Categories
E2E: Scale

THE MISSING MILLION $

Note: This blog was originally published by Julian Castelli on Growth Scaling.  

 

Why hitting the most important customer “nerve” is the key to sales velocity.

The other day I was speaking with the growth team at an exciting SaaS company. The Company had the best product of its kind in the market. In fact they had just been declared the best product by a leading industry source – woohoo! Yet, sales velocity was good but not great…

After discussing all sorts of potential reasons, I suggested that maybe they hadn’t yet “nailed the value prop”. This drew all sorts of eye-rolling and sighs by the team. “How could that be possible? We have over a hundred happy customers! Just look at our pipeline and how it is growing! Look at these names!”

While I wasn’t trying to create a controversy, nor downplay any of the Company’s achievements, I knew that there was a difference between the success this Company was having and what it feels like when you are “In the Zone” with a great Value Proposition that is crushing it. Being in the Zone is also referred to as having great Product Market Fit. When you are in theZone, you are like Michael Jordan who just knows he can sink any shot or make any play – just give me the ball!. For a SaaS company you just know that you can close almost any deal or train any good sales rep to beat quota consistently. Confidence in these capabilities is exactly what allows SaaS companies to scale growth predictably and efficiently. This attracts VC money like bees to flowers– just give me the money! – which of course provides those companies with more resources to grow even faster and improve their products to the point where it just doesn’t seem fair. That is why you have to get into the Zone and do everything you can to stay there!

A few years ago, I was lucky enough to experience what it feels like to be In the Zone. Our team got there by selling money. In fact, we called it selling the missing $1million. I recently caught up with Michael de la Torre, our CRO, who led the effort to get there and coined the term Selling the Missing Million to recap what we did differently.

“Our historical approach was to either lead with our demo or talk about what we could do for them. This approach did not get us anywhere because no one wanted to hear about what we did. But once we discovered their biggest pain point and then reframed our entire pitch around having a discussion about that pain point, our sales took off. For our customers, it was about revenue growth. An extra million in revenues would mean much more margin in their pocket and it would mean the difference between barely scraping by and a massive windfall. In other words, another million dollars at the margin meant everything. So we recrafted our pitch to reliably get to that point. We crafted our whole selling motion around engaging them in a conversation about current revenues and current approaches to revenue growth – occupancy, daily rate, and other key revenue components – and then we would use those numbers, their numbers, to frame a strategy where we could help them find their ‘missing million’. We would often transition our conversation by saying ‘based on what you’ve told me, it seems like you are missing a million dollars’. The response almost always cycled quickly from confusion, to interest, to excitement, to action. The ‘missing million’ completely changed the tone and energy of the customer conversation, and we sold many deals without even demoing our software. Once we understood the true nerve, and we crafted a pitch that could reliably hit that nerve, we almost always won the deal.”

Steps to Finding Your Pitch

Are you selling your product features or are you selling to their biggest, and often unarticulated, need? Here are some tips to help you discover your “Missing Million” value prop.

  • Deep Customer Knowledge: It is not enough to define an ideal customer profile and personas. You really need to know what keeps your customer up at night. What are their most important problems that they encounter every day? What challenges do they encounter trying to solve them today? Is it revenue? Is it cost? Is it risk? Is it peace of mind? Is it quality? Is it scaling for growth? Or it could be some combination of all of the above. If you can solve one of these problems you have a chance at reliably hitting that nerve. At LeisureLink, we hired industry SMEs versus traditional sales reps, because they could easily have the simple conversation with the customer that reliably and inevitably uncovered the ‘missing million’!
  • Iterate and Test Like Crazy: You are not likely to get it right the first or second or even the third time! It will take time, and lots of “at bats.” Make sure your team is trying multiple approaches and you are listening for what works. Weekly sales debriefs and learning sessions are critical to uncovering what may work. Remember, many to many conversations are exponentially more efficient than one to one coaching sessions, where great ideas may be missed or not connected to other discoveries to form the critical hypotheses! In other words, design your sales and marketing process to optimize discovery!
  • First Things First: Don’t lock in your website messaging right away and then waste a year or two pitching a message that doesn’t resonate. You need to nail the value prop first, then support it across all of your messaging channels. Keep things relatively light and malleable until you have nailed it for sure. And keep iterating!
  • Avoid the Rocks: Just because the customer wants to talk about something doesn’t mean that is the right path to closing. Recognize and ID the rocks, indulge them shortly if customers bring them up, and then have the courage to “reframe” the conversation to whatever value proposition is closest to selling money in your world.
  • Nail the Re-Frame: Reframing takes courage and skill. It can’t be done clumsily or it will feel awkward. You need to know enough about the customer and her pains/needs that you can lead the conversation towards solving them. Even better if you can get them to realize how to solve their problem using the socratic method! Then they’ll “ask you for the money!

I am a Venture Partner with Next Coast Ventures and COO/CFO at Voxpopme. I spend my time helping technology companies scale the Growth Mountain.

Categories
E2E: News

Announcing Our New Venture Partner: Jason Dorsey

Today, we are very excited to announce that we are adding Jason Dorsey to the team at Next Coast Ventures. Jason is joining our team as a Venture Partner where he will focus on helping Next Coast and its portfolio companies with consumer trends, brand building and customer acquisition.

We have to point out that Jason isn’t your garden variety Venture Partner. He is an expert on digital natives and generational behavior, which means he can help us refine our investment themes and evaluate big trends that impact our investment decisions AND offer invaluable insights to our portfolio companies on their marketing, branding and sales strategies.

Jason’s unique perspective underscores our relentless focus on bringing the best – and outside the box – resources to help our entrepreneurs.

Jason is the president and co-founder of The Center for Generational Kinetics where he leads Millennial and Gen Z research, speaking, and strategy to uncover the hidden, generational drivers that solve tough business challenges. He’s helped reposition global brands to win Millennial customers, advised on billion-dollar acquisitions and taken clients from last to first in employee retention. Last year, the Center worked with 180 clients on four continents in industries ranging from automotive, healthcare, and retail to advertising and technology. Jason wrote his first bestselling book at age 18 and currently serves on the board of directors at Ultimate Software (NASDAQ: ULTI) and continues to advise numerous CEOs and corporate boards.

Jason Dorsey, president and co-founder of The Center for Generational Kinetics

We are thrilled to have Jason as part of our Venture Partner program and can’t wait to introduce him to our growing portfolio of amazing entrepreneurs! His addition underscores how we are constantly pushing ourselves to think of new ways to help our entrepreneurs and make sure we understand big trends in the marketplace and how the world is changing.

Please join us in welcoming Jason to the Next Coast team! We sat down with him to learn more about his expertise and how he will implement them as part of our Company Building initiatives:

What are you looking forward to about working with a VC? How about Next Coast in particular?

I get fired up talking with the team at Next Coast! As entrepreneurs themselves, their passion for helping other entrepreneurs matches perfectly with my own journey and the impact I want to make in the world. I also appreciate how closely they work with portfolio companies to help them adapt, grow, and carry out their bold vision. That is hard to find and even more rare to receive from VC’s with such a great track record as the Next Coast team.

You often work with very large, established brand names, what are you looking forward to about working with early-stage companies that are still figuring out what their brand is?

Working with early-stage companies and their leaders means they can act on our findings and solutions much faster. The early-stage companies we’ve helped have been able to implement and benefit from our solutions almost immediately; whereas, large companies often take longer for approval, budgeting, and implementation. In addition, the feedback loop with early-stage companies is much shorter, so they can learn and adapt much faster, which is key to success when launching a new venture in new and mature markets.

As an entrepreneur yourself, what resources do you wish you would have had access to when you began your business?

I started my first business at age 18 and slept on a floor for two years. The first resource I wish I had was a bed! Candidly, I wish I had known other, more experienced entrepreneurs who had “been there and survived that.” I wish I had a mentor who had taken a business from zero to success who could have given me a candid perspective and advice on each key aspect of my business as well as opened doors. Being an entrepreneur means managing and learning how to do everything—and often the hard way—from surviving cash flow challenges and developing employees to navigating relationships with Global 100 companies. Shortening the learning curve by having experienced help or investors would have enabled me to focus on my strengths and the areas I’m most passionate so we could’ve grown faster. While I still think it’s best to learn by doing, some of the lessons involved in scaling a company are faster learned (and avoided!) through a more experienced entrepreneur sharing their experience.

“com·pa·ny build·ing (noun): a hands-on approach to helping scale businesses were we use our past experience as entrepreneurs to help other entrepreneurs succeed.”

Jason’s obstacles when he began his business ring all too true for us, everybody at Next Coast has sat in the entrepreneur’s seat at one point in their career – and we all wish we had more resources when we first began our businesses. That’s why we implement our Company Building approach and dedicate so much time and resources to making sure it offers effective tools to our entrepreneurs.

How can your research and expertise help entrepreneurs grow their businesses?

Entrepreneurs are generally trying to solve an urgent problem and build a business around their unique solution. Most of the time, the problem is driven, or heavily influenced, by generational differences and emerging trends. We see this in everything from technology adoption and retail experience to changing dynamics in the workplace. Our custom research brings accurate data to the trends that are driving—or limiting—an entrepreneur’s business. We then show them how to make these generational trends their advantage to fast-track growth. Our research-based insights and specific solutions inform new marketing campaigns, drive sales results, improve workplace strategies, and advance innovation—all must-have components for an entrepreneur to quickly scale their business. The way I look at it, entrepreneurs have enough challenges to face, and being wrong or blind to a generation’s hidden drivers or behaviors can crush a great business idea. Our research provides truth and data to entrepreneurs so that they can make smart decisions fast.

What is the most common mistake you see businesses make when it comes to understanding their consumers?

Too often they focus solely on what we term “tracking data.” They look at sales, impressions, employee retention, customer satisfaction, etc. This data is important, but it does not reveal the “why” behind the behavior. In fact, tracking data is by definition a measure of an outcome that happened in the past. If we are to change the outcome going forward, we need to understand the thinking, influences, decision-making, and behavioral drivers that led to the outcome in the first place.

What would you say to an entrepreneur who thinks your research isn’t relevant to growing their business?

We haven’t found an industry that can’t benefit from accurately understanding generations of employees and customers and the drivers underlying their behaviors. Almost everything you and I do on a daily basis is in some way influenced by our own generational experience—from how we communicate and shop to how we work and interact with an experience. By understanding generations in the context of your own business, industry, and marketplace—as well as your own generation–you have the immediate advantage of being able to faster connect with and influence people of different generations. This can make a massive difference in your business’ success or failure as well as in your own leadership results.

Your expertise isn’t typical of a Venture Partner at a VC firm, if you were at a cocktail party, how would you describe The Center for Generational Kinetics and its work?

We separate generational myth from truth. We dive into the headlines and trends that influence executive decisions to see what is right, wrong or just misunderstood. For example, there is a perception that Millennials are using credit cards more than other generations—yet they’re actually using them less. Millennials are also not all “unemployed and living in their parents’ basement;” they are actually the largest generation in the U.S. workforce and the largest percentage of managers. From a consumer perspective, you hear all the time that Millennials are out of money, yet they’ll outspend every other generation this year and drive most major consumer trends. Our research firm has also uncovered that the Millennial generation is splitting in two. In fact, the group most offended by Millennials acting entitled are other Millennials who do not feel entitled. We’ve also discovered that Millennials are not tech savvy; they are tech dependent. And here is a sneak peek from our latest national research: Gen Z could be poised to leapfrog Millennials in the workforce. Plus, they are also proving to be more financially conservative than the previous generation.

Categories
E2E: 20/20

Turning Thought Leadership Content Into Company Change with Matt Cain

Matt Cain is the CEO of Couchbase, a data management platform based in Mountain View, California. He read Michael Smerklo’s E2E post on time management and used it to construct an exercise for his leadership team during his company’s most recent offsite. Michael’s piece focused on using an Eisenhower Matrix to help CEOs learn to manage their time more wisely. Matt walks us through how he turned this thought leadership piece into actual company change.

How do you approach thought leadership exercises with your team?

I am constantly in pursuit of new approaches that can help us get better as a team and as a company. The timing of this particular exercise worked well because we were in the midst of our annual planning process – tackling important issues and building a new multi-year plan. I’m a big fan of multi-day leadership offsites because they give us the time and space to attack important issues in a meaningful way and go deep. We wanted to ensure that we were aligned on what really mattered to us, and how best we could achieve success. We are fortunate to be growing and scaling very rapidly, but ensuring we are tackling priorities in an aligned and efficient way is crucial. Michael’s framework was a simple, but creative way to start that exercise – exploring my personal priorities, initiatives, strengths and weaknesses. It was a really convenient way to allow me to personally demonstrate and model vulnerability while discussing what we want to accomplish as a group.

Matt Cain, CEO of Couchbase. Learn more about Matt below.

How did you use Michael’s thought leadership piece to create an actual team-building exercise?

I spent time ahead of the session preparing what I thought were our most important priorities, and then filled out the 2×2 matrix as Michael suggested in his article. At our offsite, I walked my team through the priority and matrix concept (pictured right). I then asked each of them to fill it out on my behalf and made it clear they would do so without seeing my draft. I explained we would then compare their versions to mine. Some people had worked with me for a long time, while others had not, but regardless the exercise established a trusting environment where we could have this conversation. Getting a level of vulnerability in the corporate arena where you can say: “Here’s something that I ‘suck’ at and here are some things I think I’m good at,” is not commonplace. Asking others you work with to tell you what they think you might be good at or “suck” at is even more rare. You can only enforce that type of dialogue by demonstrating a true willingness to take feedback and get better.

The Eisenhower Matrix from Michael's article.

What was something that surprised you about the exercise?

What really jumped out at me was the nuance behind the areas of perceived disconnect. As an example, during our initial review, several members told me that they thought I was good at networking, where I had it on my dislike list. I strive to build and maintain authentic relationships and connect with and help people, but do not enjoy networking for networking’s sake. My team assumed I enjoyed it because they perceived me to be good at it. In another example, one member of my team said to me that he thought I was really good at micromanaging, which he thought was an important skill, but yet another thing I don’t particularly enjoy. Even the term initially bothered me. We realized that I can be effective at diving into a function or issue in the organization and quickly get at the detail that matters to drive to resolution, which I agree is important. But we also realized I need to be encouraged to do so by my team because it isn’t the my first impulse. My natural instinct might not be aligned to what’s needed in a particular situation, so I have to rely on my team for help. But they need to first understand what those natural instincts are. No one can fix problems they don’t know about. We went on to explore triggers, histories, personality traits, and several other factors that brought us closer together.

What was something both you and members of your team agreed you struggled with?

Process and process creation. We now commonly refer to that as “lower left” activities for me and we have fun with that (them more than me sometimes!). Fortunately, we have process experts and operators within the team that take responsibility in these areas. It’s incredibly empowering to drive people to their “zones of genius” and remove things and are better done by others. Self-awareness emerges, but so too does insight into how leaders throughout the organization need to think about building diverse teams: thinking, experiences, perspectives, strengths, etc.

“You can only enforce that type of dialogue by demonstrating a true willingness to take feedback and get better.”

How do you make these findings actionable in the office?

After we filled out and discussed our findings of the matrix, we labeled each line item as either green or red. Green meant I or the team should allocate more time to these activities. Red meant we want to spend less time. In addition, we intend to use the matrix for all of my leaders, allowing them to go through the exercise and understand how they are over or underexposed in their roles. This will help them be their most effective selves and build the best teams they can.

What advice would you give rising CEOs about interesting thought leadership content they come across or advice they receive?

I’ve been studying leadership and team dynamics – and managing self-awareness for constant improvement – for as long as I can remember. Rooms in my house are covered in leadership and culture books from people I admire. My feedback on leadership is to follow your passion and to constantly be in pursuit of self-improvement. The best performers in the world, regardless of their profession (music, sports, business, etc.) tend to have the most coaches and are the ones that are always looking to get better. The way I pick up resources to help with self-improvement varies a lot over time: sometimes I’m into a book, sometimes I’m into retreats, other times I’m on a long-haul flight and get some direct insights just from being unplugged for hours. There’s no one model; do what works for you, just like working out. Find your recipe, stay committed, and follow your passion.

“My feedback on leadership is to follow your passion and to constantly be in pursuit of self-improvement.”

About Matt Cain

Matt has nearly two decades of experience leading global organizations, he is currently the President and Chief Executive Officer of data management platform Couchbase. Prior to Couchbase, Matt was President of Worldwide Field Operations for Veritas Technologies LLC after serving as Chief Product Officer for Veritas’ $2.5B business. During his tenure, he revitalized the company strategy, increased operational efficiency, delivered growth across the portfolio, and was instrumental in the separation of Veritas from Symantec. Matt previously held a variety of senior leadership positions at Symantec Corporation and Cisco Systems. He holds a bachelor’s degree in Electrical Engineering from Northwestern University and a master’s degree in Business Administration from the Stanford Graduate School of Business.

Categories
E2E: Scale

How entrepreneurs can think like venture capitalists

This was originally posted on Ventureburn on Feb. 14, 2017. 

As an entrepreneur involved with two highly successful full-stack technology businesses, I spent fifteen years curiously wondering how venture capitalists make decisions. When I wasn’t focused on delivering value to customers and employees, I focused on how I could demonstrate that value to VCs in order to raise capital.

Often the process felt like it was shrouded in mystery—conjuring images of tribal gatherings, Shark Tank-like voting sessions and perhaps an Ouija board or two. Even after I secured capital with several of the best firms, I still felt like an element of luck was involved.

Now that I find myself on the other side of the table after founding my own VC firm, the mystery has been revealed. In short, I have discovered that successfully presenting your company is a skill that can be learned by understanding the venture capitalist point of view, and gaining clarity into the VC approach is different from understanding how to be an entrepreneur.

The biggest difference between an entrepreneur and a venture capitalist comes down to mindset. Entrepreneurs specifically tend to take an insider’s view of their business and then extrapolate that view to the market while venture capitalists do the opposite—take in the market landscape first. Understanding this difference is the key to securing critical capital necessary to keep dreams afloat.

The following chart illustrates what those views look like in practice:

The differences are subtle but important. Entrepreneurs that understand these framing devices can modify their approach to raising capital by crafting a compelling story that appeals to investors’ practical market sensibilities.

A winning story should address all of the following aspects:

1. Be conservative and detailed when you talk about the market you’re addressing.

Spend a significant amount of time thinking about who exactly will be your customers, making sure to differentiate between total available market, serviceable available market and serviceable obtainable market. Be accurate and realistic.

2. Give VCs a balanced view about potential competition.

Don’t just make a simple competitive landscape grid that magically depicts your business in the upper right quadrant. Instead, think deeply about current and future competitors, and show that your company has a plan to handle competitors as well as to discourage substitutes. Explain why you are winning today and why you will continue to win tomorrow.

3. Give VCs a view into the customer’s mindset.

Why are customers buying your product and how satisfied are they? What steps are you taking to maintain or increase that satisfaction? Explain to us what your average customer is thinking as they buy and use your product.

4. Help us understand how you are building your team.

We’ve already read your biographies and know about your past work experience but we are looking for more context. Be prepared to tell us why your current team is relevant to your strategy and talk openly about future executive needs.

5. Spend time on key business metrics, not just financials.

Financials are helpful, but at an early stage, money may not be the best indication of future success. Focus instead on spelling out the key unit economics that will be crucial to financial success as your business grows, such as gross margins, the cost of customer acquisition, and the lifetime value of a customer.

6. Be thoughtful about what could go wrong–both internally and externally.

My favourite question to ask is a simple one. Let’s say we are in a bar, two years from now, drowning our sorrows because this business failed … what happened? Think about external factors and internal factors. This isn’t being negative, it is being thoughtful and showing a critical mindset about how you will grow and expand your business and what obstacles you imagine you will have to overcome to do so.

7. Passion might not win the day, but it is incredibly important.

If you, as the entrepreneur, are not personally convinced that the idea you are pursuing is worth every waking moment of your professional life than you cannot expect others to get excited either. VCs are looking at both the idea and the entrepreneur’s personal commitment to making an idea a success. Do not underestimate how critical your passion, commitment and enthusiasm is to making your dream a reality.

An entrepreneur’s job is to educate potential investors

Any presentation that follows all of the above guidelines will help to close the massive information gap between an entrepreneur and a source of capital. Too often, entrepreneurs feel like venture capitalists “just don’t get it,” but this idea usually stems from the fact that no one has done a thorough job of explaining it to them. VCs’ tough questions or reticent attitudes are often just ways to push entrepreneurs to give a more comprehensive and outward-facing view.

An entrepreneur who gives potential investors what they want understands better how investors evaluate potential and assess risk. If you can show us that you understand and appreciate our interests and the VC point of view, we will be more eager to work with you to help you grow and improve your business in ways that appeal to the market.