Dharmesh Shah


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10 Ideas For Those Critical Early Startup Sales

By Dharmesh Shah on April 21, 2011

The following is a guest post by Chris Savage, co-founder and CEO of Wistia which provides video hosting services for businesses. You can read more of his thoughts at savagethoughts.com.

10 Ideas For Those Critical Early Startup Sales

Closing your initial sales at a startup is one of the most challenging parts of building a company. Many startups die before they ever close a deal.

Unless you’re entering a well established market there will be uncertainty with your product, approach, and timing until you have enough customers to prove that you have a good business model.

When Brendan and I started Wistia, we had questions about how the sales process should work, what kinds of documents we needed in place, how long things should take, and where we should look for potential customers. Through sheer will, conviction, and lots of failure, we found our way to where we are today. Here are the 10 principles we learned along the way.moneygrow

1. Don’t wait to sell

You should start selling as early as you possibly can. Do not wait until your product is polished and launched. We changed direction and started heading towards Wistia about a year into startup life. How’d we know to head towards Wistia? Because we had a real potential customer that was interested when we had NO PRODUCT. We talked to them about what we thought Wistia could be. They liked the concept and we built the first version of Wistia in two weeks. A month later and we had our first customer.

We had just spent seven months building a portfolio website and four months trying to get people on board while our bank accounts shrank and our time to live decreased. In the course of a month we sold our first customer, decreased our burn, and realized that selling early was possible.

2. Do things that don’t scale

We learned an enormous amount from our first customer. That first sale gave us a benchmark for what people were willing to pay, how long it would take to close a deal, and how easy it was to use the product.

We made a point of going to our first customer’s office every couple of weeks to talk about the challenges that they were seeing and how we could make the product better suited to their needs. We could never spend as much time with every customer as we spent working with customer numero uno but we magnified all the extra learning upfront across the customer base.

Trying things that seem like they can’t scale is not just okay, it’s imperative as long as you are actively learning from every interaction.

3. Get inside your customer’s head

What books and magazines would your customers read? What conferences would they go to? What search terms would they use? Who would they follow on twitter? Once you have an idea of where your customers hang out, you need to go there. The more time you spend where your customers are, the more you’ll learn about how they think and whether or not you’re focused on the right group.

We thought some of our early customers would want to use Wistia for training, so we went to learning conferences. When that didn’t work we focused on talking to people from big companies that went to tech events. As we got better at figuring out where our customers could be we had more opportunities to learn from the right audience.

4. Focus on the buyer

Sometimes, especially with enterprise sales, the buyer of your product will be different from the user. That’s why it’s critical that you focus on the buyer.

CRMs are an excellent example of this phenomenon: a product is sold to the VP of Sales that will be used by the sales team. If you focus only on making an amazing experience for the sales team while ignoring the high level dashboards of how the sales team is doing, the VP of Sales will have trouble buying.

Look at Salesforce.com; their application can be an ardous one to setup. In fact, there are companies like OpFocus, whose main business is working with companies to optimize the Salesforce.com system already purchased. But Salesforce.com does have a great set of dashboards for the executives. The buyer, the VP of Sales, is happy and Salesforce is a $18B company with a product that has a terrible UI. All because they focus on the buyer.

5. Don’t price against cost

Cost matters when markets are mature and products are well defined. All that matters to customers is value. Should we charge our customers based on how many servers they’re using or how much video bandwidth they’re pushing because those are our costs? No.

Our customers don’t care how much we’re paying Slicehost or any of our other providers. They want to know if their videos are effective, they want to close more deals, and they want to provide a better experience for their customers. These needs could not be more divorced from our costs.

6. Position against complimentary products

For some reason, competitive startups tend to think that they need to position themselves against each other. But as my good friend David Cancel likes to say:

I believe a startup only has one real competitor, indifference.

People not caring enough about your product is your true competition, not some other startup.

- David Cancel

When you’re thinking about how to position yourself, look at the complimentary products, not the competitive ones. Ask yourself two questions: How much value can I create for my customer? And how much value are they getting from the other products they use?

Say your customers are spending $50 a month on Mailchimp, and they get an email platform they use every week that allows them to design, manage, and market to 5,000 recipients. Don’t try to sell them a video hosting solution for $1,000 a month that they’re going to use once a quarter to train 200 people. We made this mistake, and it’s an important one to learn from. Be honest about how much value you create and how much value your customers are getting from other products.

7. It’s only the beginning

When you first start selling a new product every new customer feels hugely important, and they are. It becomes easy to put a crippling amount of pressure on yourself to close deals and get people interested. While this can be a good motivator, it can also cause you to make mistakes.

When we were first getting going sometimes we’d say things like “Maybe we should wait a bit until feature XYZ is launched. Then they won’t be able to say no.” or “If we can just get company ABC to sign up, then it’ll be way easier to get that other guy too.” Here’s the problem with this: unless you’re dealing with a market in which there are less than 100 customers, the customers you’re trying to sign up should only be floating on the surface of your pool of potential customers.

You should not be afraid of scaring people away with a high price, the wrong messaging, or an initial email that’s too short. You need to try all of these things and more to figure out what’s going to work for your sales process. You need to be able to take risks and push forward quickly. This can be impossible if you structure your plans around closing each and every individual potential customer.

8. Focus on every customer

Even though no one customer should define your business model, you should leave yourself the flexibility to cater to each individual customers in specific ways. The most likely way to get customers to close is to spend a little time on each individual target. You need to personalize the correspondence as much as possible. This is true if you’re sending an email or if you’re meeting with someone in person. Figure out why they’re successful, what their hobbies are, and what conferences they like going to. The more you can understand them the more likely you are to speak in their language.

It takes time to prepare and learn about every target. But as you get more customers you’ll quickly learn what similarities and differences your customers have. It becomes easier to figure out where to focus and how to craft your message.

9. Act your size

When you’re first getting started it’s easy to fall into the trap of trying to act bigger than you are. Common pitfalls include trying to demand exorbitantly high prices, positioning to have more customers than you have, and promising more than your product can deliver. Yes, I’ve made all these mistakes.

When you’re trying to act big, it often highlights just how small you are. Pretend like you have more customers than you do and when someone asks you who your customers are you’ll be left speechless. Position your price too highly like your more entrenched comparables and people will stop responding to you.

The secret is: the right customers will gladly pay startups for services. They’ll think they can get a deal because they’re early to the party, which is likely true. They’ll be excited about using cutting edge technology to get a leg up -- again true. And if they pick right and your product rocks they get to tell the world that they were first -- how can this benefit even be measured!

10. Just keep going

The hardest part of bootstrapping your sales is sticking with the process. It can take a very long time to get your first deal. But each deal comes faster with practice and more information.

Your initial hit rate will probably be terrible. If it isn’t, you’re doing something right. I have some friends who run a company called Usable Health that just closed their second deal in a complex and emerging space: kiosk-style self checkout at mid-sized restaurant franchises. They’ve been selling for one and a half years and pivoted three times in the process. Now they have a pattern, happy customers, a model that looks like it could scale, and real tangible revenue.

Not giving up is the most important part. Give yourself time to build you business model. Once you’ve done that, you’re golden.

What do you think?  Any tips on getting those early sales?

Topics: guest sales
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Insight From Dropbox: Failure Is Not The Worst Outcome, Mediocrity Is

By Dharmesh Shah on April 18, 2011

Big news from Dropbox today.  They announced hitting 25 million users.

I'm a big, big fan of Drew Houston (founder/CEO of Dropbox).  Have known him for many years (well before he started Dropbox) and am honored to call him a friend.  I will cancel plans with my wife to hang out with Drew if he and I happen to be in the same city.  There are only a few people I'd do that for.  (Plus, it helps that she loves the product).Dropbox Logo for OnStartups

Disclosure:  Drew is on the advisory board for my company, HubSpot.

There's one big lesson and insight I want to draw out from Drew and Dropbox's story.

The worst outcome for a startup is not failure — its mediocrity.  When I first met Drew, he was still working for a local Boston-area software company called Bit9 (in the security space, and they're still around).  Good company.  Drew was in the midst of working on a startup idea that was in the SAT prep space (called “Accolade” if my memory serves me right).  I met with Drew for dinner to talk about Accolade and his plans for it.  I was not a big fan of the idea (and told him so).  Super-competitive category, and it was going to be hard to differentiate.  Most importantly though, I was not sure how big of an opportunity it was.  I just didn't see it being a big, “break-out” business.  Frankly, at the time, I could tell that Drew was really smart — but I didn't have enough data to know if he was going to be great (as in a great entrepreneur).  I know many, many really smart people.  Few of them have what it takes to be great entrepreneurs.  As it turns out, Drew is one of those people, but I didn't know it at the time.

So, Drew ultimately ended up abandoning the SAT prep idea to do something different (which later became Dropbox).

Here's the big lesson:  Many founders think that the worst outcome you can have in a startup is failure.  You try something and it fails.  And yes, failing sucks.  But, what's worse than failing is going sideways for years and years.  Being stuck in a quagmire of mediocrity.  Things are going reasonably well, but not spectacularly well.  The reason mediocrity sucks more than failure is very simple:  Failure lets you move on, mediocrity stalls you and keeps you from reaching your potential

It's not knowable as to whether Accolade (Drew's SAT prep startup) would have been a phenomenal success or not.  But, it's doubtful that it had near the potential that Dropbox did.  Had Drew “stuck to it” with Accolade, it's likely that Dropbox would have never happened and 25 million people (including me and my wife) would have been less happy.  And, of course, Drew would have been worse off for it.  As he will tell you, Dropbox has been super-fun and super-gratifying.  We all dream to have a startup like that someday.

It would have been a waste of talent and energy for Drew to have gotten stuck in a quagmire of mediocrity. 

Imagine if all the founders that are currently stuck in “sideways” startups could somehow pull themselves out of the muck, clean themselves off, and take another crack at becoming legendary.  How much better off would they and the world be?

Of course, there's one big counter-argument to all of this.  How do you know whether you're stuck in a quagmire?  Isn't startup success often about persistence and focus?  What if that break-out success is just around the corner.  Those are good questions.  The simple answer is:  There are no simple answers.  If it were me, the question I would ponder is this:  If 90% of everything started going “right” with your startup, what will it become?  (I'll call this the “wave the magic wand”, best-case scenario).  If the answer does not please you, and you've been at your current idea a reasonably long time, I'd ponder a change. 

One of the great things about software startups today is that it's very possible to reach “ramen profitability”.  That's also one of the bad things.  Once you get to “ramen profitability”, running out of cash is no longer a way to know that you should be starting afresh and trying something new.  You can run a startup like that indefinitely — and many entrepreneurs will do just that, instead of building the next Dropbox and becoming legendary.

Update:  The article has sparked a lot of interesting discussion on Hacker News and elsewhere.  One point I'd like to clarify:  I'm not suggesting that stable, sustainable businesses with modest growth are a bad thing.  Just that if the business is not something the founder is passionate about -- she should move on.  Life is short.  We don't all need to build the next Dropbox -- but we all should stretch ourselves.  It reminds me of an idea that Tim O'Reilly planted in my head:  Pursue something so important that even if you fail, the world is better off with you having tried.   

What do you think?  Are you stuck in a quagmire of mediocrity?  Should you be hitting the reset button and taking your shot at becoming legendary?

Topics: strategy
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