On Thursday, I had the opportunity today to speak on a panel at the SAEC Global Venture Congress. Other panelists included the moderator, Scott Maxwell from Insight Venture Partners, Bob Gold of Ridgewood Capital, Robert Dennen of Enhanced Capital Partners, Todd Pietri of Milestone Venture Partners, and Roger Hurwitz of Apax Partners. Our panel was focused on helping entrepreneurs build a winning technology company. While there were a number of interesting thoughts presented by my fellow panelists, a few important highlights were the following:
1. Release early and often – It is better to release an imperfect product, get feedback, and continue evolving than trying to release the perfect product because you may never get there and run out of cash before doing so.
2. Filling the product management/marketing role early is key. Having a person who can shape the product and prioritize features by gathering the data in terms of what customers need near-term and what the market may need longer term is imperative. More often than not I find early stage companies that are engineer-driven that spend too much time on features that the market may not need. Avoid this problem early on and focus your limited resources on the right priorities.
3. Sales ramp – Do more with less and be careful of ramping up sales until you have a repeatable selling model. In other words do not hire too many sales people and send them on a wild goose chase until you have built the right product, honed the value proposition, identified a few target markets with pain, and can easily replicate the sales process and model from some of your customer wins.
While our panel was focused on helping entrepreneurs build a winning technology company, we also did have the opportunity to digress briefly and dive into business models that we liked. When Scott made all of us pick what type of company we preferred in terms of its target market from a list of enterprise, SMB, or consumer, it was interesting to hear the responses. I selected enterprise with the caveat that the company have a scalable business model (capital efficient, channel friendly, OEMable, possibly hosted, etc.) while a number of others voted consumer, SMB, and hosted software. If you asked the same question a few years ago, I am sure that enterprise would have been the overwhelming choice. While there was no consensus on SMB vs. consumer, it was quite clear that all of us had a limited appetite for investments in traditional enterprise companies predicated on large direct license sales.
Hi Ed,
What is a “repeatable selling model”? Coming from a pure tech background, I can only understand – building a product and TRYING to sell it.
For example, does Salesforce have a repeatable sales model? How can it possible have guarentees that people will continue to buy its stuff?
While I love the hosted model and figured that would be the most cost effective strategy for smaller customers (we were shooting for enterprise & SMB), it turns out even the smallest customers want a solution in house (go figure). Even stranger, was that they were willing to pay more for it. So now we’ve adapted our appliance strategy so we have a cost effective solution even for the smallest of companies (like the local community college that only has 18 users on the system).
Reality will always be stranger than your business plan.
It sounds like you are listening to your customer and market which is the right thing to do. Reaching the SMB is difficult so I am glad to hear that you have a cost effective solution and I imagine that you have a cost effective sales strategy to boot.
Yes, building a product that solves the problem for one, two, or three customers is different from building a product for many customers in a market that is large enought to support your business and others who are already there or will show up. Having a few data points that prove this out is important. Think about whether or not the product as it exists today solves the problem for a number of different players or did if it required significant customization to the extent that the product needs and requirements were different for each customer. Salesforce.com does have a repeatable sales model because its product fits the needs for a market, not just a handful of players. There are many ways to go about this. For example, some companies may verticalize a solution and sell software to financial services companies. While it may not be as large as a horizontal play like CRM which transcends industry, it will still potentially get you a highly repeatable sales model in a very focused market. The “repeatable” part means that you have nailed down the value proposition, know who in the organization you are selling to, can cost effectively reach that person, understand how to win deals against competing products, and can use this as a model or template for additonal sales headcount.
Point #2 is interesting as I observe more importance being attached to the product management role. Not sure if cap tables reflect this prioritization. With geographically disparate engineering teams and outsourced development, the startup is relying more on the product manager to pull it all together.
Hi Ed,
First up, I’ll declare my colours and say that I’m 100% in agreement with the ‘release early and often’ philosophy nowadays. No arguments there then.
But that’s not always been the case for me because I’d always been led to believe, and trained, that it was best to desire all, design all, build all, test all and finally release all (oh yes, and invoice all)
This old approach to my work was fine when:-
a)markets weren’t in such a constant state of flux and
b)the procurer of the system (internal or external) was more likely to know exactly what their market niche needed, and would buy.
But the world moved on and the systems are now more componentized, both technically and comercially.
This needed to be the case in order to reduce risk in my old points a and b above as neither are as true or reliable any more.
The big but is that although we agree about releasing little and often, and strive to do so, there is a huge temptation for non-technical members of the team to then trivialise the effort required in order to achieve those releases. I’m refering of course to “well it’s only a small thing, so it’ll be easy/quick to get that done” style comments that this new(ish) extreme model seems to cause.
This in turn causes a chopping and changing of priorities at very fast frequencies which can lead to a lack of cohesive structure in the releases as they occur.
I’m undecided if this effect is a good or bad thing overall, but I do know it’s very stressfull at the coalface.
It sounds like you are listening to your customer and market which is the right thing to do. Reaching the SMB is difficult so I am glad to hear that you have a cost effective solution and I imagine that you have a cost effective sales strategy to boot
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