or how most new startups may NEVER have an “IT department” in their future

Yesterday I had the chance to talk to 2 startups. One has been around for 2 years and has raised $2 Million in seed funding and is in the B2B SaaS (Marketing) space. The other is older, has raised a series B and has over 47 people in their company.

Neither of them have a single person in “IT”. They both have over 40+ applications they use and everyone of their employees is using notebooks, phones, etc., but they dont have a central IT team.

I asked the CEO’s at what point do they see themselves getting an IT team and the answer from both of them was “Why do we need an IT team”?

That reminded me of Nichoas Carr’s piece, 12 years ago, in which he claims IT does not matter. He was subjected to a lot of ridicule many year’s ago, but he’s proving to be right.

I started to read about what all IT does actually in any company. You can break it down into 5 main priorities.

IT Org Chart
IT Org Chart
  1. Support the business with computing – notebooks, devices, etc. Turns out most new startups, (which will grow into larger ones later), have mostly a BYOD policy or let their employees choose their own machines, which focuses on the support, maintenance and upgrade of the machines to the employee. So, that’s mostly not needed.
  2. Provide the business teams with internal applications (Build, Buy or Outsource)- Email, Collaboration, HR systems, ERP, etc. Most new companies are buying SaaS products and are letting the business teams (HR, Sales, Engineering, etc.) make their own decisions on which applications to buy.
  3. Build, buy or outsource external customer / partner facing applications – These are also being moved from IT to the business teams. They directly engage with partners, agencies or buy off the shelf SaaS applications, bypassing IT to directly buy to their requirements. In fact over the last 10 years, according to Gartner, 50% of IT spend on applications is being managed directly by the business teams, bypassing IT. That’s in the large companies. In the small companies, it is 100%.
  4. Supporting, managing and assisting internal users via a help desk on problems they have with IT systems. Most users are bringing their own devices and building their own applications, so the help desk is largely eliminated.
  5. Operationally support the applications built with DBA’s, system administrators, operations managers, etc. With the rise of DevOps and the cloud, all of these external facing, customer applications, which are developed internally are being deployed, managed and supported by the developers who built the applications in the first place.

The only remaining portions are vendor management (if there are many suppliers to IT) or outsource partner management, which is starting to get managed by the business teams.

While, many of these startups are saying they dont have an IT team, what’s really going on is that many of the functional elements that IT did before are being given back to the business teams.

The two entrepreneurs who I spoke with foresee a day when they might need a person to help them with integrating their different “apps” which the teams bought, but that’s much later, and a highly specialized role.

Maybe in 20 years only 10% of large companies will have an IT org, and that’s when they have multiple locations, need to make sure all the offices have connectivity to their VPN and need an intranet (which can also #SaaS), but that’s going to be rare.

How to decide which startup to join if you are considering switching jobs

I get an email or 2 every week from employees at large companies who have interviewed at a startup wondering if “startup X” is good, will do well, or “is a good bet”. Most of the time I dont know about the startup or the founders, so I tend to focus mostly on the market trends and the problem the startup is trying to solve.

Occasionally I will also get folks sharing their salary and ownership details with me (mostly junior folks) who would like some advice on how to negotiate a better salary or more stock options.

I used to be rather dismissive of the negotiators and ask them to focus on the learning and experiences, but that turns off most people I think. They wanted advice on how to negotiate better and here I was telling them what they were getting was good enough.

Instead, I decided to develop a framework to think about the opportunity and the startup role.

The first thing you want to ask yourself is why you want to work at a startup. Or leave your current job and join another startup. If you are at a big company (and have been there for a while) and have made a good salary and are looking for a “big retirement win from 3-4 years of work” at a startup that’s going to go public, then it is very hard to choose the right startup.

If you are however at a big company and looking to learn more and get a different set of experiences, you will likely have expectations that can be met.

Predicting which startups will do well is hard. In fact, over the last 10 years, given that most companies are raising a lot of money in private markets, it is harder to “get an exit” and make it big (financially speaking) in a short period of time.

Lets start with your objective.

If you are looking to make “risk free money in a short period of time” with your talent, you will get a small reward. A role that similar to your big company role and with a pay package that fairly consistent.

If you are seeking to learn how to be an entrepreneur and master how to start a company, you are better off joining an earlier stage startup than one that’s “sure to go public in a year or two”.

If you are looking to make more money than your current role offers and advance your career, it is best you join a later stage startup that’s looking to scale.

Startups that are less than 2 years young are the riskiest, will offer the most in stock and less in pay. Especially if they have only raised a series A.

Startups that are 2-5 years young and have done one or two rounds of institutional funding will likely offer good pay and decent benefits but limited upside in stock options.

Finally, “unicorns” which are over a billion dollars in capitalization will offer compensation that’s commensurate with your current pay and benefits and even more limited upside in terms of stock options.

If you are looking for the “perfect role” with the “most awesome pay”, that’s equivalent to your current pay and “huge upside” in stock options with guaranteed returns, that does not exist.

So, my recommendation is to decide what’s important to you – steady pay with strong benefits, but learning a new technology or being part of a new culture – then join a later stage startup.

If you decide that being a part of a fast growing startup which has some traction but still has potential to scale, where you will learn and grow with the company, is important to you, then join a venture which has been around for about 3-5 years.

Finally if you wish to learn how to start your own company after this one’s done and want to learn the fundraising elements of the startup, understand how to market and scale the business, then join a much earlier stage startup.

How to pick and choose early users / customer for your #napkinStage startup?

The first few customers (or users) usually set the tone for your startup. They are the ones with either acute pain or the burning problem, and the earliest of early adopters. Usually, I have found that most entrepreneurs get their early customers because of the relationship they have with them OR they solve a really pressing problem for their customers.

When I talk to most entrepreneurs, one of the first things I recommend to them is to segment their potential customers.

The discipline of finding the factors that differentiate one set of your potential customers from another based on a set of characteristics is customer segmentation.

There are 3 important questions you will need to answer about your customer segmentation strategy before you recruit potential customers.

Most entrepreneurs, at the napkinStage end up getting customers who they know, but sometimes may not have the pain point as much. Else they end up getting customers who have the pain or are unwilling to try anything “not proven”.

When you have been out trying to get early paying customers, you will realize quickly that customers have one of several reasons for not buying or wanting to try your solution.

1. They are risk averse, and not early adopters, so while they have the pain, they use their existing  manual or alternative techniques to solve the problem.

2. They are able to deal with the pain, since they get a sense of job security knowing that they know how to solve the problem, and no product, machine or algorithm can replace them.

3. They believe the ROI from solving the pain will be negligible and their time and money is better spent elsewhere.

4. They want more mature solutions so they can handle their “special situation”, which is unique enough that no early product can customize it and be less expensive at the same time.

5. They believe the solution will weaken their position since it will solve the problem that exposes their “value-add” to the company.

6. They are not emotionally vested in either you or your startup, so they are not willing to take the leap of faith to try an early version of the product.

7. They actually dont believe your solution will solve the problem and are willing to wait and see some more proof until a point that it does.

These and many other excuses / reasons are the ones I have heard of consistently when I have been trying to get early customers for most of my startups.

If your potential customers sees a big benefit to:

a) their personal agenda (promotion, makes them look good, etc)

b) their position in the company and finally

c) their company’s standing in the market.

Picking your early customers though, is almost always a combination of personal relationships, built over time and solving a problem they have that is so intense that they are willing to try anything to get rid of it.

Fired and interviewing again for the same role

Lets say you left the job you did for 2-3 years, i.e.the co-founder of a startup. You were fired, “let go”, decided to leave or “step down”. Either ways, you are doing something different than what you started.

Then time passes and you are asked to step-in again – for the same role, but a different job than before. Same role since you were the founder and CEO, but different job since the company is bigger (or smaller) now, and has a different set of challenges than you left before.

This is not a hypothetical situation – this happens not only at bigger companies – Zynga, Yahoo, Twitter, but at most startups after a significant round of financing as well.

You will now have to “interview” for the role again.

3 C's for getting hired again
3 C’s for getting hired again

For any CEO / founder role, the board will be involved, and probably initiate the search, but also get inputs from the current management team and the “interim CEO”.

The new team will have to determine if you are the right candidate for the role, given many criteria, but we can boil it down to the top 3 that matter.

1. Competence: For any role, not just the CEO, “can the person get it done?”, is the first question most of us ask – skills, expertise, knowledge and capability to execute among other things are a must have. These are what we call table stakes.

2. Communication: A key skill and capability that sits head and shoulder above all others is the ability to communicate – written, spoken, one-one and one-many. We also put ability to motivate people to take action into this bucket.

3. Culture: Unlike in larger, older and more established companies, culture plays a very important role in smaller, younger ones. Building the right team and ensuring they are all working towards common goals and aligned objectives and is important to attract the right people for the role.

So the million dollar question to ask yourself as a founder is:

If I were to interview for my role as an outsider, will I get this job?

I know a founder, who goes through a formal interview process EVERY YEAR with 2 of his board members, 3 of his direct reports (different ones each year) and one outside executive recruiter.

His rationale for this is simple – it keeps him honest and gives him a clear picture on things he needs to do for the next year in 3,6, 12 month time horizons.

It is a great trick in your book to have. Try it.

Tell me if it helps you.

Interviewing for a job you already have. Will you make the cut?

#napkinStage customer service at startups is becoming the sales team

While sales people are becoming marketers at #napkinStage companies and marketers are becoming more data driven product managers, customer service managers are becoming the best sales people.

Changing Role of the SaaS Customer Service Professional
Changing Role of the SaaS Customer Service Professional

When you move from a market, sell, support model of software sales to a market, analyze and sell model of SaaS products, it becomes clear that the best things SaaS companies do is:

1. Build a good product segmented by users. (Product, Engineering)

2. Ensure that their target audience know about their products. (Marketing)

3. Educate potential customers about the product to help them “try” the product. (Sales)

4. Build conversion to paid customer within the product. (Product, Marketing)

5. Help increase engagement (more product usage) and reduce churn i.e. losing customers. (Customer Service)

The role of the customer service teams is increasingly becoming one of reducing churn, since that kills most SaaS business model’s financials.

It is so hard to acquire new customers at scale and cost, so when you have a good, paying customer the objective should be to help them use the product effectively and get the most value so they get the ROI and are extremely happy.

There are 3 important functions that belonged to sales – reducing customer churn, engaging users, and upselling, now belong to customer service.

Previously, about 10 years ago, most customer service professionals were measured by how quickly they resolved customer support calls, how few the escalations were and how long they were on the call.

These are now dramatically changed. Proactive customer outreach and predicting churn – to reach out to customers before they cancel is now the norm for most customer support teams.

Most SaaS products I know are also build an integration with other products such as #slack or other chat solutions to help customer service professionals resolve questions and support the customer within the product.

Many years ago I’d remember our customer service VP would measure and incent reps on how quickly they got customers off the phone.

No longer.

Now, the longer you keep the customer engaged and talking, the likely you are to uncover more opportunities to up sell and cross sell other products.

Customer service is more a sales function now, than a support function.