Rather than choosing the comfort and security of a well-paid position at a large company, some of these coveted technicians choose to forge something of their own. A number of the most successful data startups have data scientists at their helm.
VentureBeat talked with a series of data scientists who went on to become founders and CEOs to learn more about how their background influences their leadership, product, and business strategies — and what it takes to succeed in an increasingly competitive, data-driven world.
All these data scientists-turned-CEOs put a heavy emphasis on data in their own business. They make data a core part of their strategy, operations, and decision-making process. Ultimately, data is only as valuable as what you do with it, and as self-described “data nerds,” these CEOs have an edge.
Editor’s note: Our upcoming DataBeat/Data Science Summit, tomorrow and Thurdsay in Redwood City, will focus on the most compelling opportunities for businesses in the area of datascience and data analytics. There are only a few seats left, so be sure to register now!
Shashi Upadhyay has a Ph.D in physics from Cornell. He analyzed humongous datasets as part of his doctoral research. After graduation, many of his classmates and colleagues took jobs on Wall Street, where they were well compensated for their knowledge of math and statistics.
Upadhyay accepted a position with McKinsey Consulting (a global management consulting firm), where he spent six and a half years advising on sales and marketing problems before founding Lattice Engines.
“As the world has gone digital, data volume has exploded, and retailers tend to have humongous amounts of data,” Upadhyay said in an interview. “I realized there was an opportunity to connect the dots between my experiences. It is hard for most companies to put together a data-science team and compete in the war for talent, and I thought instead they would look for automated solutions.”
LatticeEngines bills itself as “big data for big sales.” Its platform analyzes data and delivers real-time reports with specific data to sales representatives, who can use the information to generate leads and close deals. The engine uses predictive analytics to help sales people anticipate their customers’ behavior.
Upadhyay said that founders and execs of datacompanies must be the “masters” of three domains: They must have unique subject matter expertise, an understanding of machine learning, and the capability to build systems that can scale. And it’s rare to find a leader with a grasp of all three.
“If you spend all your life analyzing data, like I have, certain things become muscle memory,” he said. “You know what is important to the end users, what the problems are, what is doable, and how long something will take. What makes us differentiates us is we have all three of those pieces.”
Upadhyay’s datascience background is also important for recruiting data scientists to the Lattice team and ensuring they are productive and happy employees.
“Other companies make the mistake of bringing in data scientists and treating them like developers, but they are not the same,” he said. “Data scientists care about having an impact on the business, but companies systematically underinvest in training them in the domain and forming a linkage with other parts of the business.”
Thomas Thurston is something of a renaissance man when it comes to datascience. He has an MBA and a law degree and is a member of Harvard Business School’s Forum for Growth and Innovation.
Thurston spent a stint working at Intel Capital, serves as the chief technology officer and fund manager of the Ironstone Group (a venture firm that uses datascience to make investments), and is the founder and CEO of Growth Science, which uses data to predict if businesses will survive or fail.
“I think of datascience as a way of thinking about the world in terms of hypotheses, testing, confidence, and error margins,” Thurston told VentureBeat. “A background in datascience tends to help CEOs ask better questions and get better feedback, because it brings conversations down to a level of reality and practicality. Facts, data, and probabilities can have a way of removing the ego, politics, and hand-waving from a conversation.”
Thurston said that he favors hard data over more intuitive considerations. Like Upadhyay, he is a proponent of challenging all ideas until they are backed up with data and not taking anything for granted.
“It’s not that I don’t value intuition or more ‘soft’ inputs – sometimes they’re so important they can override everything else,” he said. “It’s just all too often in datascience that you see intuition, anecdote, and feeling get turned on its head by actual data. Everyone thought the world was flat. It looked that way. It felt that way. It was intuitive. It was also dead wrong. I find it corrective to try to keep this in mind. Like it or not, I can be wrong at any moment, so I must be willing to adapt.”
Thurston said his favorite “datascience moments” are when he learns something that flies in the face of conventional wisdom, and that these can become significant commercial advantages.
However datascience and the advantages it brings have yet to make their way into more mainstream businesses. Both Thurston and Upadhyay expect that the evolution of this field will involve making datascience more accessible to smaller, less tech savvy businesses.
US retailers had a lot to be thankful for this Thanksgiving weekend as consumers turned their attention from family dinners to good deals, driving mobile sales to record highs. According to just released statistics from Adobe, "consumers took full advantage of their mobile devices to shop on Thanksgiving Day and ‘omnishop’ while in stores on Black Friday," triggering back-to-backbilliondollar shopping days.
Instagram isn't only a place to share perfectly framed photos of sunsets and selfies – some business owners have realized that the site works for pushing product, too. Today, e-commerce startup Soldsie, which previously focused only on businesses selling to their Facebook Page visitors, will now bring similar functionality to Facebook-owned Instagram.
More broadly speaking, Instagram's ability to be a marketing vehicle for businesses and brands has led to the growth of others, like Oracle-acquired Vitrue and Salesforce-acquired Buddy Media for example, which help companies manage their social media presence and run campaigns. And more recently, Instagram began experimenting with brand advertisements of its own.
But Soldsie's system is designed primarily for small to medium-sized merchants running daily and weekly sales, as opposed to individuals selling their own items, or those running some sort of marketing campaign.
“It's kind of like creating an e-commerce site, but putting it through Facebook and Instagram,” explains Soldsie co-founder Chris Bennett.
He notes that Soldsie had been quietly testing Instagramsupport with a smallnumber of merchants (under a dozen) since September, ahead of rolling it out more publicly today. And as with Soldsie's Facebook support, the process for selling on Instagram is simple for merchants and shoppers alike: a seller posts a photo of an item for sale and instructs users to comment “sold” along with their email address.
Buyers using Soldsie on Facebook complete their transactions on the site, but Instagramshoppers are treated a little differently. After commenting, buyers are automatically sent an invoice for the item in question via email, though the company is also offering an option that would direct shoppers to a form hosted by Soldsie instead.
The company is also now working with its merchant customers more closely, says Bennett, providing them support that includes advice on how to better run their sales, communicate with their customer base, and more. The pricing for either service – Facebook or Instagram – is not set in stone, Bennett adds, saying that it's now a mix of a minimum of sales or a percentage of sales.
During the beta period, the first business to test the Instagram selling feature saw 72 orders in its first day, and another business is seeing $ 1,000 per day in sales on average, says Bennett. “People are beginning to build their following counts on Instagram, and it's great to see that the businesses we work with are seeing a great return on investment for building up their following base,” he says.
However, Soldsie's beta tests have been too small to draw larger conclusions from at this point. What we do know is that social media can drive purchases – see, for example, the value of a Pinterest pin – but whether or not it will ever drive a significant number of in-stream purchases, so to speak, is something that's still being proven.
Earlier this summer, Soldsiereported over $ 10 million in transactions processed on its platform, and a reach of over 1,000 merchants. Bennett says the company is growing and has now seen $ 15 million in transactions as of today.
Startups and PRfirms have long had a halting, if not embattled relationship. Spend time talking to entrepreneurs and those working at startups, and it won't be long before you encounter the nagging mistrust founders have of PRfirms and the PR process.
That's why AirPR, the PRmarketplace and technology platform, is launching a new analytics platform that aims to restore some of that trust - or at least give companies and their CMOs a greater degree of insight into both the value of PR and how to increase PR performance.
But let's step back for a minute and ask: Why is it that, generally speaking, entrepreneurs mistrust PR and often end up unhappy with the PR process - and performance? Well, on the one hand, that's because, frankly, public relations and communications aren't skills entrepreneurs necessarily have in spades or are comfortable with (and vice versa). On the other hand, as Zaarly co-founderEric Koester wrote in a recent blog post, boiled down, startups are all about math. Simply put the job of a founder, Koester says, is to make a simple math equation work: R > E.
“You need to show how you can make the revenue you earn from a customer exceed the expenses you incur to get that customer,” he writes. It's for this reason, among many others, that most founders not only pay attention to math, they're datavores. The prevailing psychology, especially in a highly technical world, is that if you can't measure and quantify the value of some activity or spend for the business, it's not worth pursuing.
So, why is there a sense that entrepreneurs struggle to find good PR firms? Well, startups, and particularly the founders and CTOs of tech-focused companies, aren't always the most “outward-facing” people to begin with. Couple that with the fact that - and take this from someone in the media - good PR people can be hard to find, and you're already halfway there.
On the other side, entrepreneurs are already data and metrics-focused, so unsurprisingly, they have trouble seeing the value in spending money on a PR firm. Why? Well, if it's an early-stage startup, capital is tight to begin with, but, really, it's the fact that the PR process is largely opaque. Traditionally, it's been difficult, if not impossible, to effectively measure Return On Investment (ROI).
In the past, PRfirms and startups have used “advertisingvalue equivalency” as a placeholder for measuring media coverage compared to a particular publication's CPM or CPI rates - or the functional equivalent thereof. But this really isn't the most effective benchmark.
If you haven't already fallen asleep, this is the thought process that led Sharam Fouladgar-Mercer to create AirPR in the first place. The startup's initial product, as we wrote in June, was a kind of “Match.com for PR.” In other words, AirPR offered a marketplace designed to match top, pre-screened PR talent with tech startups looking for (and actually able to pay for) representation that makes sense for them given the story they're looking to tell, funding, stage of development and so on.
Since then, AirPR'smarketplace has served as a testing ground that has allowed it to observe and collect loads of data on how startups are approaching the PR process, what they want help with and, ultimately, how effective PR is at meeting its goals, costs, publications they want to speak to and so on. Apply the insight and trends from this formula at scale (over time) - now that the company has had 2,000 companies cycle through its marketplace and hosts anywhere between 50 and 75 active PR professionals at any given time - and one begins to see how this presents the opportunity for a real business.
Over the last six months, AirPR has worked to productize this data-driven insight into the PR process, ultimately resulting in an analytics platform that can potentially help PR professionals and companies alike measure the effectiveness of their campaigns. Launching this week, AirPR “Analyst” as it's being called, attempts to enable companies to track PR efficacy at a more granular level - all the way down to revenue impact.
At a high level, the product measures a PR campaign's web traffic, the number of articles to result from it, social media conversion, performance of core messages and how online interactions drive company sales.
The product allows companies to view this information, segmented by engagement, awareness and optimization, in a single dashboard. Sounds like your friendly neighborhood analytics tool, doesn't it? And, really, that's the idea - a kind of enterprise-focused Omniture or Mixpanel for PR. Depending on the pricing plan and customization companies choose to pursue, they can also compare their metrics and performance to their competitors.
To put this in context, well, the PR industry really hasn't had much of a relationship with analytics, historically. Fouladgar-Mercer says that whereas marketing clouds like Vocus and Cision offer PR monitoring solutions, AirPR Analyst can be the first big data analytics approach to measure effectiveness down to real value.
“The only thing missing from the large marketing clouds of Adobe [read: Omniture] and Salesforce is PR,” the AirPR founder contends. And, while you can rarely trust a founder to be honest in the assessment of their own company, he has a point there. Every company has a line item for advertising and PR spend, and thanks to giants like Omniture, most companies know exactly how an increase or decrease in that advertising spend effects its bottom line.
“For PR,” Fouladgar-Mercer explains, “it's still pretty much a black box.” Companies have very little sense of the degree to which tweaking PR spend positively or negatively affects their core business metrics and their bottom line.
The other approach that could end up working in the startup's favor is that, while it's initially targeting the enterprise and large brands, the long-term goal is to increase PRperformance for companies of all sizes. And if the CEO is correct and AirPR is first to market with this, then it won't matter. But the feature of AirPR's product that could have the most appeal for companies? It takes less than 30 minutes to setup and integrates with the majority of existing analytics providers, the founder claims.
In other words, without the spin, AirPR needs to start generating some revenue from more lucrative enterprise-size contracts and, once it does, it will work downstream to startups. Sure, it's Goliath over David, but that's the approach that 99 percent of founders would take. Plus, for smaller companies, there's always the AirPR marketplace and, at some point in the not so distant future, they'll get access to Analyst as well.
When asked about her experience working with AirPR's new product, “Your Network is Your Net Worth” author and former Virgin America Marketing VP Porter Gale sums it up nicely:
One major misconception about PR is that it's not a driver of revenue and sales … Some people think of PR as solely a brand awareness builder, but time and time again when the press writes a story about a company, sales tend to go up. With AirPR Analyst, marketing executives, and comms teams can track important metrics and tie them to specific business objectives.
It used to be that an “experience” was something a person had at a 1960s outdoor music festival, not something associated with being on the Internet — and certainly not something associated with banking online. But with a plethora of options competing for consumers’ time online these days (either for entertainment or for other services), if your credit union desires an effective and vibrant virtual banking presence, you’d better be aiming to create a quality experience for your members — a quality virtual banking experience. So, what can creditunions and their vendors do together to create a best-in-classvirtualbanking experience?
First and foremost: Partner with a company who understands design. Good design is at the center of a quality user experience, and only a company with design expertise can create a best-in-class user experience for your members. You want a company that employs a user-centered design methodology, whereby every facet of the experience is created with the end user in mind. A company whose focus is on workflow optimization and ease-of-use, versus payments or core processing, will be much more adept at creating the kind of virtualbanking experience your members will appreciate.
Second, recognize the importance of your website, and treat it as an extension of the overallvirtualbanking experience. After all, it’s the first impression your members — and prospective members — will have of your credit union and its virtualbanking experience. Once again, design is crucial. Your website’s look and feel should be of the same quality as your virtualbanking offerings. The greater the consistency in fonts, color scheme, and branding, the greater the overall experience for your members and the greater the perception of your credit union. If one of your goals is to increase virtualbanking adoption, a second-rate website can be a huge impediment.
Lastly, and perhaps most difficult to pull off, provide your members with a unified user experience. What does that mean? It means providing your members with a consistent look and feel across all devices and all channels. Regardless of whether they’re banking on an iPad, a Dell laptop, a Samsung smartphone or their Mac computer, the user experience should be the exact same. This is huge, as this is what consumers have come to expect thanks to the likes of Netflix, Facebook, Apple and other premium brands. Offering your members this best-in-class level of experience will distinguish you from your competitors that lack the cohesive and quality virtualbanking experience.
Sponsored posts are content that has been produced by a company, which is either paying for the post or has a business relationship with VentureBeat, and they’re always clearly marked. The content of news stories produced by our editorial team is never influenced by advertisers or sponsors in any way. For more information, contact firstname.lastname@example.org.
Matt Winn is Volusion’s marketing communications manager.
With the Internetsales tax debate lingering in Congress, many online retailers are anxiously waiting to see how passage will impact their business operations and bottom line. One major item that’s in flux is the “smallseller exception,” which states that online retailers earning less than $ 1 million in out-of-state sales each year are exempt from the requirements of the Internetsales tax legislation.
The idea behind the smallseller exception is to help remove the burden of the online sales tax from smallbusinesses and prevent any long-term impact on their growth. And while that notion may be an admirable one, the $ 1 million threshold is far too low and should be raised to a much larger amount.
1. The $ 1 million figure is arbitrary The wording of the current Senate bill implies that a “small seller” is one who generates less than $ 1 million in out-of-state yearly revenues. This threshold, however, is in no way related to the size standards defined by the Small Business Association. For some context, the SBA’s size standards “define whether a business entity is small, and thus, eligible for Government programs and preferences reserved for ‘small business’ concerns.”
In fact, the SBA has very specific definitions of a small business based on annual receipts or an organization’s number of employees. This information can be found in Title 13, Section 121 of the Code of Federal Regulations. Some examples of smallbusinesses within the “Retail Trade” industry include:
Furniture Stores: $ 19 million
Electronics Stores: $ 30 million
Women’s Clothing Stores: $ 25.5 million
Sporting Goods Stores: $ 14 million
With current small business standards already in place, the Marketplace Fairness Act has an approved baseline for what revenue amounts should and should not be exempt from an online sales tax. By following these guidelines, not only does it move the thresholds to an agreed upon standard, it helps protect smallbusinesses from the burdens imposed by a new online sales tax.
2. The $ 1 million figure puts a burden on small online retailers, impacting economic growth While the smallseller exception has good intentions in protecting the smallest of businesses from taking on the cost of implementing the online sales tax, it still places a big weight on the backs of small to medium-sized retailers. One study commissioned by a group known as the True Simplification of Taxation (TruST) states that retailers with five to fifty million dollars in annual sales will spend $ 80,000 to $ 290,000 in setup and integration costs, with annual costs ranging from $ 57,500 to $ 260,000.
Beyond implementation costs, here are some additional implications that the miniscule $ 1 million threshold could have on the economy:
Reduced incentive to grow an interstate ecommerce business: Why sell across borders and be forced to implement taxes when you can just sell at home?
A negative impact on overall online sales: Unlike in a retail store, online shoppers are typically required to pay an additional shipping fee. Mix this with an unexpected sales tax amount and online retailers will see a lift in abandoned carts and lost sales.
A potentially adverse effect on the macroeconomic landscape: Ecommerce has been a bright spot in the economic recovery, experiencing double digit growth across a span of multiple years. A potential slowdown in ecommerce growth could have larger implications for the economy as a whole.
3. The $ 1 million figure hurts the competitiveness of small businesses against mega-retailers
The fact that mega-retailers such as Amazon support the online sales tax legislation should be a red flag to smaller merchants. Whereas in the earlier days of the internet, when online selling was only accessible to the largest players, ecommerce is now readily available for businesses of all sizes. Because of this increased competition, mega-retailers see the Internetsales tax as an opportunity to increase their market share online, as these big brands can bear the brunt of the taxes that might otherwise harm smaller players.
To further demonstrate the play againstsmall businesses, Amazon is openly championing the Marketplace Fairness Act because, in many states, the company is exempt from collecting sales tax. Pair that with their lobbying and political power to further expand these exemptions, and it becomes clear that the world’s largest retailer is looking to expand its presence at the expense of small businesses.
Whether you agree or disagree with the idea of an online sales tax, it’s hard to argue that in its current form, the implications of the smallseller exception being set so low are real. Even more concerning, a recent House bill on the matter removes the small seller exception completely. As the debate continues across the country, small business owners would be well-advised to keep a close eye on this legislation.
Matt Winn is Volusion’s marketing communications manager, where he helps oversee the organization’s branding and communications efforts. Matt has created hundreds of articles, videos and seminars on all things ecommerce, ranging from online marketing to web design and customer experience.
The app, which spun out of its parent company NHN earlier this year, said it brought in 9.9 billion yen ($ 99.9 million) in net sales for the quarter ending in September. Overall revenues, which include the amount that Line has to pay out to the app stores and developers, has more than doubled in the past six months to 15.6 billion yen ($ 157.6 million).
“Of course you're going to ask questions about an IPO,” said Jun Masuda, who had served as a chief strategy and marketing officer for Line's original parentNHNJapan before switching over as an full-time executive on the app. “It's a strategy we're thinking about, especially looking at services like Twitter. But at the current moment, we don't believe that it's something that we have to do right away. We currently have enough cash and we don't have a pressing need to do an IPO.”
Line has seen an astonishing rise for a skunkworks project that came out of NHN, which is the company behind South Korea's big search portal Naver. From its launch shortly after the devastating 2011 earthquake that crippled the Fukushima nuclear power plant, Line has accumulated 280 million registered users worldwide. They have never shared figures on monthly active users.
The app has totally saturated Japan with 49 million registered users and completely upended the mobile gaming market in Japan, undermining the historical power of gaming platforms like DeNA's Mobage network and GREE. These two companies ruled in the feature phone era, but DeNA has now seen its shares slide 32.5 percent while GREE shares have fallen 41.5 percent over the last year. Line's rise, along with that of other apps like Tencent's Weixin (which has 236 million monthly actives), shows just how volatile the mobile social networking and messaging space continues to be.
Now Line is picking up momentum in the gaming space, with 39 published titles and deals in the works to bring more third-party games from abroad over into the Japanese market. They recently closed a deal with Finland's Boomlagoon, a studio from a team of former Angry Birds developers.
Before turning into a games platform, Line had aggressively pushed stickers and sponsored accounts for revenue. (Stickers, notably, were copied by many other Western rivals like Facebook and Path).
But now, the key part of Line's massive revenue growth now is in gaming. The games part of Line's business now makes up 60 percent of their revenue, followed by stickers, which make up another 20 percent of their sales. Then there are sponsored accounts and merchandising, which is pretty minimal. Their gaming-centric strategy closely follows what neighboring South Korean messaging app Kakao did in coming to dominate Google Play's charts. Kakao publishes all 10 of the top 10 grossing titles on Google Play in the country, according to App Annie.
Next, they're considering building some type of e-commerce service or marketplace, handling both consumer-to-consumer and business-to-consumer transactions. That could create competition for giants like Rakuten and scores of other small e-commerce startups based in Japan.
After saturating Japan, their big growthmarkets are in countries like Taiwan and Thailand. Then they'll be looking at Spanish-speaking or Latin American markets like Mexico, Spain and Brazil for growth.
“We've considered strategies to enter America for awhile, but it is a very difficult market at the moment,” Masuda said, declining to share how many U.S. users the app has.
He said despite upstarts like Weixin or WeChat, the venerable WhatsApp is their strongest rival, especially in growthmarkets like India.
“You're able to use that app in areas with poor network connections or on smartphones without very high specs,” he said.
Even though Line has had a very quick rise, Masuda argued that it won't be quick to fall - not like the rapid decline that GREE and DeNA have seen over the last year.
“There's a fundamental difference between companies like us and Mobage (DeNA) and GREE,” he said. “Their SNS (social networking services) were based around games, so it was easy for users to quit the service quickly. But Line is based around communication. Users use it every day for free calls and messaging, so we think our lifespan will be longer than former SNSs.”
So, you went out and bought the new iPhone 5S because you’re an Apple loyalist or a sucker for all things new and shiny. Whatever your reason, you just supported a company with your purchase — but did you get anything out of the transaction besides a new gadget?
Why not also invest in Apple, or any other company that has products and services that you love, to support yourself for the future?
Every day, people talk about various brands on social media, but they have no idea of the market potential of those brands. Going back to your new iPhone that’s sitting on your desk, you could learn that Apple’s stock (AAPL) is up several hundred percent over the last few years, and if you had invested $ 500 in 2000, it would be worth several thousand now.
And that’s just all from one product. You’d be surprised what else you can invest in.
Investing is a daunting subject for many, especially those that are new to the game. Thankfully, there are websites available that provide ways for novice investors to get started.
One such site, LikeFolio, enables people to become investors with just one click, and it pulls in investment opportunities based on the users’ social media likes, mentions, and check-ins. Plus, to help users along, the site gives them five free trades and a gift card to a store of choice.
Invest with LikeFolio by visiting their website to see how you can start investing in the brands you love.
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October saw its traditional raft of mobile device launches, but November is when the sales will really fly. It’s when all those buying for the holidays enter the market.
With Black Friday looming, expect buy buttons to be clicked and registers rung at record speeds. And it is likely to be tablets all the way as second and third screens become the norm in homes and among the most requested tech gift ideas.
With so many high-class models to choose from, the field has never been more open. So which will win in the battle for sales?
Editor's note:Deepak Jeevan Kumar is a Principal at General Catalyst Partners, a Venture Capital firm with offices in Palo Alto, Boston and New York. He focuses on funding and launching big data, cloud computing and cybersecurity startups. Follow him on Twitter @DJKHacker.
Getting to a successful initial public offering is not an easy road for enterprise startups selling to Fortune 500 customers. Earlier in the lifecycle, the first question of death they encounter is: "Who are your other customers?"
This can be effectively addressed by taking your startup on the other IPO roadshow: the initial product offering roadshow targeted at Fortune 500 enterprises.
Unlike consumer products, where early users will join a platform to discover something new, CIO offices in Fortune 500 companies are trained to play it safe. Many companies stick to Oracle, VMWare, EMC and Cisco not because their products are the best in the world, but because no one got fired for selecting one of them. Asking about your other customers is a way of de-risking the purchase decision – air cover in case something goes wrong.
There are a few simple and concrete steps available to founders to develop this "quotable referencability." Never before has it been easy for startups to engage CIO offices. In this era when cloud computing, big data, international cybercrime and mobile are simultaneously disrupting decades-old legacy infrastructure in most CIO departments, Fortune 500 enterprises realize that they will be left behind if they don't use innovative products from startups. So how do you programmatically exploit this opening to win reference customers?
Start with an ‘Initial Product Offering' Roadshow
“Sell first and code next” is my advice to any enterprise entrepreneur trying to win Fortune 500 reference customers. Selling starts before you develop your alpha/beta product and not after it.
Once you have convinced your VCs to fund your seed or series A round, it is your privilege to ask them to help you organize an initial product offering roadshow, aka a design customer roadshow. While most VCs are great in helping with ultimate initial public offering roadshows, very few can guide you through the first initial product offering roadshows. This is more than just making a couple of customer introductions. You need guidance in planning a trip to NYC and Boston to meet with 10-30 of the top financial institutions, pharma companies, insurance majors and media conglomerates.
Many companies stick to Oracle, VMWare, EMC and Cisco not because their products are the best in the world, but because no one got fired for selecting one of them.
Getting to the right person in these organizations is key. Busy Fortune 500 executives will give you guidance only if the intro comes from a prior entrepreneur they have engaged with or from a trusted VC who is familiar with the problem domain. It is also important that the founders (not product managers or sales engineers) represent the startup in these early discussions.
In my work as a venture capitalist, I find this roadshow to be the most crucial eye-opening experience for engineer-founders who have no prior interaction with Fortune 500 companies in a sales role. It helps them understand the meaning of the notoriously long enterprise sales cycle that may include RFPs, the complexity of the decision-making processes involving many stakeholders and the importance of finding a “budget.”
Develop The Minimum Viable Product With Your Customers
When you are on this roadshow, you are not expected to have a beta product, but you can still engage these prospective customers on key sea changes in the industry, their perceived needs and your mission on changing the world. Jointly brainstorm an architecture/product design that can help them address this change in a 10x cost-efficient and 10x faster manner. Make them feel a part of the company's creation process. The output of this roadshow is to select three to five design customers who are willing to engage on paid PoCs (proof of concept). Select only those design customers who have been quotable references to other startups before.
After securing soft commitments from design customers, it is time to start developing your alpha product. This may take 3-12 months. Keep your design customers engaged through this long hiatus by giving them key milestone updates and organizing joint design discussions. Make them feel like they are developing the product with you. Be well-informed on their budget changes and ensure that they still have a budget allocated to engage you on a paid PoC.
Undertake Only Paid PoC Engagements
Do not use unpaid PoCs even if you have to wait one to two months to get a paid PoC. The best VCs realize this and will tolerate such delays. The conversion rate of a paid PoC to a “production-referencable” sale is significantly higher than the conversion rate of an unpaid PoC. Understand what success in a PoC means. Define clear parameters and talk to other startups that have undertaken PoCs with the same customers. Make sure your sponsor has experience in helping other startups through this conversion process. Once you have completed a PoC, convince your design customer to be a reference for future investors and other customers.
It is a good practice to hire a program manager and a sales engineer to ensure the smooth running of these PoCs. I have also seen a few startups first engage in testing the waters with alpha PoCs before starting an almost-feature-complete beta PoC for a much larger group of customers. This is specifically useful when you have a complicated product that has a long development cycle and also has multi-week testing cycles for customers to appreciate its complete value proposition.
Power and influence in the early days can come from public silence for enterprise startups.
Use Stealth Mode
Don't talk about your product until you're ready for its general availability. This serves three purposes. First, it keeps you focused on the proof-of-concept game. I have seen enterprise startups that stay in stealth mode for two years after funding to ensure that they have a few key reference customers before announcing the product publicly. You can't open many war fronts. An all-out PR war front is unnecessary, as you already know who your design customers are.
Second, power and influence in the early days can come from public silence for enterprise startups (unlike consumer startups). Your competitors, the media and your customers like a game of treasure hunt to find out what you are doing. As you are selling to a select group of Fortune 500 customers, there is no point in announcing to your powerful enterprise tech competitors (e.g Cisco, Oracle, IBM, HP) what you are up to. Convince your design customers first before you open up the kimono.
Finally, stealth-mode PR is highly recommended instead of an open all-out PR strategy where all details are disclosed publicly. The cornerstones of stealth-mode PR are: a) speaking in industry conferences about where the world should be headed to enable a key transition and how you may have a unique plan to enable that key transition; b) getting your design customers to talk to their fellow CIOs and to the investment community; and c) engaging industry analysts and mentors.
Engage Analysts And Industry Mentors
Successful startups almost never sell to just two to three customers. There is a major risk that is built-in to the design customer PoC strategy described above. You can become hyper-focused on solving the problems of your design customers and forget that the product you create should be widely usable in the industry. You can mitigate this risk by engaging a few key external stakeholders in this phase.
Firstly, recruit a strong sales oriented entrepreneur to be a mentor, adviser or a board member. Such a person can provide expert advice on the problem described above, guide you in converting paid PoCs to production sales and help craft your recruitment strategy.
Start briefing industry analysts such as Gartner, IDC, 451 Research and Forrester. Boutique analysts such as Bernd Harzog and Curt Monash also have influence in the customer community. Get them to talk to their Fortune 500 clients about you and to provide you with the feedback.
It is also a good practice to open early discussions with key channel partners such as Trace3 and Cambridge Computer, who have experience in guiding early-stage startups to expand your beta customer pipeline. They give you an extraordinary amount of leverage in helping you focus your resources on your direct engagements.
Keep these stakeholders informed of your PoCs and reference wins. At the same time, keep these interactions limited to two to three industry analysts and two to three channel partners to maintain the stealth-mode effect.
Once you are through these steps you have validated your product-market fit. You have a few quotable reference customers and solved the first chicken-or-the-egg problem. And you're now ready for GA of your product, which will be the next inflection point in your startup's lifecycle.
This is when you start talking publicly about your company and vision. The next sales steps are to create a repeatable sales process and scale the revenues. For that you will have to raise a series B, hire a strong sales team, win the love of channel partners, start your public-facing content marketing strategy, create a top-notch customer advisory board, raise a few larger rounds to reach $ 100M in annual revenue and establish thought-leadership in CIO forums. And that will position you well for a successful IPO roadshow.