Startups, Sales, and Sales Hires

You have a startup, you seek funding and your investors appear singly focused on your sales. If only you only had more sales! If only you had a sales person. May be so, but it more likely not.
The best case made that I have read in this regard is reprinted below from Matthew Bellows, CEO of Yesware.
Beware the Sales Hire.To address the concerns of your investors you may need more results from a "Cofounder/Selling CEO" as referenced below. If you cannot do it, then find one, but it is a very different talent that a Salesperson.  Read carefully

You're Not Ready for a Sales Hire: 4 Reasons 

Hiring a salesperson too early is a good way to distract your team and waste money. But there are three signs when it is time.

Do you work in a start-up? Do you look around every once in a while and say, "You know what we need? We need to hire a salesperson to really get this company off the ground?" Well, you're probably wrong.

It's strange for me, a lifelong salesman who started a company to help salespeople, to advocate not hiring one of my own. But that's exactly what I'm suggesting, at least until you and your company are ready. Here's why:

1. Salespeople need something to sell.

Some thing—not a concept or a prototype. In general, salespeople stink atproduct development. They excel at revenue development. If you are envisioning a great salesperson rounding up customers for your idea, your beta trial, or your brand new service, then you are dreaming . Good morning sunshine!

2. Salespeople are expensive.

The better a salesperson is, the more expensive he is. If a salesperson feels your product isn't ready to bring to his contacts, she will hold back. Experienced salespeople are more protective of their contacts than the memory of their high school sweetheart. So for every day that your new sales gun thinks your product isn't awesome, she is paying a big opportunity cost by working at your start-up.And she is going to charge you for it either in money or in frustration.

And if you find a salesperson who offers to work for equity, ask her how many times she's blown away her quota.  Chances are she never has.  Don't make the hire. If you do find the exception to the rule, that person isn't in sales—she is a co-founder. Give her equity (that vests). 

3. Salespeople are hopelessly optimistic.

If you hire a salesperson, he is going to run at the job like a pole-vaulter. Heknows he'll clear the pole. But it's a rare salesperson who can keep the energy up if he doesn't get quick, positive feedback from potential customers. After a couple of weeks of failing, most good salespeople are going to start thinking about other poles they could be clearing. And the ones that just want to hang on to the job? Well, there's no quicker way to murder your company vibe than listening to your new salesman get dinged on 60 cold calls a day.

4. Salespeople are mostly risk-adverse.

Call it the curse of the fat bonus. A salesperson who has made $200,000 or $300,000 for a few years in a row is going to be counting the days until she can make that again. There just aren't that many money-really-doesn't-mean much-to-me-it's-the-work-that's-important kind of salespeople. 

So please, don't hire a salesperson to figure out what your customers need or whether they will buy some future product that might have some certain set of features. That's the job of the founding CEO. Yes, it's your job, even if you are an engineer.

How do you know that you are ready to hire a salesperson? Consider these three things: 

1. There's enough opportunity.

It will vary by company, but $1 million is the number I use. There has to be another $1 million in revenue that you can identify but that you cannot pull into your company because you are too busy selling to other people. If you can identify $1 million worth of prospects, it's a great time to hire a salesperson.

2. Your product is awesome.

What does that mean to a salesperson? It means you have reference clients—paying customers who the salesperson can leverage. When she sees your customer list, you want her to think, "Oh man, if the founder can get these customers, I am going to KILL IT here."

3. Your culture can handle an influx of sales energy.

If you have a tight, technical team, bringing in salespeople is going to change the atmosphere like a high-pressure system moving into the tropics. Batten down the hatches.

Hiring a salesperson too early is a great way to distract the team, waste your money, and bury a company. Hiring one too late means you won't grow as fast as you otherwise could. It's best to be on time, of course, but given the risks and rewards, it's much better to wait until you, your product, and your company have reached some of the milestones I've mentioned. Then make that first sales hire.

Matthew Bellows is CEO of Yesware, an email service that helps salespeople track conversations, create sales templates, sync emails with CRM and much more. @mbellows

The Magic Ten

Sales are the only unquestionable proof that anyone on the planet values and wants what you make (or plan to  make).  Therefore it is the only proof that your business has any potential of being a viable,  even a successful venture for you and your investors.
Of course your business may still fail for a thousand reasons some related to you (management skills), some beyond you (timing and economic cycle).  But if no one wants to buy, it is proof that there is no potential - change what you make or go invent something else.
 
The trouble is that this sales "acid test" is almost never performed soon enough.  Innovators waste untold  resources on whimsical notions that  the world needs X because they thought so and without ever asking anyone if it is true, except perhaps for overly sympathetic family and friends.  The genetic make up of the inventor/innovator is to instinctively seek solutions to perceived problems, then develop total belief in the solution found, often with smug disregard for the opinion of the less innovative.  Unfortunately, those less innovative folks are the customers that should buy your product (BTW they probably innovate in their domain just as much, just do not appear so to you). Because their focus is elsewhere, almost always they will have different perceptions than you. BUT, if they do not like your offering, your product is crap: beautiful, genial, elegant perhaps, but business-wise it is still crap.

Before investing a great deal of energy developing prototypes, let alone finished products, do yourself a great favor:
1  Get out of your office or garage
2  Look for 10, TEN, not two, TEN prospective buyers of your product

3  Find a way to explain in 45 seconds: what you offer, and its value proposition 

4  Continue to search until you have found ten that say they would buy whatever you intend to make
5  After TEN people say they will buy at the price you envision, go prototype your product.
6  Then go back to validate with your ten prospects if they would still buy it.
7  If less then ten would, use the feedback to explore design modifications and
8  go back to searching for prospective buyers until you are back to ten
9  Repeat the loop for every prototype iteration
10 If you have less than ten fans or buyers go back to look for more - Remember TEN

Clearly this formula calls for good walking shoes and door knocking stamina far more than an MBA.  The latter in fact will give you countless excuses to stay in your office to over analyze your own questionable notions of reality until, eventually failure will lead you to forget the textbooks and fancy formulas codified years ago, then get good sneakers and go talk to customers about what they want NOW.
It is a simple formula: TEN

Oh, and you can bet heavily on this outcome:  If you can show your prospective angel investors that you have done this field market research, or better yet you have actually sold something to somebody, you'll be in a class apart from all the funding seekers they see - you will have the beginnings of a proof of market

Marco Messina

Markets, Customers and Angels' Risk Aversion

Famous entrepreneur and Stanford Technology Ventures Program lecturer,Steve Blank reports that business failure from technology failure (the business' technology encounters operational conditions under which it cannot perform as hoped) is about 10%. Business failure from misunderstood and miscalculated markets, market failure, is about 90%. Why?  I propose that the nature of the "entrepreneurial brain" has much to do with it.

Entrepreneurs by nature are innovators, problem solvers: they perceive a need (more convenience, more speed, less cost, whatever) and instinctively start seeking a solution, a fix. That initiative and independent thinking is the power of entrepreneurs, but is also a curse. Asking  "what do others think" does not come as automatically. So, the entrepreneur finds a solution to "the problem", a problem possibly perceived by only one person, himself, and presumes it is a widespread need.  Then, enamored with the conceptual "solution" (s)he commits time, effort and treasure to create a prototype.  Sometime for lack of sufficient resources a detour is needed into fund raising to finance the idea now morphed into a business venture.  

Eventually a product is ready for sale and the surprises start coming: customers are not as enthusiastic about it as hoped, they have difficulty using the product because of a million reasons, or they could benefit from using it, but other circumstances prevent its adoption (e.g. supply chain disruption, legacy systems, not invented here, etc.). In a few words our entrepreneur has invented a Bricklin or a Segway, an innovative design with definite benefits but overall unsuitable for the larger market originally targeted. The outcome is then outright failure or a walking zombie of a business.

In product and software development there are long standing disciplines (use case analysis) to ensure that acceptable performance will be possible in specific instances of use.  Use case is a discipline that forces  asking questions, and more questions, and more questions.  The same discipline is needed with respect to markets and customers. Here are the questions to ask:

What are your customers top problems?
How much will they pay to solve them?

      Could they do nothing and get by?
Does your product concept solve them?
      Do your prospective customers agree with you on this? [Your guess that they do is the issue we are trying to avoid!]
Draw a day-in-the-life of a customer (the customer's use case) 

      before & after your product adoption

      what will the product improve

      what will the product hinder/change/complicate

Draw the org chart of users & buyers

     are they the same?

     we must satisfy both, but buyers control

     who has a vested interest in favor or against adoption?

     who is the loser if adopted?

     can your customer afford to upset the loser?

Are there enough buyers NOW to make it worthwhile?

Can we scale our processes to match the market size?

The only way to know for sure is for the founders to go out (out of the office, in the real world) and ask the customers.  Go out and ask are obvious, but would marketing consultants be able or even better at doing this research? Definitely NOT.  Consultants can go out with clipboards to get data and analyze it, but at this stage the critical component is intimate understanding of BOTH the customer and the product concept/prototype.  Only the founders-inventors can "feel" both sides of the equation and catalyze a workable solution based on the customers' responses.  If the consultants could do it, they would have been the inventors-founders.

So, early on, even before prototypes, go out and ask your intended customers how your product will meet their needs and what issues it will cause and LISTEN. The product will almost inevitably be modified by this effort, but at much lower cost than building and rebuilding prototypes or final products. You may discover that your product is perfect at a perfect price with the expected benefits, etc.  Too bad that its adoption would kill another more important part of your customer business and therefore your customer would have to be mad to adopt your product.

Validating your value proposition in person and directly with the customers (taking into account all vested interests involved)  may just reduce the probability of your business' market failure from 90% to something less. Any improvement will likely appease your angel investors' risk aversion.

Marco Messina