How to Get Your First Customers | Startup School

Y Combinator
29 Dec 202222:53

Summary

TLDRIn this insightful talk, Gustav from Y Combinator discusses the critical early stages of startups, emphasizing the importance of manual customer recruitment and sales. He argues that founders should initially handle sales to deeply understand their customers and product. Gustav shares strategies for writing effective sales emails, building sales funnels, and the necessity of charging for products to validate value. He also stresses the importance of working backwards from goals to understand sales conversion rates, using real examples from successful YC companies to illustrate his points.

Takeaways

  • πŸš€ **Importance of Non-scalable Actions**: In the early stages, startups must do things that don't scale to gain traction, as growth doesn't happen by itself and requires founder involvement.
  • πŸ› οΈ **Product Development with Users**: A good product is rarely built in isolation; it is developed in conjunction with customers, and thus may not be perfect when first introduced.
  • πŸ’‘ **Founder's Role in Sales**: Founders should initially handle sales to understand the customer, maintain control over the startup's narrative, and ensure the product meets customer needs.
  • πŸ“ˆ **Sales Funnel Basics**: Understanding the sales funnel is crucial, starting from prospecting to closing, and recognizing the importance of each step in the process.
  • πŸ“Š **Tracking Conversion Rates**: Keeping track of conversion rates at each stage of the sales funnel is vital for understanding where improvements are needed and for setting realistic sales goals.
  • πŸ“§ **Crafting Effective Sales Emails**: Writing concise, clear, and direct sales emails that address the customer's problem and include a call to action is key to successful outreach.
  • πŸ’° **Charging for Your Product**: Charging for a product is essential to validate its value and to ensure that you are building a real business, not just a free service.
  • πŸ”„ **Iterative Learning Process**: The early days of a startup are about learning and iterating quickly; founders must be willing to test, learn, and adapt to succeed.
  • πŸ“‰ **Understanding the Startup Curve**: Recognizing the ups and downs of the startup journey, including the 'Trough of Sorrow,' and understanding that perseverance is key to reaching product-market fit.
  • πŸ“ˆ **Prioritizing Easiest Customers**: Focusing on the easiest customers first simplifies the sales process and helps in building momentum and confidence in the product.
  • πŸ” **Utilizing Personal Networks**: Leveraging personal networks can be an effective way to find early adopters and start generating sales, as these contacts are more likely to take a chance on a new product.

Q & A

  • What is the primary focus of Gustav's talk at Y Combinator?

    -Gustav's talk focuses on how to transition from talking to users to acquiring the first customers for a startup, emphasizing the importance of doing things that don't scale at the early stage of a company.

  • Why is the mindset of 'doing things that don't scale' important for early-stage startups?

    -This mindset is crucial because it encourages founders to manually recruit customers and engage directly with users, which is essential for understanding customer needs and driving growth, rather than relying solely on a good product to take off on its own.

  • What is the 'startup curve' and what does it illustrate about the journey of a startup?

    -The startup curve is a visual representation of the typical trajectory of a startup's growth, illustrating phases such as launch, the trough of sorrow, the crash of ineptitude, and eventually finding product-market fit. It shows that founders play a critical role in navigating these stages and making a difference between success and failure.

  • Why should founders be the ones doing sales in the beginning?

    -Founders should be the ones doing sales initially because it allows them to understand their customers deeply, gain full control of their startup's destiny, and ensure that sales become part of the company's DNA.

  • What is the significance of charging for a product in the early stages of a startup?

    -Charging for a product is important because it validates that the product provides real value to customers. It also helps in identifying serious customers and prevents the pursuit of leads that are not genuinely interested.

  • Why is it recommended for startups to start by selling to other startups?

    -Selling to other startups is recommended because they typically have shorter decision-making processes and less bureaucracy, making it easier to close deals and learn from the sales process.

  • What is the main mistake startups make when it comes to sales according to Gustav?

    -The main mistake startups make is not doing enough outreach and not working their way backward from their sales goals, leading to incorrect conclusions about the effectiveness of their sales efforts.

  • What are some characteristics of an effective sales email according to the script?

    -An effective sales email should be short, use clear language, address the potential customer's problem, avoid HTML formatting, include social proof, and have a clear call to action.

  • Why is it advised to avoid offering free trials in B2B sales?

    -Offering free trials in B2B sales can lead to a lack of commitment from the customer. Instead, a money-back guarantee or the ability to opt-out is preferred as it still requires an upfront commitment and signals that the product provides value.

  • What is the importance of tracking conversion rates in the sales funnel?

    -Tracking conversion rates is crucial for understanding the effectiveness of each step in the sales process and for identifying areas that need improvement. Without this data, founders cannot make informed decisions or receive helpful feedback on their sales strategy.

  • What are some resources Gustav recommends for learning more about sales and startup growth?

    -Gustav recommends 'Founding Sales' as a book and 'lineage newsletter.com' as a resource for additional insights into sales and startup growth strategies.

Outlines

00:00

πŸš€ Entrepreneurial Growth through Non-scalable Actions

Gustav, a group partner at Y Combinator, introduces the concept of 'doing things that don't scale' as crucial for early-stage startups. He outlines the importance of manual customer recruitment and the common misconception that a good product alone guarantees success. Gustav emphasizes the need for founders to take initiative, referencing Paul Graham's essay and Airbnb's early strategies. He also highlights the 'startup curve', illustrating the challenges and the critical role of founders in overcoming them.

05:00

πŸ“ˆ The Fundamentals of Early-Stage Sales and Customer Engagement

This section delves into the necessity of founders being personally involved in sales to understand their customers and gain control over the startup's destiny. Gustav argues against outsourcing sales until the founder has mastered it. He provides examples of successful founders who excelled in sales and shares insights on writing effective sales emails, including brevity, clarity, and a direct approach to addressing customer problems.

10:02

πŸ’‘ Prioritizing and Executing Effective Sales Outreach

Gustav advises startups to focus on the easiest customers first and to build a large pipeline to increase the chances of sales conversions. He discusses the importance of prioritizing potential customers based on their likelihood to close and the value of leveraging personal networks. The paragraph also touches on the simplicity of selling to other startups due to shorter decision-making processes and the reality that most people are not early adopters, necessitating a larger number of outreach attempts.

15:04

πŸ’° The Importance of Charging for Your Product and Qualifying Customers

The speaker argues against offering free trials or unpaid pilots, stating that paying customers are a testament to the product's value. He suggests using money-back guarantees as an alternative to free trials and emphasizes the need to increase prices until customers complain but still pay. Gustav also stresses the importance of qualifying customers during the first call to ensure they are a good fit for the product.

20:05

πŸ“Š Working Backwards from Sales Goals and Tracking Conversion Rates

Gustav explains the concept of working backwards from sales goals using a sales funnel, highlighting the need to understand and track conversion rates at each stage. He warns against the common mistake of not doing enough outreach and relying on scalable growth channels too early. The speaker recommends using a CRM to track data and provides examples of successful sales emails from Y Combinator companies that led to significant contracts.

πŸ›  Tools and Strategies for Scaling Startup Growth

In the final paragraph, Gustav recommends tools for managing the sales process, such as apollo.io, close.com, pipedrive, and hunter.io. He also suggests reading 'Founding Sales' and subscribing to the Lineage newsletter for further insights. The speaker emphasizes that while scalable growth channels are important, startups must first engage in non-scalable actions to establish a customer base and understand their market.

Mindmap

Keywords

πŸ’‘Sales Funnel

A sales funnel refers to the process that leads a potential customer from initial contact to making a purchase. In the video, the sales funnel is discussed as a critical tool for startups to understand and manage the customer acquisition process. It is used as an example to illustrate the importance of tracking conversion rates at each stage, from initial outreach to closing a sale.

πŸ’‘Early Adopters

Early adopters are the first individuals or organizations to embrace a new product or idea. The video emphasizes the importance of targeting early adopters in the sales process because they are more likely to take a chance on a new product. The script mentions that most people are not early adopters, and startups need to identify and focus on this group to gain traction.

πŸ’‘Outreach

Outreach in the context of the video refers to the proactive act of contacting potential customers to introduce and sell a product. The script highlights that many founders do not do enough outreach, which is a mistake as it is essential for understanding conversion rates and building a customer base.

πŸ’‘Conversion Rate

Conversion rate is the percentage of potential customers who take a desired action, such as making a purchase. The video script discusses the importance of tracking conversion rates at each stage of the sales funnel to understand how effectively a startup is moving potential customers towards a sale.

πŸ’‘Customer Onboarding

Customer onboarding is the process of integrating a new customer into using a product or service. The script points out that startups often overlook the importance of onboarding, which can lead to high churn rates if customers do not understand how to use the product effectively.

πŸ’‘Early Stage Startups

Early stage startups are new businesses that are in the initial phases of development and customer acquisition. The video's theme revolves around the unique challenges and strategies that early stage startups need to employ to grow, such as doing things that don't scale and focusing on manual customer recruitment.

πŸ’‘Minimum Viable Product (MVP)

An MVP is a version of a new product with the minimum features that allows a startup to collect user feedback and validate the product idea. The script mentions that the Brex founders focused on building a minimum viable product to start signing up customers, emphasizing the importance of getting a product in front of users as soon as possible.

πŸ’‘Product-Led Growth

Product-led growth is a strategy where the product itself drives user acquisition and retention. The video script contrasts this with sales-led growth, indicating that some startups find success with the product being the primary driver of growth, especially in the early stages.

πŸ’‘Qualification

Qualification in a sales context is the process of determining whether a lead is a good fit for the product and likely to become a customer. The video script advises founders to qualify customers during the first call to ensure that they are pursuing leads that are genuinely interested and a good match for the product.

πŸ’‘Scalability

Scalability refers to the ability of a business process or system to handle growth. The video discusses the misconception that scalable growth channels are the right approach for early stage startups, when in fact, it is often the non-scalable, manual efforts that are crucial for initial traction.

πŸ’‘Sales CRM

A sales CRM (Customer Relationship Management) system is a tool used to manage interactions with current and potential customers. The script recommends using a sales CRM to track the progress of sales efforts, conversion rates, and other key metrics, which is essential for understanding and improving the sales process.

Highlights

Importance of doing things that don't scale in the early stages of a startup.

The misconception that a good product alone guarantees success and growth.

The necessity for founders to actively recruit customers rather than relying solely on advertising.

The role of the founder in making a startup take off, rather than expecting it to happen automatically.

Insights from the 'Startup Curve' and its implications for early-stage companies.

Why founders should be involved in sales to understand their customers and have control over their startup's destiny.

The argument against hiring a sales team too early and the importance of founders learning sales themselves first.

Examples of successful founders who took on sales roles and excelled, such as from DoorDash and PlanGrid.

The strategy of Brex founders in recruiting their first customers directly from the YC batch.

Tips for writing effective sales emails, including brevity, clarity, and addressing the customer's problem.

The sales funnel concept simplified, from prospecting to closing and the importance of tracking each step.

Advice on prioritizing the easiest customers first and the importance of not being afraid to let go of unpromising leads.

The advantage of selling to startups due to their shorter decision-making processes and lack of bureaucracy.

The myth that most people are early adopters and the reality of targeting the actual early adopters through extensive outreach.

The significance of charging for your product as an indicator of providing real value to customers.

Recommendations for tools to assist in the sales process, such as Apollo.io and Close.com.

The common mistake of not doing enough outreach and the importance of working backwards from sales goals.

The necessity for founders to understand and track their sales conversion rates to improve their strategies.

Transcripts

play00:01

foreign

play00:03

[Music]

play00:10

School my name is Gustav and I'm a group

play00:13

partner here at y combinator today I'm

play00:15

going to talk about how to go from

play00:16

talking to users

play00:18

getting your first customers here's what

play00:20

I plan to cover today one what does it

play00:22

mean to do things that don't scale and

play00:24

why is this mindset so so important at

play00:27

this stage of your company two how to do

play00:30

sales I'll make the argument the founder

play00:32

should be the ones doing sales in the

play00:34

beginning then we'll cover some sales

play00:35

funnel information and then why is it so

play00:37

important to charge for your product and

play00:39

finally we'll learn how you work your

play00:41

way backwards from your goals and why

play00:43

that's important I hope you've read this

play00:45

article or this essay the most important

play00:47

essay ever written about the very early

play00:49

stage of startups is do things that

play00:52

don't scale by Paul Graham Paul is the

play00:54

co-founder of Y commner he published

play00:56

this essay about the early days of

play00:58

Airbnb Airbnb is perhaps the best

play01:00

example of a successful YC company who

play01:03

got their feet off the ground this way

play01:05

many Founders who never worked for a

play01:07

startup or an early stage company

play01:09

incorrectly believe that all you need to

play01:12

succeed is a good product and growth

play01:14

will take care of itself this is not the

play01:16

case the truth is that good product is

play01:19

very rarely built in isolation but

play01:22

together with your customers and as a

play01:23

result it's not actually that good when

play01:26

you show it to your first customers set

play01:28

this another way

play01:29

startups don't take off by themselves

play01:31

startup takes off because Founders make

play01:33

them take off and you have to manually

play01:35

recruit your customers it's not enough

play01:37

to push a button on an advertising

play01:39

Network this is uncomfortable and

play01:41

Founders continuously find many ways to

play01:43

avoid doing this the most common way is

play01:46

believing that you can recruit people by

play01:48

just writing more code or doing more

play01:50

work on your machine or your robot or

play01:52

whatever you're building I know this

play01:54

from my experience of YC that this

play01:56

actually don't work so why am I talking

play01:58

about this right now learning the

play02:00

tactics of sales is just one side of

play02:03

this uh of of this learning the most

play02:06

important side is just really realizing

play02:09

that it comes down to you it's not just

play02:11

knowing exactly how to do sales in

play02:13

theory but actually doing it and

play02:15

actually wanting to succeed another

play02:17

great visualization is what's called a

play02:19

startup curve this was initially drawn

play02:21

by YC found program and then labeled by

play02:23

Trevor Blackwell and you've probably

play02:25

seen this curve before most companies go

play02:27

through something like this it's kind of

play02:30

like a timeline for startups here's how

play02:32

it goes first you launch these days most

play02:35

companies don't launch on TechCrunch but

play02:37

probably on product hunt or Hacker News

play02:39

or some other internet board the launch

play02:41

energy that you get from this launch

play02:42

eventually starts wearing off as early

play02:45

adopters are looking out for something

play02:46

new if you don't have instant High

play02:48

retention nobody does for what you are

play02:51

building then you'll enter the through

play02:53

of Sorrow this can take a long time and

play02:56

many companies die during this stage

play02:57

they just give up and don't move fast

play03:00

enough with testing new things some

play03:02

startups do move fast enough and release

play03:05

new improvements of their product

play03:06

they'll listen to users and they improve

play03:08

many still don't get anywhere further

play03:10

and becomes victims of the crash of

play03:12

ineptitude it's the founders to stay the

play03:14

course and don't give up that reaches

play03:17

the Wiggles of false hope and eventually

play03:18

the promised land of crack Market fit

play03:20

the learnings we draw from the start

play03:21

curve is that every moment in the early

play03:24

days of startups the founders are the

play03:26

ones that make the difference between

play03:28

success and failures if you are in the

play03:30

wrong Market

play03:31

it's the founders that switch to a new

play03:33

one and if you don't know how to do

play03:35

sales it's the founders who learn so you

play03:37

have to really want it otherwise this

play03:39

won't work all right let's talk about

play03:41

sales and how to do sales first Founders

play03:44

should learn how to do sales you should

play03:47

learn how to do sales because you'll

play03:49

need to learn to know your customer

play03:50

talking to customers and sales are

play03:52

effectively different sides of the same

play03:54

coin and the same reasons Founders can't

play03:56

understand what to build they don't

play03:58

understand what the problem is you don't

play03:59

know how to sell unless you know your

play04:02

customers two learning how to do sales

play04:04

actually gives you full control of your

play04:07

destiny as a startup just like you can't

play04:09

Outsource engineering sales has to be

play04:11

part of the DNA of the founders

play04:13

sometimes you just have to learn it as a

play04:15

result you should not hire a sales team

play04:17

until you know how to do sales yourself

play04:19

only then will you know what good looks

play04:22

like you also can't do sales if you

play04:24

practice bad and you won't know if the

play04:26

product is bad unless you've had some

play04:28

effort in trying to sell it first if you

play04:30

don't know how to sell don't worry you

play04:31

you can learn it's probably the easiest

play04:33

job to learn in startup if you know the

play04:35

problem you're solving if you know

play04:37

you're product intimately if you know

play04:40

the market you are an expert in the eyes

play04:42

of the customer they will want to hear

play04:45

what you have to say finally a love for

play04:47

solving customer problems is really

play04:49

infectious if you're really passionate

play04:52

about solving this problem they will be

play04:54

able to tell if you don't believe me

play04:55

here are some examples of Founders who

play04:57

took on the sales job and learned to get

play05:00

really good at it so Tony from doordash

play05:02

matild from front Tracy from plangrid

play05:05

and Steve Jobs let's get straight into

play05:07

an example so these are the brex

play05:09

founders Pedro and henrique when brex

play05:11

was in wycomner in Winter of 2017 they

play05:14

recruit the first 10 customers directly

play05:16

from the YC batch June YC you have the

play05:19

benefit of being around other startups

play05:21

I.E potential customers the brex

play05:22

founders asked themselves what would the

play05:24

minimum product look like that they can

play05:26

build to be useful to other startups and

play05:28

then they went with strain straight into

play05:30

signing up those customers the first

play05:32

version was very very simple customers

play05:34

just had a virtual credit card and

play05:36

Enrique from brex actively onboarded

play05:38

everyone of the customers himself of

play05:40

course they could have waited until they

play05:42

had a full-blown product a website a

play05:44

Mobile app all of those things but they

play05:46

decided to get going when they have

play05:48

something that was really useful this is

play05:50

how their first physical card looked

play05:51

like this before they had this card they

play05:53

just had a virtual card Rex reached out

play05:55

to the their YC batch and otherwise the

play05:58

companies and this is the email that

play05:59

they sent I'm just going to read a brief

play06:01

portion of it hey guys we're opening up

play06:03

our beta for winter 17 batch friends

play06:05

with the 10 spots for beta users 10 spot

play06:08

this sounds like there's a limited spot

play06:10

so I should take actions brex is a

play06:11

corporate credit card focused on

play06:13

technology companies that's me perfect

play06:15

you're actually writing the email

play06:17

directly towards your customers we don't

play06:19

require a personal guarantee it can

play06:21

underwrite startups who just got started

play06:23

this was the value prop most other

play06:25

alternatives to brex did not have

play06:27

something like this so how much does it

play06:29

cost it's free the merchants are paying

play06:31

us so there's zero Annual fees this

play06:33

seems like a no-brainer I would argue

play06:35

that this email is probably a little bit

play06:37

too long but it did work so let's talk

play06:39

about how to write a great sales email

play06:41

so first it should be short Max 6 to 8

play06:45

sentences the brexit sample on the

play06:47

previous slide is probably too long it

play06:48

still worked but probably too long

play06:50

people don't have time to read long

play06:52

emails if you're coming out of Academia

play06:55

your culture is going to be very

play06:56

different you write very long emails but

play06:58

in the world of sales you want to get to

play07:00

the point and be brief as much as you

play07:02

can two you want to make sure you have

play07:04

clear language no jargon no buzzwords

play07:07

just say exactly what you do and how it

play07:09

works and then three address the problem

play07:12

that the potential customer is having

play07:14

four do not use any HTML formatting

play07:16

write your email in plain text only like

play07:18

you would written it to a friend say you

play07:20

are the founder of the company who makes

play07:22

this product many people forget to do

play07:24

this describe why you and your team are

play07:27

impressive include social proof and

play07:29

remember to show not tell don't say

play07:31

you're an expert don't say how many

play07:33

years that you have been an expert if

play07:35

you're in the YC match if you worked at

play07:37

impressive companies in the past those

play07:38

are other piece of social proof that you

play07:40

can include you won't include a couple

play07:42

of these ones so that the reader knows

play07:45

the source and even if they don't know

play07:47

you gives assign you some authority six

play07:49

you want to include a link to your

play07:51

website the website needs to be simple

play07:53

you have to have information about the

play07:56

product the website should not have a

play07:58

lot of drawings or sort of like paid for

play08:01

graphics you should just have

play08:02

screenshots from your product and

play08:04

bullets about what your product does

play08:06

sometimes it works to send a short video

play08:08

a YouTube video that you can embed in

play08:10

the email that's very easy for the

play08:11

receiver to click on and View and I've

play08:14

even seen people using gifs now those

play08:16

videos and those gifs needs to get to

play08:18

the point right away because the the

play08:20

receiver is kind of intimately familiar

play08:22

with the problem but not really have

play08:23

time to watch two or three or four

play08:25

minutes of a potential solution and then

play08:27

finally you want to include and ask for

play08:29

a call or a meeting or a self-serve

play08:31

whether whatever is appropriate for your

play08:33

company but there needs to be a call to

play08:35

action in the email that you're sending

play08:37

all right let's talk about the sales

play08:38

funnel the concept of sales funnels is

play08:40

really quite easy I think people get

play08:42

confused by the language the sales

play08:44

people are using so I try to simplify it

play08:46

here on the left hand side I call it the

play08:48

founder speak on the right hand side I

play08:51

call it the sales speak these are not

play08:52

going to be perfectly mapping but you

play08:54

get the idea so first you want to make a

play08:57

list of customers you plan to reach out

play08:59

to in sales it's called prospecting or

play09:01

lead generation we'll just call it make

play09:03

it the list and you can use Google

play09:04

spreadsheets or something like that to

play09:06

make this list then we want to send them

play09:08

an email or a LinkedIn message or add

play09:10

them on LinkedIn or whatever is the

play09:12

appropriate way to contact these people

play09:13

after that you want to schedule and run

play09:15

a demo or a meeting from that response

play09:18

to the email and then you want to talk

play09:19

pricing and then finally close them as a

play09:21

customer the last thing which you should

play09:22

not forget is after you've closed them

play09:24

you still need to onboard them to make

play09:26

sure that they start using your product

play09:28

if this is successful and you have good

play09:30

retention that could lead to long-term

play09:31

Revenue if you forget the last step then

play09:34

you will have lots of churn because

play09:35

people don't actually know how to use

play09:36

your product and this is common with

play09:38

early products because they are not easy

play09:40

to onboard in the beginning this is not

play09:42

something you spend a lot of time

play09:43

optimizing so make sure that you do the

play09:45

onboarding as part of this process if

play09:47

you go back to the Google spreadsheets

play09:49

that I'm that I'm making that I'm

play09:51

putting in all the information you

play09:52

should start simple but you should have

play09:54

some Columns of things that you're

play09:56

tracking so industry uh the company the

play09:59

title the name the email maybe the

play10:01

LinkedIn this could be enough to start

play10:03

with a lot of CRM software comes with

play10:06

these categories so these columns it's

play10:09

pretty good idea to kind of use a simple

play10:10

CRM software

play10:12

um to kind of accomplish the same goal

play10:14

but the key thing here is doing this

play10:16

work up front and I've seen a lot of YC

play10:18

Founders that when they are getting to a

play10:20

thousand of these they're like oh this

play10:22

is a very simple task I can actually

play10:24

Outsource this and I think that can work

play10:26

if you know exactly what it is you're

play10:28

Outsourcing storing all this information

play10:30

is going to be helpful for you in the

play10:31

future now I made my list I understand

play10:34

this the sales funnel so who should I be

play10:37

going after and how should I be

play10:38

prioritizing as I'm doing the Outreach

play10:41

here's my most important advice when it

play10:42

comes to sales your first customers

play10:44

should be your easiest this is not the

play10:47

time to bite off the hardest one

play10:49

focus on the easiest ones what I mean by

play10:51

that is you should try to do sales

play10:53

make the sales processes easy for you as

play10:55

you possibly can startups don't really

play10:58

have time to chase every lead there's a

play11:00

lot of leads out there you you don't

play11:02

have to pick all of them you really

play11:03

don't you're so early you can pick only

play11:06

the ones that are the most likely to

play11:07

close the best way to do this I have a

play11:09

big pipeline where that means a lot of

play11:11

people that you're emailing are

play11:13

potential customers and then as you're

play11:15

getting responses and you're getting to

play11:16

meetings start prioritizing those who

play11:18

are the most likely to close you can

play11:21

probably tell from their answers to your

play11:23

qualifying questions during the sales

play11:24

call

play11:25

avoid those who are moving slow and

play11:28

don't be afraid of letting customers go

play11:31

don't be afraid of letting customers go

play11:32

what I mean by that is that if someone

play11:34

is dragging you along two or three calls

play11:36

you can always be like it's been great

play11:37

getting to know you

play11:39

um and I've learned a lot but

play11:41

um we should talk again in six months

play11:43

that's totally fine to say two

play11:45

selling to people you know is going to

play11:48

be easy to selling to strangers so you

play11:50

should take advantage of your network

play11:51

three selling to startups is the easiest

play11:55

category and I've I've learned this On

play11:57

and On Again with YC company

play11:59

specifically the ones that sell software

play12:01

it just turns out that bigger companies

play12:04

have more bureaucracy more processes

play12:07

they even have a specific Department

play12:09

that is in charge of negotiating with

play12:11

you and that takes a long time and

play12:13

startups don't have any of these things

play12:14

because they don't have time to create

play12:15

these things but it's not a priority for

play12:17

them

play12:18

so startups have short decision-making

play12:19

lines you can often find that the

play12:22

decision maker right away as you do in

play12:24

the Outreach and you don't have to go

play12:25

through a difficult process that's why

play12:28

startups are easier and that's why we

play12:30

recommend most companies to sell to

play12:32

startups at least leads me to the fourth

play12:34

Point most people are not early adopters

play12:39

and I keep saying this to the white

play12:40

companies I work with all the time the

play12:42

reason you have to sell send hundreds of

play12:44

emails is not that most of those people

play12:47

get really upset and be like I can't

play12:49

believe you emailed me like I really

play12:50

love this alternative product by hate

play12:52

your product that's not what's going on

play12:53

most people they email are just be like

play12:56

archive they just don't care they're not

play12:59

going to try a new product that comes in

play13:01

through your LinkedIn or your email and

play13:03

they might not be the people that try a

play13:04

new product at all in their career

play13:06

that's most people some other people I

play13:08

remember being one of those people when

play13:09

I worked at Airbnb I would love when

play13:11

founders emailed me with new new

play13:13

products and I would be the one signing

play13:15

up for them so

play13:17

when I worked Airbnb and you were a

play13:19

startup email me was great I am an early

play13:21

adopter I love trying new things I don't

play13:23

mind the risk of trying new things so

play13:26

for every outbound uh to an average

play13:28

company that you send you will mostly

play13:30

like most likely on the average outbound

play13:32

average email average LinkedIn reach

play13:35

someone who is not an early adopter to

play13:37

reach early adopters you just have to

play13:38

send more out by messages because then

play13:41

you don't have time to convince anybody

play13:43

to become an early adopter you have to

play13:45

find Aero adopters and just go for them

play13:47

early on don't worry about everybody

play13:49

else you just don't have time to

play13:50

convince them let's talk about charging

play13:51

it's attractive for you as a founder and

play13:54

for your company to offer your product

play13:56

for free offer free trials or unpaid

play13:59

pilots and these things come in many

play14:02

shapes and forms however if you don't

play14:05

charge your customers they are not a

play14:08

customer and you don't have a company

play14:10

customers paying you money is a great

play14:13

sign that you're providing them real

play14:15

value

play14:15

so you should resist the fear of getting

play14:18

a no because of price

play14:20

instead of figuring out what the price

play14:21

should be if they don't want to pay and

play14:24

you learn this during the qualification

play14:26

process in the first call or the first

play14:28

meeting

play14:29

if they don't want to pay that's a great

play14:31

sign that you should move on to the next

play14:34

customer

play14:35

again fire the ones who seem like

play14:37

they're not good fit move on to the next

play14:39

customers

play14:40

free trials are common for consumers but

play14:43

if you thought about it most consumer

play14:46

free trials ask for the credit card up

play14:48

front and then we forget and then we pay

play14:50

anyway

play14:51

that's because that actually works the

play14:53

best the bdb version of this

play14:55

is a better one than a free trial is a

play14:58

money back guarantee so we charge you if

play15:01

you're not happy you can get the money

play15:03

back in 30 days so 60 days

play15:05

um or even better you have the ability

play15:07

to opt out from the annual contract you

play15:09

just pay for one month instead of the

play15:10

annual fee but you should not offer free

play15:13

trials in B2B sales go for a money back

play15:15

guarantee and go for the ability to opt

play15:17

out instead increasing your price until

play15:20

your customers are complaining but still

play15:22

paying is the right way to go all right

play15:24

let's talk about the thing that most

play15:27

Founders get wrong I've seen as many

play15:28

times but there are a few things that

play15:29

most wanted to get wrong and this is one

play15:30

of them working backwards from your goal

play15:33

with your sales funnel in order to work

play15:35

your way backwards from a goal of say

play15:38

two signed customers you have to

play15:39

understand that each step in the sales

play15:42

funnel is going to have a drop-off when

play15:44

you haven't started sales yet you don't

play15:46

know what these draft off percentages

play15:49

are maybe you haven't done a lot of

play15:50

sales before you don't know what you're

play15:52

not good at maybe you're really good at

play15:54

sending emails but really bad at closing

play15:55

or vice versa you don't know that so as

play15:58

you're sending these outbound emails you

play16:01

need to take notes and start tracking

play16:03

all of these conversions in this example

play16:05

I'm sending 500 Outreach emails or

play16:08

LinkedIn messages I have a 50 open rate

play16:10

that means 250 people will open the

play16:13

email five percent will respond that's

play16:15

about 20 potential customers 50 of those

play16:18

will convert to demo from the response

play16:20

which means I'm doing 10 demos that's

play16:22

pretty good but I'm not that good at

play16:24

doing demos only two end up becoming

play16:26

customers from the demos that's 20 I bet

play16:29

you most of you don't even track this

play16:31

data but you should if you track this

play16:33

data you will have some idea of how long

play16:35

it will take to get to 10 paying

play16:37

customers if you don't track this it's

play16:39

very hard for someone to give you

play16:40

feedback of what's working and not

play16:41

working right it's just like when you're

play16:43

launching a new product you want to have

play16:45

some metrics and some user data to be

play16:47

able to tell if it's working when you're

play16:49

doing sales you want to have this data

play16:50

if you have this data people will be

play16:52

able to give you feedback on what what

play16:53

you're good at and what you need to get

play16:54

get better at my advice is to use a

play16:57

simple sales CRM software that tracks

play16:59

these conversion rates automatically

play17:00

let's look at the same second example

play17:02

this is how it looks like for most

play17:04

startups even the ones that I work with

play17:06

in the batch in the second example I'm

play17:07

sending 100 Outreach email it feels like

play17:09

a lot to me if I keep the conversion

play17:11

rates constant from the previous example

play17:13

I actually end up with zero customers

play17:15

and the conclusion the founders draw

play17:16

after this is that sales is not working

play17:19

for me and I should just do marketing or

play17:21

SEO or something else or referrals or

play17:23

something that sounds attractive this is

play17:24

simply wrong you don't have the data to

play17:26

make that call you did not do enough

play17:28

Outreach to actually get to correct

play17:30

conversion rate percentages in your

play17:32

sales funnel so the answer here is you

play17:34

sent a few minutes too few emails you

play17:36

don't have the data you can't draw the

play17:38

conclusion that sales is not working

play17:39

even though you have serial customers

play17:41

and this is the mistake that funders do

play17:43

on and on and on again so to summarize

play17:45

what I just went through here you don't

play17:47

know your sales conversion rate that's

play17:49

why you need a CRM to keep track of it

play17:51

two because you don't know who is an

play17:54

early adopter you have a lot of drop off

play17:55

in the outbound sales that makes up on

play17:58

sales ultimately a numbers game and

play18:00

successful startups we like this and

play18:01

internalize this three you cannot close

play18:03

five customers from 10 leads it's not

play18:05

possible you need a lot more app on than

play18:07

that a lot more and unfortunately most

play18:10

finders don't work their way backwards

play18:11

from this sales funnel and they don't do

play18:14

this exercise and the result they don't

play18:16

succeed as sales and they don't really

play18:18

know why so a friend of mine from Airbnb

play18:20

Atlanta rashitzki he writes an excellent

play18:22

blog and he wrote a great blog post

play18:24

about how YC and a bunch of non-yc B2B

play18:27

startups

play18:28

um got their sales go to market strategy

play18:31

going I recommend reading this and other

play18:32

posts uh newsletter it's it's one of the

play18:35

best ones I've come across it has a lot

play18:37

of real data that he collected from real

play18:39

companies uh many of them being YC

play18:41

companies so in this example here in the

play18:43

second column Lenny is describing the

play18:46

initial sales motion of some of these

play18:47

companies as you can see some of the

play18:49

early ones like amplitude stripe front

play18:52

they were doing app on sales emails just

play18:54

like the one we described to get started

play18:56

those Founders were doing those sales

play18:57

emails as they get started some of the

play18:59

other ones was called Product LED

play19:01

product LED could mean something else

play19:03

than just doing up on sales but it

play19:05

doesn't mean having a big sales team and

play19:07

it usually does not mean doing marketing

play19:09

or SEO or something else practically it

play19:12

means something that the product itself

play19:13

is is sort of like driving the growth as

play19:16

you're running the demo

play19:18

um your goal is to close your first

play19:19

customers

play19:20

you want to ask a lot of questions up

play19:22

front in the demos and there's the

play19:24

founders who should do the demos because

play19:25

you are the one knowing the product and

play19:28

you know the customer pain points here

play19:30

are three examples of YC emails that led

play19:33

to customers so I'll let you guys look

play19:35

at the details of these afterwards but

play19:37

this is an app on email that led to uh

play19:39

72 000 a year contract this one LED is a

play19:42

very specific email that led to out

play19:44

Landing a goalie as a customer and this

play19:47

third example here is the one email the

play19:49

same email they got them 22 different

play19:50

customers all right I'm going to

play19:52

summarize this again the biggest

play19:54

mistakes that most finders do is they

play19:55

don't do enough Outreach because they

play19:57

don't work package from the goal

play19:59

believing that something else then sales

play20:00

is going to solve your sales problem

play20:02

Outsourcing sales is wrong you should do

play20:04

it yourself and you need to qualify your

play20:07

customers during your first call here

play20:08

are some of the tools I recommend so

play20:10

there are many many many tools this is

play20:12

perhaps one of the biggest categories of

play20:14

potential things you could use as you're

play20:16

doing sales but I recommend apollo.io

play20:18

close.com formerly called closed.io

play20:21

pipedrive or hunter.io these are great

play20:24

tools that you can use either as a

play20:26

simple sales CRM or Hunter you can use

play20:28

to get contacts or potential people to

play20:31

email from LinkedIn here are two

play20:33

additional resources if some people ask

play20:34

me for books usually there aren't good

play20:36

books but there is actually one that I

play20:37

come across I find really good it's

play20:38

called founding sales and then I also

play20:40

recommend lineage newsletter.com there

play20:43

are of course other ways that you can

play20:44

grow as a startup but the truth that

play20:47

I've learned is that even if you end up

play20:49

with say like Airbnb where the sources

play20:53

of growth is Word of Mouth Google search

play20:56

referrals Facebook advertising if those

play21:00

are the kind of end states of your

play21:02

growth strategy that's not how ambica

play21:05

started they didn't start by running

play21:06

Google sem or Google SEO

play21:08

the referral program did not bring in

play21:10

the first 2000 customers they did things

play21:13

that didn't scale and they looked

play21:15

different than the one they do at scale

play21:17

so a lot of companies are shorting

play21:19

straight into What's called the scalable

play21:21

growth channels the channels that

play21:22

they've heard work which is true at

play21:25

scale but that's not the same thing as

play21:27

when you're getting started so in this

play21:30

slide I'm outlining kind of like just a

play21:32

rough idea of like even if it turns out

play21:35

the Google sem and Google SEO is what's

play21:37

going to work at scale you need to find

play21:38

another place online where these people

play21:40

that you're going to reach through sem

play21:42

and SEO is identifying themselves online

play21:44

right and that might not be the same as

play21:46

Google if you're trying to go after sem

play21:49

which means search engine marketing it's

play21:51

going to be expensive probably because

play21:52

there's competition if you're going

play21:54

after SEO it's going to take a long time

play21:56

if your growth is say proc LED or

play21:59

virality referrals then personal

play22:02

networks selling through your personal

play22:03

Network to your co-workers is the way to

play22:06

get started of course if you're doing

play22:07

sales you should be doing sales it

play22:08

doesn't change very much like early

play22:10

stage sales to to large sales basically

play22:13

means all the things that I just

play22:14

described here

play22:15

done by 100 people in a sales team with

play22:17

more automation more tools more metrics

play22:19

but it's the same thing and if you

play22:21

practice setup to do online marketing

play22:23

it's not usually how most people start

play22:25

why because you can't really easily talk

play22:28

to people you can't learn from users if

play22:32

the first thousand or first-handed

play22:33

customers are brought in through Google

play22:34

and Facebook those people are not the

play22:36

kind of people that you can easily get

play22:38

on a 30 minute phone call with all right

play22:40

that's all I had today thank you

play22:42

everyone

play22:45

foreign

play22:47

[Music]

Rate This
β˜…
β˜…
β˜…
β˜…
β˜…

5.0 / 5 (0 votes)

Related Tags
Startup GrowthSales TechniquesCustomer EngagementY CombinatorProduct Market FitSales FunnelEarly AdoptersOutreach StrategiesPricing StrategySaaS SalesCustomer Onboarding