Dean McEvoy is a serial entrepreneur, investor and technology advisor who shares in a video which is also transcribed 10 tips to make sure you nail your pitch every time.
I’ve recently come back from an incredibly fruitful trip to the US with Telstra’s muru-D accelerator helping a bunch of Aussie founders launch and grow their tech companies. It was great to be back in San Francisco again. This was where I lived for a few years while starting my first technology business.
Over drinks, in meetings and presentations I heard the word “scale” mentioned a lot and there seemed to be quite a bit of confusion around what the term means, especially when speaking with investors.
And I think I know why.
The art of speaking with investors is being able to read between the lines of what they’re really trying to understand. The following is what I’ve put together to help clear up all the different meanings of scaling. This will help you to nail it in your next pitch and think about it in the right way for your startup.
What is a scalable business and why do you want one?
The best definition I‘ve heard of scaling was on and a16z podcast. It’s when your inputs grow in a linear fashion and your outputs, for example revenue, increases exponentially.
So in short, how do you make more money without spending more.
Most of the time this involves some use of technology, which is why it’s often thrown around so much in the tech space.
A tech-enabled startup is also the kind of business that venture capitalists want to invest in because the few million invested in the beginning to work out the business can turn into billions when put to work in a scalable technology business.
What do people mean by “are you ready to scale?”
This is the source of some confusion. This is a question about whether you have your operational systems in place so that when you rapidly grow your business it doesn’t break the company. It’s partly related to the question above, but a truly investible and scalable business has its internal processes optimised and automated as much as possible as well as a very scalable business model.
That is: A business that uses technology as a key component of its offering that has optimised systems and processes already in place.
This scenario is typically series A and later. You don’t want to focus on this too much in the early stages of your business but you also don’t want to set up your business in such a way that you can’t optimise and be able to scale quickly in the future. Things like long setup times and labour intensive customer onboarding are often red flags here.
How scalable is the business model?
This question is again a little confusing as sometimes when investors ask this, what they really mean is:
- how big and sustainable is your competitive advantage or
- how can you profitably acquire and retain customers or
- does the business have network effects or
- is it viral.
The core of this question is the moat that you can build between you and any future competitors. A moat is just like it was in medieval times. It protects you from being attacked and makes it very difficult for others to damage you. The bigger the moat, the harder it is to damage you in the future. There’s a lot to dig into here, but the simple overarching question which can turn an unscalable business model into a scalable one is:
“When users interact with your startup how does each interaction actually create more utility?”
That is, in each interaction how do the customers make your startup more valuable. Is it their data? Is it they help acquire customers for you? Or is it something else? If you build a great product, advertise it online, acquire customers and sell it at a great lifetime value – that’s awesome, but it’s not necessarily a scalable business model. Your competitors can copy your product, your acquisition channels can become expensive and so what looks like a great business in the beginning can fade away to just being just ok…..
This article first appeared on Telstra's accelerator website at muru-D. Dean is currently consulting to them to advise their current cohort of startups.
I had a revelation on the weekend, it was triggered by the opening ceremony in Rio. Only those who are 30ish or older will remember what it was like going out during the Sydney Olympics. 16 years has gone quickly. An even scarier thought is that I can clearly remember the night we won the Olympic bid in 1993. “The Winner is Sydney.”
I was 16. We convinced a mate of mine’s brother to drive us into the city. We had snuck into places underage before (Sorry mum) but, wow… the city was electric that night.
Sydney celebrated the fact that we had beaten the rest of the world and won the rights to put on the Olympics in Sydney. The taste of victory was sweet.
Sydney as a whole city had decided to take on the rest of the world. We wanted to be great and in the end we were. The Sydney Olympics were truly one of the best ever. We delivered as a city and nailed it on a global level.
It’s time for us to do it again. It’s time we stepped up and asked; What will make this city great? What does the future of this city look like, and what do we want to be known for?
Now is a time for hope. When Malcolm Turnbull became leader, I felt the same feeling as when we were bidding for the Sydney Olympics. Back then we asked ourselves if, as a city, we could be truly great. We dug deep and had hope. Wepushed through, we bid, we won and we delivered on a global scale. But most importantly – we didn’t just look to implement best practice from the rest of the world. We raised the bar and set an unprecedented standard. We were going to put on the BEST Olympics ever..
So what is Sydney’s new Olympics? What can we do that will put us on the map again as a global force and have long-term economic benefits to this great city?
Mr Turbull has been talking about innovation and startups and to Bill Shorten’s credit they have shown bi partisan support as they both know its too important for this country. Could this be our new Olympics? Why should you care about technology and innovation? Well, I’ll tell you the story of how starting a technology company changed my life and how starting more of them could not only change your life too, but also the future of this great country we live in.
Early Taste of Success
My first job was working for an entrepreneur. He started his advertising agency with a mate and two Amex cards. Things went well for them. They launched Microsoft in Australia. He mentored me, gave me the opportunity to step up, make mistakes, and learn from them. I got to taste success. I was hooked and destined to be an addict for the rest of my life.
From there, I saw opportunity in every problem in the world. I worked in a family bar and restaurant for what I thought was a few months but turned into a few years. I identified that the bar’s biggest problem was about getting bums on seats. With my newly formed entrepreneurial superpowers, I thought I could solve this problem with the introduction of Booking Angel, an online reservation system.
Unfortunately I didn’t change the world. I started Booking Angel in 2004. In 2007, after not being able to raise money or get much traction in Australia, I moved to Silicon Valley. Wow… that place was like the Sydney 2000 Olympics equivalent of entrepreneurialism every day. It was electric. Everyone around me was focused on startups and I learned a lot, and quickly. I lifted my game and with this higher dose of entrepreneurialism I was even more addicted and determined to be successful.
I met some of the smartest and brightest people in the world, including very astute entrepreneur and investor Kevin Hartz, cofounder of Eventbrite. Kevin gave me some great advice; He asked me to think deeply about why my startup wasn’t successful. I told him we had had some success running special offers on our partner websites to drive more online reservations. This triggered a thought and he pointed out that that part of my business seemed similar to a model he had seen working well in Chicago which involved a group buying model that had been pioneered by Groupon in the US. “Wow, how cool” I thought. “I’ll have to implement something like that in Booking Angel as an added feature at some stage…” Thankfully, 3 months later, Booking Angel ran out of money.
I remember the call when my Dad called me in the US and told me my Grandfather had passed away. I was sad. He was awesome. He taught me magic tricks and could recite amazing poems that seemed to go forever. I was sad also as I knew the moment I stepped on that plane to Sydney, Booking Angel was going to be finished. I had $956 in my bank account which I know wasn’t enough for a flight back to Silicon Valley.
It was 2009. I’d invested 5 years into Booking Angel, and now I was back home and was wondering what to do with myself. I did a little consulting on website developments to pay some bills. The work happened to be in the offices of Pollenizer who at the time were incubating startups.
I managed to convince Pollenizer founder Phil Morle that the group buying model I had seen in the US was worth a building in Australia. I convinced him to partner with me (probably because I got him drunk at the Christmas party). We called it Spreets. Why? Because it was a shopping spree and a treat… But mostly because the domain name was available ;-)
We launched it on my birthday; 4 February 2010. The first deal alone bought in $4270 revenue; It was for 41% off a meal at the Foveaux Bar and Restaurant which was downstairs from our office. It was equivalent to a months’ revenue at Booking Angel. From there it grew. I pitched to investors in Australia. Nobody would invest, but one of them introduced me to some German guys who were considering launching a group buying site in Australia themselves. Instead of launching a competitor, the Germans:
- invested $800k in April/May 2010,
- introduced me to my co founder Justus Hammer (Yeah it’s a cool name huh, he’s a cool guy too), and
- got us a partnership with Brands Exclusive to help us grow.
Soon after, Damien Andreasen joined as Sales Director and Spreets grew very quickly. In June we were opening a new city every week. In September, we were bringing in $1 million dollars a week. We were spending big on marketing and hiring staff like crazy. Soon, we had about 40 staff in an office made for 20… Let’s just say we got to know everyone well.
It was great fun. We introduced a policy that if we beat our best revenue week we would celebrate with Staff drinks on a Friday. This was an awesome incentive that really did drive people. We had a hell of a good time most Fridays. And no, we didn’t got to bed at 1:30am; Sometimes it was later. There are lots of debate’s going on about Sydney’s culture at the moment. This article isn’t about that but I tend to agree that the cities that thrive in technology do have a fun, accepting open culture London, Berlin, LA even San Francisco city vs Palo Alto. The type of people that are attracted to these types of cities also start great companies.
So back to how a high growth technology company changed my life…When Justus and I were in Europe meeting up with investors, we got a call from Groupon. They wanted to buy us.
We considered their offer, but recognised we had other options. and could raise more money for Spreets
We knew the group buying market was getting competitive, so we asked ourselves; Which company is going to help us get in front of a lot of eyeballs?
Seven West Media was the biggest media company in Australia and their partnership with Yahoo in Australia to form Yahoo!7 made them a superpower in terms of eyballs. With this in mind, we decided that they were the best buyer for the company’s future.
In January 2011, only 11 months after launching, we sold the company for $37 million.
So I guess you can see how a startup can change lives in a pretty short time.
Not only did Spreets success change my life, but the lives of employees, my family and our investors who made most of the money from the deal. In fact they made 18x their money in 6 months. The industry, although it has certainly cooled off since its peak, is still generating in excess of $500Million revenue every year and employing over 1000 people in Australia. This is on par with the figures when we sold in January 2011.
1000 employees mightnot seem that much BUT when you consider that the $500Million revenue represents hundreds of thousands of new customers to thousands of small business, the multiplier effect of this business in terms of benefits to Australia were significant.
You just never know how big or successful a company will be. Who would have considered that, 10 years ago, that these two guys would trade their IT professional of the year certificates for the NASDAQ listing certificates.
Atlassian is now bigger than Qantas. They have an industry of agile development practitioners who implement their software for teams around the world so their impact is probably even bigger when you consider that.
Jobs of the future
A century ago, a large portion of us worked on the land. Now, only 4% of the world’s population are involved in providing the world’s food supply.
Did the advent of the first tractor cause nervousness about the future of agricultural jobs? Probably not, as innovation on the land has happened relatively slowly. But with the introduction of technological solutions, the world hasn’t ended; we as humans just found bigger problems to solve.
This rate of innovation is now happening quicker than before. The world is a better place than what it was 100 years ago, but we must adapt with the innovations or be disrupted but remember in the end the world wont end, infact its going to get better. We just have to get used to change.
It paints a scary picture when you ask yourself a question. How could my job be replaced by technology? The fact is that 22% of Australian GDP will be disrupted by new technologies, and with that, the traditional job roles that we currently know.
If you look globally at those same trends, it’s 10’s of trillions in GDP. On one hand, that might seem scary. But entrepreneurs see opportunity to capitalise on these trends, and a chance for this country to shine.
Sydney needs to decide if we are big wave surfers who will ride the waves of new innovation, or if we stay watching at the water’s edge, hoping the waves will calm down eventually so we can go for a nice swim. Truth is, the waves are only going to get bigger and faster, so we had better learn to surf. Those who do get to enjoy themselves. Those that don’t just get smashed by the waves.
If we organise ourselves as a city, and commit like we did for the 2000 Olympics, there is $109 billion up or grabs and around 540,000 jobs . These are not just any jobs - they are more than likely jobs that will be around a lot longer than any car manufacturer.
In fact the Kauffman institute highlighted that startup companies were the only net increase in employment in the US economy. This means existing industries will be employing less and less people, whilst startups will be employing more and more people. So teaching our kids how to do existing jobs might notbe a great idea if you want them to have a job in the future. We need to equip them with the necessary skills to securethe jobs of the future, and we need to prepare ourselves.
We really do need to commit though. Figures according to a recent study by Tufts and Mastercard show that Australians have been slow to seize this opportunity. Worst of all, their study shows that those bloody New Zealanders are beating us. They not only have the Bledisloe cup, they are kicking our butt in terms of technology innovation
So we need to ask ourselves: What jobs can never be replaced, and how do we train people in those positions? The answer is the creative entrepreneurs & scientists that discover and drive this innovation, and the clever engineers and software developers that know how to build them.
The skills kids can learn in school to set them up for these positions included science, technology, engineering and Maths (STEM). If Aussie kids don’t have a solid education in these subjects, they won’t be well equipped to build the companies of the future. Data shows that we arealready behind the rest of the world in this, so we need to act now.
Slipping down the ladder
According to the Compass report, we are ranked 16th in the world as an ecosystem for the birth of new technology. A few years earlier, we were 12th. Again, this is the gentle kick up the butt we need to get things going. We need to turn this around. We need to ask ourselves what would it take to be one of the top 10 ecosystems by 2023? Could this be our rallying call for this city? Is this our time we step up to do something meaningful for this city to make it great and to put Australia back on the map?
Recipe for change
There are three things I believe we can do in Sydney to achieve this now.
Firstly, get together. A group of entrepreneurs in Sydney have got the ball rolling and started a not for profit group called TechSydney. If you want to be part of improving the startup ecosystem in Sydney, jump onboard and sign up to the site. TechSydney.com.au. This in itself is a lean startup, so the most important thing is that they start set some sprint goals and get shit done.
Secondly, we need a location for the Sydney ecosystem to live. A multitude of research and anecdotes showing the strength of other global ecosystems is the strength of the network, and that the strength of network is accelerated by having everyone in close proximity.
So what kind of location would work as the startup ecosystem? Sydney’s biggest draw card is its beauty, so if we want to capitalise on this strength to attract the best people into the industry, the location it needs to highlight the best this city has to offer in scenery, vibrant entertainment, healthy lifestyle, close to transport and centrally located. We need at least a temporary location now to host the Sydney network.
Thirdly, let’s look at the data from the Compass Report and think about how we can capitalise on our strengths and address our weaknesses.
In 2015 the size of the ecosystem in Sydney was estimated at around $4.4 billion The median of the top 4 ecosystems (excluding Silicon Valley) was around $46 billion, so to get in the top 5 we need to grow 10 times larger. That’s a big ask but we could certainly make it into the top 10.
Time to grow
How do we grow the existing ecosystem? We grow the companies in the ecosystem. Research with existing company founders about what will help them grow is:
- Access to Talent – This is about positioning the technology industry to smart graduates, talented people in corporates and smart folks from overseas.
- Access to Experts – Often there are specific problems that Perhaps they need better people in the industry, experienced Mentors more capital, or access to bigger markets. We are on the doorstep of China and have established a free trade agreement with them. Is that opportunity knocking? Once we understand what’s stopping them – we will be able to support them make the adjustments necessary to allow for maximum growth.
We need to focus on starting meaningful companies, but it is vital that we work out how to make existing companies successful before filling the funnel with too many new startups.
The downside of Sydney is that it’s expensive. There has been talk of re-introducing the living away from home allowance for technology workers and streamlining the visa process. Maybe, with an awesome ecosystem here, our brilliant people freezing in New York or San Francisco will be tempted to come home and hey if Trump gets in. I think there are going to be a lot of people leaving.
Now is the time for action. Our Prime Minister is the only technology entrepreneur heading up a country and to Labour’s credit Bill Shorten realizes this as well. Malcolm understands what it is like to grow a successful company. We just need to ask the politicians for the policies that will help make us successful but government is just one ingredient.
Startups changed my life. Startups can change your life by giving a future to this country that will allow us to maintain the awesome lifestyle we have in this country
It up to us as a city to decide to be great again. The winner was Sydney and it’s time for us to win again.
Dean McEvoy is a serial entrepreneur / investor and co founder of the industry group TechSydney.com.au. They are running a crowd funding campaign to garner support for the initiative, which ends Friday 12th August. Visit https://pozible.com/project/techsydney-campaign
Data from Andreessen Horowitz shows there is not really a tech bubble and the dynamics are ripe for Aussies to excel in the US just like Matt Dellavedova has in the NBA playoffs. I loved this Article in the Wall Street Journal about Matthew Dellavedova and Andrew Bogut. Every NBA team needs an Australian .
"Australian players, they say, tend to be the opposites of most American players. They don’t seek superstardom. They actively avoid attention. They excel in the egoless roles that most players reject.
American coaches have found that the stereotype of Australians as relaxed and fun to be around isn’t that far off. “Almost every one of them is like that,” Bennett said. “They seem friendly and likable. And they pretty much are.”
The only time they aren’t, Bogut said, is when they’re on the court. “We’re very laid-back in Australia,” he said, “but when it’s time for work and time to get after it, I think people don’t mind putting their hard hat on.”
Something I read today lead me to draw a parallel between basketballers in the US and Aussie startups in the US.
Andressen Horowitz released some compelling data that deflates the argument of there being a tech bubble in Silicon Valley.
The key take away's are that:
- Yes Valuations are rising but so are earnings if you look at the P/E ratios of tech companies they are not increasing
- Markets are real now not theoretical. E commerce and Ad Spending is big but still a small % of total retail spending or advertising $. Large numbers of people are online now but again still lots of room to grow.
- The huge dollars being invested in the Unicorns are mostly being invested in the very later stage by investors with similar risk profiles as those that used to invest in tech IPO's. Its just a shift from public market investment to private.
- The dollars invested in early stage companies has stayed pretty flat, whilst the number of investments has increased. In effect reducing the risk of that portfolio of money as its distributed amongst a greater number of companies.
The other conclusion I drew out of this is that the Unicorns of the future need to learn how to get to success with less initial investment at the same time when the Unicorns of today are sucking all the talent out of Silicon Valley and inflating the cost of hiring great teams.
This creates a great opportunity for Australian startups. We have an ingrained or forced culture of bootstrapping. So the fact that the average dollar investment is declining, means that those who will win have to get to success with less. None of us in Australia have had the $1 million investment to build an MVP. We arent hooked on the crack cocaine that is early stage VC funding as we never had it and we arent hooked on raising the next biggest round and getting on Techcrunch. We just want to get our hard hat on. With declining round sizes US entrepreneurs who have grown up with the culture of big early stage investment or maybe even have failed at 1 startup and now will be expected to succeed with less will be at a disadvantage.
Australia also has talented engineers and an increasing number of folks who are bored to tears working for corporates and willing to trade cash for equity to get into something more meaningful. The government subsidises this engineering team through the R & D tax credits so you can build a great team in Australia easier and we know how to be thrifty.
But and there is a big BUT. The Australian company must want to be the BEST in the world. Do you want to play in the NBL or the NBA?
In order to be with the best some of your team are going to have to mix with the best and have the balls to know they can beat them. Its hard to be a world champion if you aren't playing next to other potential world champions. You can argue that you could compete remotely. I think it's bullshit (Don't regurgitate the exceptions Atlassian, Big Commerce, Campaign Monitor etc etc), You can only be the best by being close to your biggest markets and customers and even the exceptions mentioned above were either in the market for a long time and hence knew a lot about what it took to compete or were on planes a lot. Most of the Startmate companies when asked about their experience in Silicon Valley realise how awesome and smart the people are in Silicon Valley and they mostly either lift their game or fold. Its the NBA baby.
So. It means at least one of the founders needs to move to where your biggest market opportunity is and or where the best people are. If that is the US then it's there. If its Asia then it's there. BUT you can manage your engineering and product development in Australia and the benefits and opportunity are great to those that are willing to make that hard step.
So Unicorns of the future will be born in Australia but able to compete and fit in the US - After All we are both red white and blue. US or International VC's who see this opportunity and capitalise on it (some already are) will tap into a group of entrepreneurs who have built amazing companies by bootstrapping or at least operate on the smell of an oily rag but also who like our legendary ambassador Aussie Matt Dellavedova have the balls to compete and win globally.
@deanmcevoy is an technology founder, investor and advisor. He has started 4 startups, is a founding mentor of startmate.com.au and investor in various global internet startups that just happen to be born in Australia.
PS when I say the "balls" to win I know it's not gender neutral but I would also say she's got balls as it means something totally different in my mind and I'm Australian we say balls all the time.
This is an experiment in itself. I often don't blog enough because I take too long to think about what to say. So this is an experiment in eating my own dog food as it says. I'm just doing, not thinking.
As humans we think to much, we let that filter interfere with what our brain really wants to do. Those deep rooted impulses often get stamped out by the rational mind. Its probably part of the limbic system. Have you ever seen Simon Sinek talk about how people don’t buy what you do they buy why you do it. I reckon that same thinking probably also works on yourself ie you don’t do what you do you do why you do it… yeah I know that doesn’t make sense but there will be no grammatical awesomeness in this post its simply me doing and not thinking, no editing, no second guessing no wondering if people will think Im stupid from this post…
Anyway I digress. I reckon you have to learn to get in touch with that inner voice that give you the hints of what to do in life. I have always called it Feather, Brick, Truck. Let me explain. You ever been in a situation where say a partner was just a bit rude to you in front of other people. It annoyed you and maybe you didn’t address is as you didn’t want to make a scene and soon you forgot about it – that’s a feather a really subtle hint most people ignore. A few weeks later you are out and they are drunk and seem a little bit too flirty with some random person in a bar you are in. Again you ignore it as you dont want to come off as the jealous type. That’s a brick. Then a month or so later you walk in on her in bed with your best friend. That’s a truck. The key to happiness and success in life is acting on the feathers. Take action when you first feel it and life will be good to you.
Our brain gives us hints when something is not right with the world it also give us hints when opportunity knocks on our door, for those talented individuals who have a brilliant idea its knocking right now. Startmate entries are closing this Sunday 24th of November. I wish that Startmate or something like it existed when I started Booking Angel back in 2003. I wasted 9 years of my life learning and making connections that Australia’s best technology mentors will teach and connect you with in you in 3-4 months. Plus we give you some cold hard cash – $50,000 for7.5% of the company. Most will say the knowledge is worth more than the cash. When you read my grammatically incorrect post you may question that but whocare I’m just doing not thinking. So should you.
You never regret the things you do. Only the thing you don’t.
Dear Mr Turnbull
I write to you and copy Mr Hockey, Mr Bilson and Mrs Mirabella firstly to wish you all the best of luck on Saturday, and secondly to highlight an opportunity to you all that, at the moment, nobody appears to own and could win a few extra votes for your party on Saturday.
As some background, I have started a few startup technology companies over the last 10 years. Most were not too successful but I learned and kept trying and had some eventual success with Australia's first group buying website Spreets.com.au. Spreets launched in Feb 2010 with just myself and 1 other person. A few months later I raised some money from European investors (As I couldn't find any here). 10 months after launching my company we employed over 45 people and were approached by Yahoo!7 who purchased the business for around $40million. This industry which I started, now employs over 1000 people and generates over $500 million in 2013. There is an opportunity with the right incentives to inspire a generation of technology entrepreneurs and increase that number to over 500,000 employed and $109 billion by 2033 according to a report by PwC & Google. However I raised some concern in person to Mr Bilson at a lunch at KPMG that the needs of this industry are very different to a small business. It was suggested that your portfolio would be a better fit for fast growing technology businesses, but from reading the press around your announcement at the York Butter factory the other day, that focussed mainly on how the government will interact with the public more efficiently by investing more in IT and cloud services. This is great, but it doesn't really address the opportunity described above and I feel unless one of you decide to own it, it will be an opportunity that slips through the cracks.
So what can you do? Firstly, fix the things that are broken. The current tax laws don't incentivise people to take risks and be entrepreneurs and inhibit experienced people from helping new startups. The review of employee share plans is one area which I am glad to hear you are reviewing but there are more issues which I discussed on a public forum here that need fixing and it is why I wanted to bring it to the attention of Mr Hockey. It is also one of the reasons why my smart entrepreneur friends are moving to the US. Australian tax laws just make things too hard. There are some great things like the R&D tax credits which should stay but many things that just don't make sense.
One other reason people are moving is that there is little support networks and sharing of knowledge for the elite technology entrepreneurs. That is why some leading technology entrepreneurs and myself have recently started the Endeavour Institute which aims to be like the Australian Institute of Sport for technology entrepreneurs but instead of gold medals we will build jobs and revenue. I have purchased a building on Stanley St Darlinghurst which I aim to utilise for this venture and we are currently securing initial funding from the top 20 technology entrepreneurs in Australia. 8 have already committed in just the first few weeks of us starting it.
The second and most important thing is to take ownership of this opportunity. Let it be known that you are aware of this opportunity and will sit down and help work out policies that make it thrive not let this massive opportunity slip through the cracks. I feel with your background in technology it probably sits best with you, Mr Turnbull, but I don't mind who owns it as long as somebody does.
If any of you wanted to take me up on the offer and quite simply acknowledge the opportunity in the startup technology area, acknowledge that no current minister is really focusing on it at the moment and that you will address it. I know it would be a welcomed by the startup community. I will publish this letter on my blog so others in the industry can add their comments. If you want, I will also push your response out to a very wide and very well connected audience to let them know of your support. I know at this last minute it could help sway a few undecided voters.
Of course, I realise the last minute nature of this email so if it doesn't reach you in time I would be happy to connect after the election and would welcome your feedback. As a registered voter and now business owner in Wentworth, you can count on my vote and let's hope for a good victory on Saturday night.
Startup Adviser, Mentor & Investor
I think of sales as a process. It can be flow charted and optimised. It's not just about the sales person, it's the entire company process. I think the idea of sales and marketing is dead; It's more about demand generation and lead conversion and this is a seamless process that you just iterate and improve over time with the team.
- How do I find customer who has the problem you solve? i.e. how do you generate demand / interest (this is whole post on its own).
- When you find them, how do you illicit that problem out of them? First, you need rapport, then think - what questions can you ask that make them realise or think of the problem in the most intense way? This course is pretty good for those that have little sales experience: Persuasive Selling Skills For Sales Professionals
- Understand its' a process. Get little commitments out of them to move them through the process.
- Don't send them lots of information via email. If you have a lot of information to convey, firstly try and simplify it. Chunk it down into single paragraphs and send a series of emails with just a few lines at most per paragraph. Always include your phone number so that if they are interested in finding out more they can call you.
- When the series has finished, ideally check whether they have opened the email and call them then to secure a meeting, or maybe try and close them over the phone. Mailchimp integrated with capsule of saleforce.com will tell you this.
The process continues, and you continually optimize by getting feedback from your sales people. Share best practice of how people overcame objections, listen to calls and use technology to systemise the process so it can be measured and improved, then ultimately remove the required number of warm bodies you need to hire to sell.
This process must be real people in the beginning, but your goal is not to hire more people to sell more, it's to get better at selling so you don't need to hire more people but can still grow.
This book is pretty good too:
Demand generation systems like Marketo are good, but expensive:
When it comes to managing sales people:
It's a story I'm very proud to tell; how we built a company that was acquired by Yahoo!7 for $40 million just 11 months after it launched.
Nobody hears about a startup and writes a cheque straight away, it just doesn't happen (maybe you’ve heard of some ‘stories’ going around but it's as rare as hen's teeth). Instead, it takes time. It's like buying a house; chances are you are going to want to take at least one more look before making a decision. You want to make sure you really like the house, the street, and that you can see a future there. Investors need the chance to get to know you, to like you, and like your business, so ask yourself - how are you going to get them to notice and like you?
You’re always pitching. Whether you’re trying to raise money, talking to a customer, talking to a co founder or talking to an employee, you need to be prepared to pitch at all times. But to get the investment you’re after, don’t think about your pitch as a one off to convince someone to invest in your business, rather its a 6 step process Pitch, Second Meeting, Negotiate a Term Sheet, Due Dilligence, Final Contract, Show me the Money Baby...
In this post I will just talk about the first two steps.
Preparation Confidence is key, and the only way to get confident is to practice. Practice in front of anyone who will listen, and then have a few pitches with people who don't matter as much. The more practice you do, the more natural it will become for you when you are up in front of the people who count.
I’ll let you in on a little technique of my own when it comes to practicing. It sounds strange but it really works... When I’m rehearsing a speech or a pitch and I nail it I pinch my left nipple. Then, when I’m about to actually give my pitch or speech and I’m feeling a bit nervous, I pinch my left nipple again and it reminds me of the awesome feeling of confidence and energy I had when I nailed it during my practice. As I said, it does sound strange but its actually a commonly used Neurolinguistic Programming technique called anchoring. It’s where people attach a certain behavior or state to a certain trigger. For me its pinching my left nipple, for you it could be anything from tapping your knuckles with your other hand, as long it gets you in the right zone when you’re pitching.
In reality, you have 20 seconds to convey enough excitement about your business to investors, the rest of your pitch is about reinforcing and elaborating on the first 20 seconds. But if you didn't have them interested in the beginning, chances are you won't get them interested at all
Main Points to Cover
There are a few main points that investors are listening out for in your pitch. They want to know if your idea is big enough, your team is good enough, and you're worthy of an extra hour of their time. So your job is to tell them what they want to hear, that is;
1. You have a great business. Describe the big lucrative problem you are solving, your understanding of your competition, your unique approach and external validation.
2. You have an awesome team. Talk about their capabilities and background.
3. You’re not desperate. It works with dating and it works with investors - put yourself in a situation where you will be successful without them and demonstrate that you don't actually need the funding.
4. Why you believe in your business. The best way to do this is by telling a story that elevates your status to the audience "When I was working at Google" or “It wasn't till three weeks after I was voted Australian of the year" for example. By engaging with people through telling your story, you’ll find yourself talking about why you’re doing what you’re doing, why its such a big problem, and why you think you can create a solution. And the great thing is, when you talk about why you do something you access a different part of your brain called the limbic system which is the area in charge of your emotions. Simon Sinek does a great ted talk that nicely summarises that people don't buy what you do, they buy why you do it and stories are the best way to convey that.
5. You're sticking to what you know best. The most innovative businesses solve problems in an area that you know really well. If you have spent the last 10 years in the construction industry dont try and build an app for restaurant owners.
6. You’ve set yourself a milestone. A nice way to finish is to let investors know that you’ve set yourself a milestone - for example, “I'm not looking at raising money right now. We have a good team and are focusing on X, Y, Z. I would however like to hear of any feedback you have on the business” and ask them if you can get back in touch once you hit your milestones.
Do this with 10-20 investors, and remember, the objective of your pitch is not to sell your business right then and there, its just to create enough interest in it to get you to the next stage.
2. SECOND MEETING
It’s amazing how many entrepreneurs don’t follow up with investors, and actually, it’s the follow up that’s going to get you your second meeting. Make sure you get back in touch with the investors like you said you would, tell them briefly about hitting your milestones and organise another time to meet. You’ll be surprised how positively this is received. My experience is most entrepreneurs don't actually do what they say they’re going to do so make sure you’re being proactive and in the investors mind you’re ticking all the right boxes.
The strategy for your second meeting with investors can be looked at like speed dating - if they don’t say yes straight away and suggest a next step then its a no, so move on. Its important to hit all the 10-20 investors that you pitched to at once and have a number of conversations happening at the same time. I would suggest opening the first round with money from a friend and/or family member. Get one investor who is key and give them a discount for investing first or for coming on as an adviser (who also invests). Paul Graham writes a good post about why raising with convertible notes is good for this reason - http://www.paulgraham.com/hiresfund.html
And when you get them interested comes the fun part of actually negotiating the deal! But that’s for another post...