Dialing in the message
Gil Dibner

The trouble with customer intros. As a VC, I do a lot of customer intros for our portfolio companies — especially those focused on more traditional “top down” enterprise sales. More accurately, I should say that I attempt to do a lot of customer intros for our portfolio companies. Sometimes they work, and sometimes they don’t. But more accurately, I should say that they usually don’t work. Why not? Lots of reasons. First of all, though my network is good, it’s also full of old connections, irrelevant connections, connections that have moved on, or connections at the right company but the wrong functional area. A lot of my best connections are founders, CTOs, CEOs — but not necessarily the “dev ops lead” or the “head of logistics operations” that our portfolio companies want to talk to. The guy I know, as it happens, is usually not the guy that knows the problem my portfolio company is trying to solve. On top of this, people are busy, inboxes are full, and no one has budget for any new anything these days. Lately, we’ve been hearing that last one all the time.

A funny thing happened last week. I found myself sitting in the Tel Aviv office of one of our companies. The CEO and CTO are there, and they tell me that they have just signed a new customer, one who will pay $100K. That’s pretty good. Even better, they are ripping out the incumbent technology and replacing it entirely with ours.

“How much were they paying the incumbents?” I ask.

“A million dollars a year, they said.

“So you’re saving them 90% of their annual _______ cost right off the bat?”

“Yes,” they said,” and we are providing a bunch of capabilities those guys don’t provide in a better architecture…..”

That part I already know, so I cut them off. I whip out the laptop, and want to capture this. Suddenly, the marketing message for this company is clear — and it’s about to write itself. I start writing something in front of them, with their help. It’s an email, aimed at any CEO — at the guy I happen to know, not the guy they need to talk to — and it’s written so that that persona (the wrong persona) knows who to forward it on to and why. The email is pretty simple. It promises 90% cost savings on _________ spend, and gives the specific (but anonymous) example of this new customer (spending $1M which is going down to $100K). The email is specific in its promise but generic in its relevance. Everyone is spending a ton of money on _________, and everyone wants to save 90% of that spend — especially now.

Out of the woodwork. With the email drafted and approved by the team, I start sending it out. I search my network for CEOs — any CEOs, including people I am connected to on LinkedIn but haven’t spoken to in years, and start firing off the message. The feeling I have is that I am doing them a favor. The pain we are targeting is clear, the benefit we are offering is clear, the call to action was obvious and clear, the persona in the org that needs this email forwarded to them is obviously (CTO/CIO), and the confidence is palpable.
By today, just a few days later, the results are in, and I’m amazed. The response rate to that email was higher than any other customer intro request I’ve ever sent. Nearly every CEO I pinged replied back with their CTO/CIO in cc, and the text was always the same. “Thanks. Connecting you with my CTO to take a look….”

It may be obvious but the learning for me was powerful. It can take some time until a customer story speaks loudly enough and clearly enough, but when it does it can be harnessed to great effect. If you can translate the benefits of your product into dollars and into a clear immediate ROI, you can craft a clear and powerful message that will find its way to the right person — even if your contact is the wrong person — and even if you haven’t spoken with that contact in years. When that message is dialed in on the right product, the response rates will skyrocket — and sales will accelerate, even in a very challenging market.

Another takeaway is that if you do not yet have the ability to write up that sort of powerful message, you should be seeking to create the conditions that will allow you to do so as soon as possible. This can take time, but keep it at. The journey to product-market-fit is not always linear or fast — but you’ll know it when you get there. Work closely with your early customers to crystallize the value proposition and translate it to dollars, ROI, and time to value (TTV) as quickly and as clearly as you can. If your product is going to work, there will eventually be a moment — just like the one I experienced last week — when the intro request email finally starts to write itself, and when nearly everyone who receives it writes back…

Keep the faith, stay focused, and work to turn your first customers into stories that can be packaged up into powerful messages.

Gil

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WORTH READING

ENTERPRISE/TECH NEWS

Q1 was rough. Another excellent newsletter from Jamin Ball. This week, he highlights how rough Q1 has been for public software companies. From Ball: “If we look at the net new ARR added in Q1 vs the quarterly average net new ARR added across the 4 quarters in 2022 (graphed below), you’ll see only 7 companies added more in Q1 ’23 than their quarterly average across 2022. For many companies the net new ARR added in Q1 was the lowest it’s been in ~2 years (emphasis mine).” For most companies out there in Ball’s analysis, Q1 was the worst quarter of net new ARR in 2 years. That’s worth remembering if you’re a founder and wondering why it’s so, so hard to hit your numbers, or if you’re an investor trying to keep your expectations grounded in reality.

The Button. An interesting meditation from Ethan Mollick on the value of knowledge work, and how that might change as generative AI becomes more and more ingrained in the tools we use every day. Mollick just got access to the “help me write” button in Google Docs, and it prompted him to start thinking about activities that are hard, but the “hardness” of them is the point. His example is letters of recommendations from professors. They’re hard to write. They take a lot of time to do well. And that’s exactly the point. The content of the letter is one signal, the fact that the professor took the time to write the letter at all is a signal as well. What will happen when those sorts of “hard” tasks aren’t hard anymore? Read Mollick’s piece for more.

HOW TO STARTUP

Forecasting 101. An excellent primer from the folks at Bessemer on forecasting. It’s easy for an early stage founder to not take forecasting seriously. When there’s so much uncertainty, what’s the point in trying to build a forecast? Bessemer makes the case that forecasting, even early on, can be useful. As one founder interviewed said, “the first few forecasts can help bring a nascent business model to life.” It’s not about getting it “right,” it’s about understanding the drivers of the business, and how they interact with each other. For more tactical tips, check out the full write up here.

Better to be fast than perfect. I loved this advice from Kristen Anderson last week:
See a problem, fix 60% of it in an hour?
You’re a rockstar.

See a problem, hold 3 meetings, spend 2 weeks researching, and use 2 engineers to fix 90% a month later?
You’re a problem.

In my experience, in early stage startups, this is exactly right. Startups live off of speed of learning. Quick iteration. Velocity.

Excess process kills that.

If you’re a founder, figure out how to imbue your culture with that level of urgency. If you’re an early stage employee, figure out how to solve problems without asking for (too much) help.

The importance of updates. Everyone wants to know the best way to drive a fundraising process to a quick close. Jason Lemkin has some good advice on how to leverage monthly updates to give investors more information about your company, derisk your execution in their minds, and even, perhaps, create a bit of FOMO.

HOW TO VENTURE

Venture contagion. Kyle Harrison of Contrary wrote an interesting piece this past week about how much venture capital subsidizes its own success, and whether that means VC is doomed. He starts by pointing to companies like Uber…companies that raised reams of capital, used most of that capital to subsidize customer acquisition, but still, billions of dollars later, can’t get the unit economics to work. Harrison’s point is probably best made with this paragraph: “Venture capital, as an institution, has developed a number of “move fast and break things,” “grow at all costs,” and “blitzscaling” playbooks. There are very few playbooks for how to make progress from unsustainable to sustainable territory. Instead, you have a bit of a mentality of “passing the bag.” Who cares if Uber is at $30B of revenue, still trying to figure out “if our unit economics work”? The early investors made lots of money. The next phase is someone else’s problem.”

Harrison goes on to pose the critical question: can venture remake itself to focus on creating sustainable businesses that don’t need billions in cash to get there? Read more here.

PORTFOLIO NEWS

LightSolver’s all-laser technology is poised to outperform and outpace quantum and classical HPC.

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JFrog unveiled their all-star speaker roster for swampUP 2023 in Silicon Valley.