Your “Frontier Tech” Startup Should Hire Business People.
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Your “Frontier Tech” Startup Should Hire Business People. Stat.

by Founder CollectiveSeptember 11th, 2017
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<em>By </em><a href="" target="_blank"><em>Parul Singh</em></a><em>, Principal</em>

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By Parul Singh, Principal

Jordan gingerly pulled the prototype out of its protective casing. Her team of scientists has been holed up in development for 18 months — continuing the research she was doing in a prestigious university in Boston. I leaned forward in my chair in excitement: this device, fused with the team’s new machine learning techniques, could be a breakthrough in healthcare. The jolt back to reality came in the form of the go-to-market plan. When a team of scientists and technologists is this smart, they might well forget — You don’t have to reinvent selling from scratch.

When pressed on this, she proceeded to describe a commercialization strategy that sounded almost like a faucet that could be turned on (and up!) at will. She explained a straightforward-seeming formula for how many sales calls she expected the first business hire to make, hypothesized a (rather high) conversion rate, and closed with an explanation of how the organization would scale by adding more reps linearly, with little consideration to a broader commercial organization or strategy. “It’s just math, after all.”

The product was a scientific marvel. The rest of the business doesn’t have to be.

One of the biggest mistakes technical founders, especially those in highly technical fields like healthcare, aeronautics, or robotics make is putting off hiring a business lead, or finding a commercially savvy co-founder until it’s too late.

I get it; sales seems slimy…

I started my career as an engineer, and I understand that in many technology and scientific environments, sales, marketing, and technology are like oil and water and view each other with suspicion. The same founders who would never skimp on engineering resources (“yes, we absolutely need ten engineers before we find product-market fit”) may sometimes just as assuredly tell me that they will hire a VP of sales after they raise Series A funding. “We’ll finish beta testing the product first,” is a refrain I often hear. I am tempted to bang my head against the wall.

It’s as if they forget the “market” part of product-market fit. It’s helpful to remember that the goal of product-market fit is not finding users who will tell you what they want from your product, but being able to reach customers who will pay for it at scale. The former is possible with simple user testing; the latter is not. These are the questions that need to be asked concurrently with product development:

● How much does it cost to acquire a customer?

● How long does it take?

● What pricing will customers accept (and what pricing will encourage them to buy)? What are the best channels to reach potential customers?

● How long does it take them from introduction to signing a contract?

These questions are as important as any technical risk and need to be explored accordingly.

This actually sounds complicated. So why the suspicion?

For scientific, thoughtful, highly rational people, sales sometimes doesn’t make sense. They think, “why wouldn’t my customers buy the best product available? That’s what I would do.” Commercial efforts may seem impure or transactional, or too simple to need dedicating a costly early-stage resource.

Furthermore, it can be disconcerting to get pulled into a direction which you never envisioned. Sales and marketing people may seem to want to bastardize the product in inelegant ways that seem almost sacrilegious to their inventors or settle on a feature or use case which may seem incidental to why the product was developed. How else will you ensure the integrity of your product vision, unless you control (or worse, delay) commercialization until your “pure” product vision has been realized?

There’s also sometimes a cultural barrier — and perhaps some subtle snobbery at play. Many brilliant Ph.D. founders I meet believe they shouldn’t have to rely on a team of back-slapping and elbow-bending “good old boys” to ship their product. How hard can marketing be anyway? “We can probably get an intern from HBS to run the commercial function,” they think.

But the best way to think of sales at a startup is not signing up a slick Don Draper type, but instead having an internal champion who will enable unlocking value in your customer’s organization. If you are not making this crucial connection, you are not guaranteed to be able to bridge the gap between wishful thinking and pocketbook in your customer’s business.

In rare cases where the technology is truly a breakthrough, and there is a clear market demand (read: customers know who you are and are incentivized to break down your door to give you a check) it’s possible to succeed without sales and marketing. But 99.5% of the time, a successful tech startup requires a balance between sales and science. Teams need to be able to answer these questions:

● Who will translate your value into a need-to-have value for your customer?

● Who will translate your value into terms they will understand across the organization?

● Who will find the most compelled customer segment to target as a first market?

● Who will handle the annoying, but essential block and tackling of going to market?

Viewing commercialization as a watering down of your vision can be perilous. The graveyard of amazing products which never succeeded due to market adoption is unfortunately crowded.

Why You Should Hire a Sales Person, Stat.

Here are some additional concrete reasons that hiring a sales/marketing/growth person early is an invaluable addition to your team:

Pitching a realistic TAM

Too often, otherwise bright founders will earnestly explain that their product serves an impossibly broad market. In health care, they may cite that one in six dollars that is spent on healthcare. I’ve been pitched with a slide of Elon Musk talking about the company’s target domain as proof that there is a market. If companies have some self-awareness, they’ll highlight a smaller number, but surprisingly few dig down to actual, believable specifics about how large or small a given market opportunity is. Gentle reminder: when investors see a pitch deck with large, non-specific projections it is not compelling. The value of the market is equal to the value you can capture.

If you have a list of target markets, you don’t have a product

The other classic failure mode is explaining how the technology is so powerful that it can be applied to almost any industry. Rarely can a startup focus on more than one market at a time and that should never be a go-to-market plan for a first-time founder. Even if a startup could address more than one market, I’d argue that under most circumstances it’s hard enough for a company to be best in class in even one market. Far better to own one market and then expand. Focus on demonstrating maniacal execution in the market subset you have thoughtfully selected as the highest value.

Learning to analyze a market is no different than learning to design experiments. The scientific method can be explained in moments, but takes a lifetime to master. I’ve met founders who are in the 99th percentile in terms of intellect but have difficulty properly sizing their market. Most could dramatically improve their chances by finding a talented MBA, or even a commercially-minded scientist, to help them filter and prioritize opportunities or run an effective sales process.

Fine-Tuning Your Business Model

Who on your team will rigorously ask and answer these questions?

● Should a startup have a SaaS-based model?

● If so, will it be self-serve or facilitated by a sales rep?

● Is the pricing by the seat, month, or usage rate? (Please not a combination of all three!)

● What are the standard practices in the industry?

● What are the key success metrics to prove efficacy of a new product?

● What are the potential obstacles to a sale?

● Which channels will the product be sold through?

● Will the sales be direct to consumers or delivered through distributors?

● What potential margin are you willing to give up for sales / customer acquisition / channel revenue share?

These are all critically important questions that should be, though rarely are, resolved in tandem with product development itself.

Figuring Out How to “Crack the Stack”

In the last year, we’ve seen a lot of companies in the automotive space struggle with their business models. In every pitch we see, the technology seems plausible, but almost no one we’ve met has a plausible strategy to “crack the stack.”

There is a small universe of buyers for auto tech — the big automakers and some OEMs — that’s it. All of these startups are putting themselves at the mercy of the manufacturers. These founders were willing to bet their companies on the idea that they’d be the beneficiaries of the caprice of a handful of decision makers. Even if these startups did sign contracts, they’d be vulnerable to price pressure from day one.

With savvier business leadership these companies might have rejiggered their products to make them less dependent on a small group of buyers, or even better, found other applications that put their startup in a stronger negotiating position.

Designing a Sales Process

Beyond the gross size of a market, technical founders regularly fail to appreciate how factors like the length of a sales cycle and its cost, account management, and customer service impact the viability of a business. The logistics of sales, while they do not happen in a test tube, still require as much finesse and attention to detail and follow-through, as a reasonably sophisticated synthetic biology experiment.

Designing Your Product

This heading may be horrifying to a product-oriented founders, but the truth is that without market knowledge, you may be optimizing for the wrong feature set. Technical people sometimes over optimize the wrong things or strive for a level of technical perfection that is unneeded. In doing so, they may overlook the real commercial opportunities. It takes one kind of acumen to synthesize an antibiotic, another kind entirely to design a new package that consumers will use.

We met a technical founder who spent years and millions of dollars developing an electrochemical technique for measuring blood glucose that could more accurately help people with diabetes dose insulin. He found a partner to distribute the product, but was shocked to learn what made the sale wasn’t the core tech, but the fact that his device had rubber grips. Fifteen cents of thermoplastic elastomer made as big an impact as a technology protected by half a dozen patents.

A good commercial lead will help direct product design decisions to get the most bang for the buck.

Commercial naivete can kill promising startups

When you’ve built an MVP that feels pretty basic, smart people will often undercharge. A lot. An order of magnitude or two under what they should. A commercial lead versed in value based pricing, which sales sniffs out more readily since they are key to unlocking the value within customer org, will prevent that rookie mistake.

Pilots Can Crash Your Startup

Startups will often invest huge resources into a pilot program with a larger company. To a first time CEO, a pilot seems like a precursor to an enduring relationship, a make-it-or-break-it proposition for the company. However, wily veterans know those big companies “have more pilots than the Navy, but few get off the ground,” and apportion effort commensurately. Many repeat founders avoid big companies altogether, knowing that they’ll suck up the resources that could otherwise be spent getting repeatable customers who will be less demanding and actually commit to purchase orders.

TL;DR: The business side is just as hard as the tech side

Sales may feel like so much unpleasant and irrelevant fluff while the real business of building a company happens elsewhere, but savvy founders know that revenue can’t simply be turned on or off like a faucet. Healthcare, and other desirable, highly technical or highly regulated industries are labyrinths with multiple stakeholders and gatekeepers who must be appeased before a product can reach the market. Technology sales are as complicated as the most complex machine and require fine-tuning, and calibration — by no means is there a one-size-fits-all approach. By adding the right competencies early on to your innovative startup, you will greatly increase your chances at achieving the technology + business alchemy needed to build a world-changing company.

Action Items/Takeaways:

● Find a business co-founder early who fits in with your team culture and is responsible for the “market” half of product-market fit.

● This must be a trusted, co-equal team member whose input you are comfortable incorporating into the design of your business. If you are not willing to take this input, either you have the wrong person — or ask yourself whether you want a side project, rather than a business.

● Task your business co-founder with creating sales materials, signing initial customers, and developing a sales and growth strategy that will help you go to market effectively.

● Your business co-founder will spend their day-to-day finding, reaching out to, and signing up people who want to pay for your product. Keep in mind that the economics and strategy around customer acquisition is an important input into any fundraising you do — as important, if not more important than production or development costs/timelines.

● If you have a long product development cycle, you can sometimes bring in a more senior person as a consultant/advisor to work on your go-to-market efforts. If they are a great fit, you can later bring them on full-time.

● Always remember that you are building a business, not just a product (and will need to show proof points accordingly.)

If you read this far — or think this post might help an entrepreneur you know —consider hitting “👏” below to help spread this piece. Also, please follow me on Twitter (@Parulia).