Startable - Healy Jones’ & Prasad Thammineni’s Blog

Vivek Wadhwa had an interesting post today on selling in TechCrunch. I’m learning some serious lessons on selling now that I’m the head of marketing at Pixily - although I am very much still a novice sales manager! I reserve the right to be completely wrong/change my mind on any or all of these points

1. Aspiring to a touchless sales model is great, but small business customers like to know they can reach you on the phone. Many great SaaS companies have a great sales funnel that terminates when a customer signs up online without speaking to a sales rep. I think most small business SaaS startups hope to create this type of sales cycle. After all, how can you have a profitable company if you need to have a sales person on the phone closing $15 per month sales? But, at Pixily, we’ve found that phone calls result in sales and great free to paid user conversions. We offer a free trial, and a decent number of our paying customers choose to sign up for the free trial and eventually convert to paying customers. The highest converting (free to paid) lead source is the customers who call us and who we sign up for the free trial over the phone. The convert to paying customers by over 3x vs. the next best source. (Note: “source” is probably not the right word to use, but it’s Saturday and my coffee isn’t kicking in quite yet…) Is this sustainable in the long term? I’m not experienced enough to know at this point.
2. Customer service reps make great sales people too! Vivek mentions how developers make great sales people. I’d very much agree, since our developers often drive closed leads from networking events they attend and from conferences they speak at. But we are having success with our customer service reps doubling as sales people. First of all, they know the product. Secondly, they understand how live customers are using the product. Third, when a free user calls in to ask a question it’s the time to try to sell them on an upgrade!
3. Customers do the darnedest things with the product - asking them “why are you interested in my product” is really helpful in selling. For example, one of Pixily’s products is a simple document scanning service. We happen to be pretty good at scanning documents, and can offer it profitably as a stand alone service. We had a bulk scanning customer who was a magazine publisher. He wanted to get his old magazine issues (from the 80’s and beyond) online, but only had them stored in print. Once we actually really understood how he wanted to use our product we were able to sell him - even though we were more expensive than a couple of local scanning providers in his area. We’ve sold this particular product a few more times, mainly because we “get” what the customer’s end goal is.
4. Managing a sales pipeline is harder than it looks. When you are the VC, you get to see all these pretty sales funnels at board meetings. When you are the person trying to grow the business, keeping the different campaigns and leads all moving along in the funnels is much more challenging! I guess it’s just in my nature to enjoy playing/measuring our sales channels by output, but I have to fight the instinct to not spend too much time in analytics and not enough time in selling/content creation.
5. When selling online, content is king. I’ve had a ton of luck getting great content out of a marketing intern we recently hired. Not only has he built an entirely new site dedicated to document scanning, he’s also put out some very helpful blog posts and made content upgrades to our web site. All this content is producing - both in terms of us moving up on Google, getting more traffic and improving our conversion rate.

Properly supporting and working with the CEO is the most important action a venture capitalist can take after funding a startup. When I was a VC, I was very impressed with how often the partners I worked with would communicate and brainstorm with their portfolio companies’ CEOs. Part of the VC’s responsibility, and the board of directors’ responsibility, is to perform annual reviews of the CEO’s performance.

The board evaluation of the Chief Executive Officer

The CEO position of a startup is pretty lonely sometimes. Just because a CEO is in charge of a business doesn’t mean that his/her professional development is over - but getting the right feedback and guidance that can help the executive grow professionally can be challenging. Getting effective feedback from employees can be hard, since it is not always easy for them to speak “negatively” about their boss to their boss. And of course, your employees and co-founders are probably pretty busy trying to grow the company. Interactions with the board can be enlightening, but usually focus around discussions of strategic imperatives and operational milestones, not the CEO’s professional development.

While it is certainly the CEO’s own responsibility to try to grow as a professional, it is up to the board to provide the critical feedback and development. Some of the partners I worked took their CEO’s growth very seriously and ran rigorous CEO evaluation processes from the board level. This is a huge amount of work. Sometimes my partner would run the process, other times another VC on the board would, and sometimes it would be the independent director. This is not the same as the “hit this revenue number and these operating metrics and your bonus with be $XYZ” that is put together by the compensation committee. This is really a process intended to help the CEO become a better leader and manager.

I only got to see this a couple of times; I wasn’t a VC long enough to run through this cycle more than that. I’m sure that I am missing some of the important nuances (heck, maybe even some of the important macro-themes) of a CEO evaluation.  However, from what I could tell this is what happened:

The CEO was informed by the board that one of the directors would be running a review process. That director would inform the CEO what the expected timing of the evaluation would be. The end product of this review would be a discussion with the CEO as to his/her performance for the previous year against the company’s stated goals and the CEO’s developmental goals from the previous year, critical feedback and the setting of additional goals/areas to for improvement for the following year. That director would also have a private conversation with the board alerting them as to his/her findings in this review.

To prepare for the review evaluation forms were distributed to each member of the board of directors (I’ve put an example of this form below - I’ve embedded it with Pixily’s document sharing/embedding feature). The director in charge of running the review would collect these forms and have conversations with the other members of the BOD as needed. The director would also do the same with critical members of the management team, such as the CTO, Sales VP, etc.

The evaluation focuses on:

1. The company’s previous year’s goals and performance vs. those goals
2. The company’s near and long-term prospects
3. The CEO’s character, as demonstrated in the past year
4. The CEO’s ability to develop and articulate a vision for the company
5. The CEO’s leadership of the company
6. The CEO’s leadership of the board of directors
7. The CEO’s management of the executive team
8. The CEO’s ability to recruit talent into the company
9. The CEO’s decision making skills
10. The effectiveness of the CEO’s operational style/skill-set
11. Top strengths and weaknesses of the CEO
12. Critical advice from the BOD and team on how to improve management skills and lead the company

I’ve put my own version of this CEO evaluation form into Pixily and embedded it below. This is not a perfect copy of what I’ve seen other VCs do - it is my own attempt to make a more clear, less overlapping review form. I’d love comments on it, as I’d like to leverage other people’s experiences to make up for my own lack of experience and then improve the evaluation form…

After collecting all of this feedback, the director would then create a master evaluation form that would be shared with the CEO during an evaluation. Read the rest of this entry »

Wow, there is an incredible amount of customer feedback that can be collected through a customer support number. I’ve learned some interesting stuff by listening on conversations the Pixily team has had with users of their service. This got me thinking - why don’t more internet-based businesses have phone numbers?

I guess it’s pretty simple to understand why Google doesn’t have a help desk. Think of the calls they would get: “Hey, I can’t find the address of the restaurant I’m going to on Google Maps,” or even more likely, “Why isn’t my company at the top of your search results?” (Or me a few weeks ago: “what the hell just happened to gmail?” This afternoon at TechStars I attended a talk by Nitzan Shaer, who was at Skype for a few years, and he mentioned that Skype consciously did not have a customer service number available because there was no way the service could handle the number of calls they would receive. I can buy that.

But what about smaller/startup internet companies? Can they have a help desk and actually not get overwhelmed helping customers? Should they? I’m starting to think that maybe… I’m pretty sure that for each customer who cares enough to contact a startup there are many, many other users who don’t bother. When you are trying to get something totally novel accepted by an as-of-yet undefined market, any customer feedback that you can get sounds pretty good, even if it is negative feedback. Early product decisions should probably be based on more than just the founders’/programmers’ gut instinct. Most startup internet companies have such a short runway to develop a product that will actually be accepted by the market that minor tweaks to the UI, content, etc. can have a huge impact on customer acquisition and retention.

I realize that actually talking to people is sometimes scary. And constantly picking up the phone can be very distracting. But you may be able to carefully expose a customer support phone number and not only help your business but also help some customers.

I’d imagine that the right way to have a customer service number starts with an easy way to REMOVE the customer service number. After all, if you end up having a Skype level of user adoption you just can’t support a support line very easily. So I’d go with one of those easy to throw away 800 services for the original number. I mean, you don’t want mooches like Mark MacLeod constantly bugging you… On the other hand, if you are an accounting software company and a well known startup CFO is constantly raving about how great your service is, maybe you do.

I’d also think that you will want your developers/product managers to answer a lot of these calls. I know this will slow them down, but on the other hand get the customer info into their hands asap. Also, if they build something that sucks shouldn’t they be the first to hear?

The feedback you get should also be taken in the context of customer segmentation. Maybe the particular user group that you are targeting just can’t “get” your product. Or maybe you want a help line specifically for bigger or corporate customers, or as a way to differentiate your free vs. premium app.

I obviously don’t have most of the answers on this topic. I’d love to learn from others who have or have not had a successful experience with their customer support line.

Prasad and I had an interesting discussion with Siamak Taghaddos, co-founder of Grasshopper (formerly GotVMail.com), a provider of phone number and voicemail services to entrepreneurial companies. Siamak and his team have done a very impressive job bootstrapping Grasshopper into a successful company. He is known in the area as a very savvy marketer, which is why Prasad and I wanted to meet with him - he’s the guy who sent out thousands of chocolate covered grasshoppers recently. We were looking for any advice he might have on how to continue to increase sales at Pixily since he was able to grow his own sales so effectively without a big ad budget in the early days of his company.

His advice was pretty interesting, and is something that I think maybe needs to be reiterated in today’s go-go world of internet based marketing. I was expecting him to mention some sort of a viral online campaign or SEO tactic that really helped get things going back when his company was just a tiny startup. I was wrong. Instead, he said:

1. Figure out the right pricing
2. Get the positioning correct

Then worry about promoting/advertising the service. No one will sign up for your service if you can’t convince them they will get value for what they pay. He even went so far as to say that RAISING the price can be a good thing, if you can simplify your pricing structure. Customers don’t like to worry about overage charges or special fees, even if that means they pay a bit more - a predictable/stable bit more. And a higher price, in the funny world of the internet, can be a signal of quality. If it’s too cheap businesses owners may be afraid that the service is not up to par.

Of course, Siamak is totally right. And of course, his advice is totally obvious. But it was so refreshing to hear from someone who is walking the walk everyday that I thought I’d share it.

My (occasional) co-blogger, Prasad Thammineni, had his company featured in a great BusinessWeek article. BusinessWeek’s well known technology reviewer, Arik Hesseldahl, wrote a solid review of Pixily. 

First of all, this is a really cool acknowledgement of Pixily’s growing success. The article has a very realistic description of Pixily’s service. As a happy user of Pixily, I agree with Arik’s positions around how easy it is to use and search within formerly dumb paper documents. I also agree with his opinion that it would be great if users could merge documents and delete pages from within a document. 

Secondly, this is an example of  great PR for a startup. I’m sure we can all learn a bit about developing solid PR from Prasad… like, how did he get BusinessWeek to review his product, how did he get in touch with Arik, what did it take to convince him that the service was worth reviewing, etc. 

Finally, I’d love to hear from Prasad what this review has done to his site’s traffic and new customer sign ups. Is it creating buzz that is translating into sales??

Thankfully I’ll be getting lunch with Prasad today so maybe I can learn a bit about this stuff… and not to steal any thunder, but I think Twitter might have been involved…

Here is a great link to “50 Essential Strategies For Creating A Successful Web 2.0 Product” by Dion Hinchcliffe. I’m about half way through the list, but some of the points are pretty thought provoking. Dion is trying to be quite comprehensive, so he has the standard “release early and often” advice, but also has more nuanced suggestions such as “Search is the new navigation, make it easy to use in your application” and “The link is the fundamental unit of thought on the Web, therefore richly link-enable your applications.”

This is a solid read on Web 2.0 strategy/design execution. I’d recommend that even experienced web executives take a look at the list. Even if you already know everything he mentions it is still a well written refresher on what makes the online environment so special.

It is hard to want to be aggressive in a scary market. I was reminded of this during a recent internal meeting where we gathered our partners and discussed our portfolio companies. A number of technology companies continue to grow very well despite the nasty economic environment. These companies are typically doing something quite unique, with a clear value proposition to their customers. I’m not talking about marginally improved solutions over existing solutions. Instead, these companies are real game changers, offering something that is a break with how their customers solved the problem in the past. As a venture investor, you want to encourage these startups to hit the gas and grow aggressively through this tough economy.

How does a venture investor encourage a CEO to continue to think big in a rough market? Should a venture capitalist push a CEO who has a startup that is performing well to go for the brass ring in this environment, even if it greatly increases the risk profile of the business? Does “slow but steady” win the race in difficult times or does the team that bets it all end up winning?

I guess that there isn’t a grand theory to apply to every single startup. Each company should be take in a case by case basis. But it is important for entrepreneurs with venture backing to realize that your VC may be highly inclined to take that bet and push you to get aggressive despite the environment. This is just the nature of the beast, and you need to be aware of it. I’m not really able to offer great advice on how you deal with it, but below are a couple of ideas I’ve heard recently on when to be aggressive and when to be more careful with cash burn.

Aggressive falls into several buckets.

One is sales. In a nasty market environment, how big do you grow your sales team? I have a woefully under formed opinion here, so welcome any advice. What I am hearing from the partnership is that the “right” level of aggressiveness in your sales hiring/expenses (from a VC’s perspective) is based on the health of your end market and the ROI of your current sales team. You should think about growing the sales team, even if this burns cash in the near term, if: 1) customers will have the cash and resources to buy your solution, and if they are really getting positive returns from it 2) your current sales people continue to be ROI positive and closing new opportunities or growing the bookings pipeline with legitimate potential deals then you probably want to keep hiring.

Around R&D spend, I think the real question to ask is one that I heard from a board member of one of our portfolio companies. This board member was CEO of a company that recently sold company for $1 billion+, and has offered some excellent advice from his board position in the past. His take was: “who is chasing you right now?” If there is someone in the rear view mirror nipping at your heels then this is the time to be aggressive. However, if the market conditions has taken the wind out of your competitors sales, then you can be smart on how you spend your development money and conserve cash. I thought this was really good advice.

General infrastructure or processes. This may be the time to under build. I realize that you may end up getting bitten in the butt if your startup isn’t yet totally scalable when the turn around happens, but if you can get by now with less and avoid building in advance of demand then you may be better positioned to weather this storm. I know Prasad has some opinions on this point.

Obviously my generalizations above don’t apply to every company. They were more just reactions to things I’ve heard recently. I welcome any comments!

In how to choose the right business idea, I introduced the concept of the Idea Funnel.  Like me, you could use the idea funnel to narrow down a bunch of startup business ideas into few viable ones. I talked about stage 1 of the due diligence process, namely, “Is the idea viable?”. In this post, I will present the second and final stage, namely, “Can I execute on it?”. 

Stage 2: Can I execute on the business idea?

In stage 2, you are focused on things that you need to successfully take your business idea to the market. Here are the few things you need to have:

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Last week, I gave a talk on “Starting a Business upon Graduation”  to a group of Harvard Business School students. In addition to sharing my experiences in starting Pixily right after graduating from Wharton, I shared my approach on how one should zero in on a viable business idea. 

I approach the idea development process similar to how one approaches sales leads within a sales funnel (see below). I start of with a number of rough business ideas and put each idea through the due diligence funnel. Some make it through the funnel and some don’t. Ideas that make it through the funnel are more viable and have a higher chance of being successful.

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Your startup can survive this recession. The stock market might be crap and financiers may be pissing themselves with fear, but other entrepreneurs before you have fought through these tough times and had tremendous success. In the light of depressing powerpoint presentations on the state of the market created by some venture firms, I thought I’d highlight companies that you may have heard of that got going when the economy was hurting.*

The Late 1930’s - Europe is at war and the US economy is limping through the Great Depression. Dave Packard and Bill Hewlett conduct some experiments in a garage in Palo Alto… and in January 1, 1939 formally launch the Hewlett-Packard Company. Yes, that’s right. The cornerstone corporation of Silicon Valley was founded during the Great Depression.

Early 1980’s - Read the rest of this entry »