Richard Brody on the debate over the decline of a genre: http://nyr.kr/1xALTza
“In the eighties, the industry found that it had left its largest market, that of young people wanting to get out of the house, untapped or shunted to ludicrous beach-blanket anachronisms. After that market is served, what’s left is the equivalent of the New York Philharmonic, the Metropolitan Opera—or, for that matter, Bargemusic, The Stone, or IRCAM.”
The past few months I have been recounting our experiences with some of our CEO’s who have taken their business from Europe to the US. Many of them have done this successfully including TrustPilot CPH -> NYC; Conversocial LON -> NYC; Bitbar HEL -> to SFO; Campanja STO -> SFO etc. Others have struggled (not that any of these didn’t go through the struggle). I am also pulling together a dataset to run some stats that we will publish soon covering how high-growth and high-potential tech startups from Europe have entered new markets.
This study will aim to answer questions such as: what market did they penetrate first and why?; how did they first start selling into that market - inside sales from the HQ or did they set-up a branch/subsidiary?; how much VC/angel money had they raised to date?; what was their MRR at the time of formally internationalizing?; how many employees did they have?; what was the background of the founders?
The study is focusing first on B2B companies (and depending on the size of the dataset we may limit the first study to UK companies only as opposed to European wide). I have also spoken to key individuals at companies that were instrumental in taking their companies abroad that have gone on to have large liquidity events (LogMeIn, MySQL, Zendesk, etc) and I’m interested in speaking with you if you have been through this process, are going through this process, or are thinking about going through this process.
There are a lot of things that we have learned about this process and my goal is that by pulling as much data together about the companies who have successfully launched their companies abroad will enable us to make better decisions about supporting our portfolio companies with their international expansion.
Please get in touch with me if you would like to learn more or contribute to the report with a case study or any anecdotal evidence.
How do you build a successful lead generation strategy from scratch as an early stage startup? This post will outline the 3 things you should be focusing on in the early days of driving leads at your startup.
First, let’s define our goals in setting-up your marketing strategy. Here are some of the goals that I think matter the most very early on:
- Site visits -> Drive a significant number of visits to your website through creating compelling content that potential customers WANT to engage with to learn more about your product. This is about attracting as many leads as possible because only a small % of leads will ever convert into customers. Note: You should aim for this content to be fun and informative so that people come back to your site to learn more regularly.
- Metrics -> You are able to measure key metrics like visitors, which content is winning, number of email addresses captured, number of webinars registered for, number of white papers downloaded, if your intern is producing the best content etc. Note: down the line, it will be important to then measure which visitors went on to become customers and understanding the funnel that they went through to get there.
- Lead commit ownership -> Finally, someone needs to ‘own the number’ which is called the ‘lead commit’. This is simply the number of qualified leads that entered into your funnel. Who will this be at your startup? Note: most of our early stage saas businesses don’t have a VP Marketing yet. This number is usually owned by the head of lead generation or a marketing manager. In some cases the CEO still owns it.
The 3 Outputs to Focus on Getting Lead Generation Live
Step 1: Account segmentation
Most early stage companies that we meet have either not started thinking about marketing at all or have implemented a spray and pray approach to marketing. Sadly, neither of these are going to drive awareness about your product.
How do you segment your customer base (I’ve written about this in the past)? Well it’s actually quite easy, look at your first paying customers and identify the common themes that they share. Where are they located? How big are their companies? How big is their team? What sector do they work in? All of this data should be used when targeting customers that will fit a similar profile as you know you’re solving a pain point. For example, our company Bitbar has had a ton of traction with both gaming companies and financial services companies. A lot of their messaging is targeting engineers at these companies based in key geo’s.
Once you have a good idea of where your product is getting the most traction, we can start building content for like-minded potential customers to engage with.
Step 2: Become a Content Marketing Machine
Look at all of the modern successful web software companies like Hubspot, SugarCRM, Box etc. They all create highly relevant content for their target audience - almost on a daily basis. This isn’t your general brand advertising that large enterprise companies have - this is specific content which covers a feature of your product and why it is the best in the market. It is white papers which demonstrate that your company is a thought leader in an emerging space. It is a video demonstrating how customers have successfully used your product to make them better at their jobs. The goal is to teach your customers more about the market in which they operate.
Early on, you need to set a goal of creating x pieces of content a week. Blog posts, videos, white papers, newsletters, events should all be weapons in your arsenal. This content should be distributed through email, social media as well as through partner’s blogs. For example, relationship intelligence platform company Datahug (a DFJ Esprit portfolio company) has partnered with various CRM and Customer Success software companies in distributing blog posts to their customers.
PR also counts as content and I know founders who have goals of getting mentioned at least once a week in key publications that their customers read.
Step 3: Pause, Reflect, Iterate
You now have a dedicated person on the team creating content, managing your leads and measuring the outputs. After your first 4 weeks of running campaigns, take a time-out and sit down as a team to decipher the results. Which content was engaged with the most? Did it drive customers to register for a webinar or call you directly to discuss pricing? Are those customers now registered to receive your newsletter? Are the same people coming back to engage with new fresh pieces of content?
Whoever owns the lead commit number should at this stage have a general idea of how much of what kind of content is going to need to be created every month to drive the leads that you as a business need to fuel your growth. In a later post, I’ll talk about how to measure what kind of lead’s growth you need to grow your business well over 100% p.a.
It’s going to take time to build an effective lead-gen marketing machine. It’s not something that will grow exponentially. It is very much an incremental process. Remember, its always better to start early (as early as day one) in creating content. It will sit there forever and help to drive leads for your sales team. And most importantly, make sure you set goals and have someone directly responsible for owning the lead commit number. If you do all of these things, (assuming you have a good product!) you will be on your way to your first $1m in ARR.
Identifying disruptive footholds means connecting with specific jobs that people - your future customers - are trying to get done in their lives. The problem is that in an attempt to build convincing business cases for new products, managers are complied to quantify the opportunities they perceive, and the data available to do this are typically cast in terms of product attributes or the demographic and psychographic profiles of a given population of potential consumers. This mismatch between the true needs of consumers and the data that shape most product development efforts leads most companies to aim their innovations at non-existent targets. The importance of identifying these jobs to be done goes beyond simply finding a foothold. Only by staying connected with a given jobs as improvements are made, and by creating a purpose brand so that customers know what to hire, can a disruptive product stay on its growth trajectory.
As the CEO, Head of Product or VP Engineering at a startup, hiring is one of your most important, but difficult tasks. You don’t have enough time to meet candidates, you don’t have years of experience hiring candidates, you’re not 100% what their job spec looks like and the list goes on.
If you are trying to get the right people into your startup at the right time, then you might want to consider the circumstance based-theory which was devised by Professor Morgan McCall from USC’s Marshall School of Business. McCall points out that skills that enable new hires to succeed in a new role were shaped through their experiences in other assignments in their careers. A previous role can be thought of as a school, and the problems that they have confronted within it is the “curriculum”. The skills that new hires ca be expected to have or not possess depend on the courses they did and did not take.
Given you are building a new product in a new market that has never been built before, how do you hire people that have taken the relevant courses previously in their career? If you are hiring grads straight out of college, how can you be certain that they will be a fully functioning and productive member of your startup?
You need to look at the kinds of issues that your potential hires have tackled in the past. It’s not as important that they accomplished huge milestones, rather it is important that they have faced similar kinds of problems and figured out how to deal with them. It is difficult to ascertain whether or not a new hire was successful in their last role because they may have succeeded for reasons outside of their control.
One place where we see founders struggling consistently is with early sales hires. When you’re looking for your first handful of sales people to come and take over from you as the founder, you typically overshoot and start talking with people at very large successful software companies selling products in a similar category as your own. These hires typically joined their respective orgs when the org’s were already generating leads, converting them into opportunities, had marketing materials, customer success etc and didn’t have to establish early sales execution. So how relevant are they to come in a help you define your early sales execution?
Using the circumstance-based theory for hiring early sales managers, you should be assessing: how early did they start in their last co, how many sales people were there when they started, where did they hire the first sales people from and what profiles did they have, how many customers were there, what was the average deal size when they joined/now, how did they build the sales org etc? If they were at a larger company, its unlikely they they would have done many of these things rather, they were on the phone generating leads and closing deals - being a good salesperson, not a good startup sales execution person.
For a much larger company looking for a COO the circumstances could be: were they directly responsibly for running the operations in their last company with many direct reports, how fast was the growth over that period and how were they correlated to that, how many people did they hire directly, what kind of P&L responsibility did they have?
Hopefully this approach will enable you to recruit and retain the best possible talent for your company.
So many startups that I meet are looking for a niche to fill with a new product. Often times they segment a market by price or demographic data as a first step in the research phase. As an example, a head of dev ops may get tired working at their startup and decided to launch their own platform for other dev ops to use. They will go and research companies that have a head of dev ops, segment them into various industrial verticals (finance, marketing software, ecommerce etc), by size (SME, mid-market, enterprise) and by how big their budgets are. They might decide to target one of these markets first - mid-market fintech companies. Most of the time they fail to get traction. Why is this?
In their brilliant book The Innovators Solution, Christensen and Raynor talk about the Pomp and Circumstance in Segmenting Markets and why these segmentation schemes fail so frequently.
“The reason, in our view, is that these delineations are defined by the attributes of products and customers. As we see….theories based on attribute-based categorisations can reveal correlations between attributes and outcomes. But it is only when marketing theory offers a plausible statement of causality and is built upon circumstance-based categorisations (segmentation) schemes that managers can confidently assert what features, functions, and positioning will cause customers to buy a product”.
They then introduce the idea of understanding the circumstances in which customers buy or use things. People have “jobs” that need to get done. For example, an early stage sales team needs to keep track of their sales pipeline. In order to do this, they go out and “hire” a product to get that job done, in this case a CRM system.
“The functional, emotional, and social dimensions of the jobs that customers need to get done constitute the circumstances in which they buy. In other words, the jobs that customers are trying to get done or the outcomes that they are trying to achieve constitute circumstance-based categorisation of markets. Companies that target their products at the circumstances in which customers find themselves, rather than at the customers themselves, are those that can launch predictably successful products. Put another way, the critical unit of analysis is the circumstance and not the customer.”
If you have launched a product recently and have yet to find product market fit, go back and speak to your potential users and find out what product they are trying to hire, and what jobs they have that aren’t getting done well. This will hopefully enable to you compete with the real competition that your users are using.
Several of our B2B portfolio companies had first mover advantages by building innovative products for a market that didn’t yet exist. They are now two to three years into the growth of their markets and no longer have to think about competing only with themselves. Newer startups have launched similar products and are now direct competitors coming after your existing customers.
Typically, these newer startups are taking advantage of a geographic arbitrage and are going after new customers in new markets where your startup hasn’t committed marketing and sales resources yet. When they start coming after you, the incumbent (if you can be called that as the one with the first mover advantage), they almost always do so by being cheaper. In some cases, they will even give the product away in the hope that the customer will start paying for it once they become hooked. Given a smart enough engineering org with a focused roadmap, its not hard to fast-track product development given the validated learnings from watching you as the market leader (though this is a lot harder than it seems - I often hear founders say things like “they’re going down the path we originally went down and it will take them 6 months to realise why that didn’t work”).
So, here you are with 50-100+ customers, the majority of which you closed personally as the founder in the early days. You’ve made your first marketing and sales hires and are slowing building sales execution into your business. The next 6 months are about coupling sales acceleration with continued product development. How are you supposed to compete with a newer entrant who is coming in and competing with you on price assuming their product isn’t more than 6-12 months behind you?
Here are three strategies that when deployed effectively, will continue to give your company the edge (side-note: you should probably already be focusing on all three of these things if you are a B2B company with over 20 paying customers):
Somehow you have created a product that is solving a big enough problem that someone at another company found you and somehow, miraculously, paid you for the right to use. How do you make sure that they have an easy transition from the old way of doing things to using you? How do you ensure that your product is being adopted across their team? Who is measuring that company’s success with using your product and ensuring that they are aware of upcoming and future developments with the product? Who is soliciting feedback from them in order to create new scorecards for product dev?
Customer Success (also known in some industries as account management) is in charge of owning the execution of most of these things - alongside marketing and product. By putting the customer front and center, you will continue to learn how they are most effectively using your product, how to better market and sell it to new customers, how to drive engagement (and ultimately renewals and up-sells) and what new features to be considering building.
Both product marketing (targeted at existing customers) and content marketing on your site/blog are crucial. Success is effectively communicating how and why your product is different and better than the competition. Sometimes this is done via a box-ticking exercise (comparing/contrasting feature sets); case studies from existing customers honing in on the two or three most widely used use cases; if your mature enough and have the time to commit - getting into analyst reports; and finally PR. Getting that guest blog post on Salesforce.com or having a gues appearance on Squawk Box will help you to enhance your brand when trying to differentiate from your competitor.
But no matter how effectively you support your existing customers and get marketing working, the only thing that truly matters to your end customers is how good your product is. No matter how quickly you’re growing your customer base, you need to continue to measure how they are using your product and where certain features are lacking and where there is demand for new features. Continuously innovating on product, executing on the marketing and communication to your existing customers and ensuring that they are getting the most out of your product, I believe you will be able to stay at the forefront of your growing market.
We first invested into Conversocial in 2011 and the company has more than doubled their revenue each year since we invested. They are now starting to grow at an exponential rate due to a number of initiatives led by their young CEO Josh March. These include opening their first US office in NYC last year, spending a lot of time nailing sales execution and acceleration, and continuing to listen to their 150+ enterprise customers on continuing to develop the best platform for customer service.
As a result of putting the customer first and listening to their needs, its exciting that they recently launched their latest feature called ‘Conversations’. Conversations enables enterprise’s to manage social media based customer inquiries directly from the contact center. This empowers businesses to elevate social media from a marketing tool to a strategic business operation owned by the customer service department. This workflow threads together related customer interactions from different channels and allows large scale customer service teams to see the complete picture of an outstanding customer service issue. It makes it easier and much faster for the agent to resolve a particular query which in turn, satisfies their own customer.
There has been a shift in social customer service away from traditional marketing and into the contact center over the last 6-12 months and Conversocial has dedicated a lot of resources to educating large enterprise customers on how to handle the transition from on-premise software used to track emails and calls to their cloud based offering.
Over the next few months they have a few more major features that they will be releasing that will make their large enterprise customers and new potential customers even more able to handle the number of customer service issues at scale. You can read more about Conversations here.