Who values your Value Proposition?
A value proposition tells people why they would buy your product, yet a lot of startups have value propositions that are met with little, if any, enthusiasm. This post should help you look critically at your value prop and see if it has the right ingredients.
Each year, CB Insights publishes a research brief called “The Top 20 Reasons Startups Fail”. And each year, the #1 reason is “No market need” (42%). You might wonder how it is that there is no market need for products and services that are clearly better than legacy products, faster than legacy products, and cheaper than legacy products?
Generally speaking, the answer is: because the product wasn’t created with a real understanding of a particular customer. That may sound like an oversimplification, but hear me out.
A big part of my coaching work with founders is about helping them see what’s holding them back. And because founder coaching is about both the founder and the company, I help them surface what is holding their company back as well. I recently wrote a blog article about how Founder Bias was one of the things that held companies back. In that article, I spoke about why customers might not be interested in your product. Your value proposition, when done correctly, focuses on why they would be interested.
I started this piece talking about the necessary ingredients of value props. If you Google: “definition of a value proposition”, you get a pretty wide range of answers. Some of the definitions that I like the most are:
- “A value proposition refers to the value a company promises to deliver to customers should they choose to buy their product.” Investopedia
- “Your value proposition should describe; how your product or service solves/improves problems, what benefits customers can expect, and why customers should buy from you over your competitors.” Impact
- “Value Propositions are the products and services that create value for a specific Customer Segment. They do so by solving a customer problem or satisfying a customer need.” E-Commerce Digest
I like those particular definitions because they include clues to the “necessary ingredients” that I mentioned earlier as being part of great value propositions. Each of these definitions include the words “value” and “customers”. I see a ton of startups that either don’t understand “value” or don’t understand their customers. Value is what people pay for, not features. Customers are the folks that make the purchase decision.
The first thing you need to understand is that value, like beauty, is subjective. Two people can be presented with the same set of product benefits and have two wildly different perceptions of the value of a product. Among other things that means that you can’t generally create a product or service that has “universal appeal” and by extension, universal value.
The second thing to know is that generic benefits don’t necessarily correlate to a person’s perception of value. Value is a personal calculation. It’s a net of a lot of different things and that calculation is different for different people. One’s perception of value is a primary driver of what someone would be willing to pay for something. And what people are willing to pay for your product or service is a critical component of your business model.
The calculation that I mentioned isn’t always numeric, it’s quick and intuitive. “Will this product add more value for me than the cost of adopting the product?” “Does this product improve my life in a meaningful way?” “How often will I use this?”
So if value is based on “personal” perception and an individual’s specific net calculation, you can see that a great value proposition has to start with a specific set of individuals in mind: your target audience. Your value prop should start with a strong idea about who needs your product. So when we talk about the “pain point” or the “problem”, you need to have given some thought to who exactly has the problem you are seeking to solve. This might seem obvious, but you might be surprised how many founders assume too broad a target audience.
- Good startups start with a thesis about who would really value their product.
- Better startups validate that their original guess was correct.
- Great startups dig deep into the motivations and worldviews of this set of potential customers to understand what they would see as valuable.
What about not-good startups? Those startups start with a product. They get wrapped up in the bells and whistles, the features and capabilities, and the “cool factor”. Bad startups think about the customer last. They build the tool and then go around looking for people that might want the tool. They work hard at trying to convince or persuade potential customers that their product has value. If you need to do much persuading that your product has value, your product might not have the value you think it does, or you are trying to sell to the wrong person.
As a startup, you should always start with a strong need and knowing exactly who has that need. That way, you don’t have to persuade them that they need a solution, you just need to let them know why you should be the solution they select.
Theorize your initial ideal customer
So how do you create an effective value proposition? Start by thinking about a specific group of people that are experiencing a certain use case and would love to improve their situation by a meaningful amount. In other words, find a group of people who care about a current use case outcome and are ready to make a change.
I emphasize “change” because that often gets missed by founders. The fact is that adopting your product requires a change of some sort. Humans don’t especially like change. We’re creatures of habit. We change when we think that the personal value of the improved outcome is worth the risk or the switching pain.
Personal value is different from generic value. For example, if I made a “better” running shoe, the word better doesn’t mean the same thing to all people. To some, better means more comfortable. To others, it might mean more breathable. To still others, it might mean that it helps you run faster. So your “better” shoe might not be better to me. You need to start with a group that aligns with your idea of “better.”
The value to any customer is going to be outcome focused. For example, the product will get them to their destination quicker, or make it easy to coordinate all of the transportation and housing for a vacation, or help them get investor funding in half the time. The value won’t be centered around features or the mechanics.
Don’t stress about whether you will initially guess right about who the best customer is. A lot of startups either misidentify the target audience or the problem, or both. If you pay attention and iterate, there should be time to adjust. The key here is at least having a starting customer in mind that you can build assumptions for and that you and do customer development interviews with.
Don’t be married to your starting assumptions
Your value proposition is likely to evolve over time. It could even evolve the moment you start having conversations with your target customers or seeing how they interact with your product. What matters is that you start with a theory and validate your assumptions as quickly as possible. Your initial thinking might be wrong about the ideal customer, wrong about the perceived value, or both. If customers are not as excited as you expected about your product, it’s likely due to a mismatch in their perception of value and yours.
Also keep in mind that, in addition to showing value to your target clients, the best value propositions include strong value relative to other products and solutions. After all, the target buyer has 3 choices:
- Stick with their current solution
- Switch to someone else’s product
- Switch to your product
Lastly, be clear and simple. Although your value proposition will be targeted to a particular audience, anyone should be able to understand it. Use short, simple sentences. Don’t use big words or jargon or try to make it sound overly professional. And don’t exaggerate or use hyperbole. I see startups that make unsupported claims or overstate their value. As a startup, it is vital that you deliver the value you promise.
Having a strong value proposition has lots of obvious benefits, but it can also serve to make sure that your entire company is focused on exactly how you deliver value to your customers. A well crafted value proposition will impact all of the departments in your company and help you to establish your place in the market.
A great value proposition will:
- State clearly what you do
- Be created with a particular user in mind and be based on what they would see as valuable
- Be short and simple. Value propositions don’t include jargon or buzzwords.
- Show not just absolute value, but show value relative to other options in the market
- Be a work in progress that will evolve as your users, your market, and your competitors evolve
To finish, I wanted to show 10 company value props done right. Enjoy!
Slack: Slack gives your team the power and alignment you need to do your best work.
AirBNB: Top rated, unique experiences around the world
Uber (for drivers): Get in the driver’s seat and get paid
Uber (for riders): Tap the app, gt a ride
Unbounce: Create custom landing pages with Unbounce that convert more visitors than any website—no coding required.
Stripe: Stripe is the best software platform for running an internet business. We handle billions of dollars every year for forward-thinking businesses around the world.
Zapier: Easy automation for busy people. Zapier moves info between your web apps automatically, so you can focus on your most important work.
Spotify: Music for everyone. Millions of songs. No credit card needed.
Asana: Asana is the work management platform teams use to stay focused on the goals, projects, and daily tasks that grow business.
Dollar Shave Club (clearly evolved): A top-shelf grooming routine. Personalized for you.
MailChimp: Our all‑in‑one Marketing Platform gives you the tools to find the right customers, build your audience, and bring your brand to life.
When you work with a variety of founders, a number of patterns emerge. In my work coaching early stage founders, one of the most common issues I see is Founder Bias or Founder Blindness. They are variations on a theme, but both, if not addressed, can be fatal for a startup.
Being a startup founder is hard. I say that in a lot of my blog posts because it’s hard in a variety of ways, including the sense of isolation, imposter syndrome, navigating amid uncertainty, the pressure of making things work, etc. For this post I want to talk about how founders have to walk a fine line between between being enthusiastically in love with their idea and being able to see past their own blind spots.
Have you ever had a conversation with a founder where they are frustrated that people “just don’t get it”? “It” being the brilliance of how their product will change lives. Or what about conversations where the founder is convinced that they “just haven’t found their audience yet” (which might be true)? How about the conversation where they have all sorts of the metrics that show things like anemic conversions or weak engagement, but they just want to give it “more time”?
By themselves, these are not horrible things for a founder to say. But at some point, if the founder isn’t making changes to address these things because “eventually things will take off”, then that’s either founder bias or founder blindness rearing its ugly head.
How are Founder Bias and Founder Blindness different?
For the purposes of this piece, here’s the difference between “bias” and “blindness”. Bias is when a founder is inclined to believe something more than the data that they have would support. They see what they want to see in the data or more often, don’t feel the need to research data because they feel that they already know the answer. If you show a founder with founder bias real data that contradicts their bias, they are sometimes open minded enough to consider that their bias might be unwarranted.
When a founder has founder “blindness”, they’re “true believers”. They know that they are Correct (with a capital “C”). Almost no amount of data can convince them that they need to adopt a new strategy. Unless the founder is right and never needs to adjust course, blindness is terminal for a company for a lot of reasons. The most obvious reason is that investors can spot founder blindness most of the time and will steer clear. No one wants to invest in a founder that isn’t open to course corrections when needed.
On the other side some founders aren’t so much biased or blind, they just don’t have the instinctive empathy for their customers and don’t know why things are not working as planned.
There is an exercise that I usually have my clients do, that can help them see past their blind spots. The exercise is designed to pull the founder outside of “invented here” mode and help them imagine “why” there is a gap between their expectations and reality. The exercise is “Why Not?”.
To do the exercise, a founder should have an open mind and be willing to let go of the things that they know about themselves, about their company, about the product, and about the magnitude of the problem they are addressing. It’s an even more effective exercise if it’s done with a number of people involved. Maybe as a group exercise for the founding team. Even better if it includes people who are not emotionally invested in the product at all, like friends of the founding team. I’ve done this exercise with many of my coaching clients if they don’t want to make it a team project.
The rules of the exercise are simple.
First you need to create a persona or personas for someone who fits the demographic and psychographic description of someone you would expect to be an “early adopter”. This person should have the capability to pay for the product and the authority to purchase or recommend the product. They should be someone who regularly encounters the use case where your product adds value. In short, they fit your target, have the problem, and have no limitations in being able to become your customer.
The persona should be considered to be sane and intelligent. They make sound judgments for good reasons. In other words they are rational and are able to grasp the information “that you share with them”. I put that last part in quotes intentionally and will explain its importance in a moment. The key to this part is that this person should be as close to a slam dunk early adopter as you can imagine.
Now comes the tricky part. Now you have to imagine that you pitched or marketed your product to this person and they decided “thank you, but no thank you.” This is where the hard part begins. Based on your thinking, this person should have been a “yes”. In reality, they were a “no”. Why?
Why wouldn’t they buy from you?
It’s time to make a list. But before you do, you need to remember two things. The first is that this person does not share your thinking.
- They don’t know what you know.
- They don’t think like you.
- To them, you are a stranger. A startup. Someone without a deep performance history.
- They don’t know how smart you and your team are.
- They don’t care that you’ve raised money or graduated from YC.
- They don’t know the research that you read and have not seen the spreadsheets you created.
- It doesn’t matter to them how long it took you to develop the prototype
The second thing is to recognize that what they do know comes from two places. They know what they knew before you encountered them, and they know the information that you shared with them (mentioned earlier).
The information they had before includes:
- Their personal experience with the pain point/use case that you are solving
- Their history with the legacy product that they currently use for that use case
- Their awareness of other current options for that use case
- How the decision to purchase your product might impact them personally
- Anything they may have heard about you from other people
- Their perceptions and worldview
The information you shared with them starts with your initial marketing message. It’s pretty limited. If the headline isn’t compelling, don’t assume that they scrolled to the bottom of your landing page. If the landing page isn’t engaging, don’t assume they know what you would tell them on a phone call (since they may never make that call). So in short, they may not have known much about you before you reached them with your marketing, and what you shared with them might be limited.
Time for some Persona Empathy
So now you make the list based on everything above. The list is a list of the reasons why this perfectly sane person, with no limitations on becoming a customer, decided to pass. To get you started, here are some common “reasons to say no” that might have a place on your list:
- They don’t believe your claim/assertion on the product’s impact/effectiveness (you don’t have social proof or they don’t believe your social proof)
- They are worried that you won’t stay in business and they’ll be left with an unsupported product
- The switching cost from their legacy system to yours is too high
- The learning curve or change in workflow isn’t worth the impact they perceive
- They don’t trust you with their information (especially with products that require sensitive information)
- They don’t think that their legacy product is as bad as you think it is
- They don’t perceive the benefits of your product to be as big as you do
- They don’t fully understand what your product does
- They don’t have the need you think they do. At least not at the magnitude you think
- They may see your product as a risky one to switch to (the purchase could affect how their judgment is viewed by others)
- You get the idea. Your list will vary…
Be honest and really brainstorm the possible reasons. When you’re finished with your list, go through each and ask yourself which ones you can and should try to address. Keeping in mind that your product isn’t for everyone, ask yourself if anything on the list narrows your thinking on the definition of your early target market.
So far, this exercise has provided something useful for all of my clients. At a minimum, this will give you some additional customer insights or increased empathy. At its best, it will help you address invisible roadblocks that can materially dampen your traction. In either event, if you block some time and take this seriously, I promise it will be worth the effort.
I recently gave a presentation at GSVLabs on Effective Storytelling for Startups (a recording of the workshop is here). GSV Labs is an accelerator with offices in Silicon Valley and Boston and works with early stage founders to help them improve their odds of success.
The first part of the workshop was partially about redefining storytelling as something we do with practically everything we say and do. The clothes we wear, the words we use, our body language, the cars we drive, our tendencies to exaggerate, etc. In other words, we aren’t just telling stories in board meetings, at investor pitches, in our advertising, or when setting company culture. We are telling stories all the time.
What most people don’t take advantage of is their ability to manage the narrative. That’s partially because they don’t recognize the amount that they’re telling stories. It’s important to note that the stories you tell in aggregate form your “personal brand”. The stories you tell about your company create your corporate brand. And the combination of those two brands have a huge impact on things like:
- Your ability to raise investment capital
- You ability to recruit great people
- Your ability to form strategic partnerships
During the presentation I spoke about how you can instantly improve the quality and effectiveness of communications with a few storytelling tips. At the end of the presentation, someone asked what I thought was the most important part of great storytelling. And while there are lots of videos about storytelling that focus on how you “tell” a story, I realized that I thought the most important parts of storytelling happened BEFORE you actually tell the story.
When I’m coaching founders, I encourage them to consider a few things when creating a story (pitch decks, presentation, meeting, etc.). My top 4 pre-story considerations are:
- Who is your story for?
- What emotions do you want people to feel?
- What do you want people to take away?
- How can you help them see what you see?
I’m surprised at how often people don’t start with the impact of a story when crafting one. So I thought I’d write a quick piece to let you know how these things help.
Who is your story for?
Most stories are not universal. Stories affect different people in different ways. Have you ever gone to the movies with a friend and discovered that while you loved the movie, they hated it? Or can you imagine how commercials for a fast food burger joint are received very differently by a vegan versus a fast food lover? People hear your stories through different filters and mindsets. If you know what some of those filters are before you tell a story, it gives you the opportunity to decide whether the story is right for that audience as is, might be right for them with some adjustment, or just isn’t right for them at all.
Let’s use a fundraising pitch as an example. I sometimes see founders who are are at the seed stage trying to tell their story to Series A investors. It should be easy to see that this is not the right story to tell to this audience. And yet people try.
Another version might be someone that is pitching the right type and stage investor, but telling them the same story they use in their consumer advertising. Investors and customers have completely different concerns and motivations. In that instance, the founder should tell the “investor story”, which addresses things about the business prospects, not focused on the product benefits.
A third variation would be someone trying to pitch an investor on a product that focuses on a use case that the investor has no direct experience with and little empathy for. The question there is whether the founder can help the investor relate to the product or market be relating it to something that the investor is already familiar with. That’s why so many founders include analogies in their pitch. It’s an attempt to help the audience connect with something unfamiliar by comparing it to something familiar Another tactic is to use a case study and give the investor the perspective of a customer.
If your audience doesn’t relate to, care about, or understand your story, you won’t get the reaction you want. Craft a story that’s right for the audience you are telling your story to. I’m not suggesting that you lie or change facts, but rather that you be thoughtful about who would appreciate, understand, and be positively impacted by the words you choose to use and the picture those words create..
What emotions do you want people to feel?
When I say “positively impacted” in the section above, I mean a positive from the standpoint of the “hoped for” impact. Good stories can create an emotional response, enhance a pre-existing emotional state, or have no emotional impact at all. The question to consider in this case would be: what emotional responses are you hoping for?
In the case of a pitch presentation, you likely want the audience to feel a number of things. You’d want them to feel:
- Confidence in you as a founder
- Curiosity in wanting to learn more about what you do
- A sense of exhilaration about something new and exciting
- Belief that this is a strong potential investment opportunity
These may seem obvious, but when I am working with founders I see a lot of pitches that don’t do enough to try and create an emotional impact. Instead they’re focused on just presenting facts and figures. Large market numbers might be a good start in creating some good emotions, but if they are not the right numbers, the response you get might now be the one you want..
If your story is the story of your brand, what emotion or feeling do you want that brand to evoke? Volvo makes you think of safety. Tesla is sexy. What do you want your personal or company brand to make people think of? Should they be confident that you do what you say? Worried that you don’t care about certain things that are important to them? Thrilled that your corporate values seem to align with their personal values?
I know I’m using feelings and emotions as the same thing here. And while they aren’t the same, they are intertwined. How do you want your stories to make people feel? With early stage founders, if your brand doesn’t suggest confidence (not cockiness), investors aren’t likely to feel confident in your potential for success.
What do you want people to take away?
Take aways are another thing. What do you want people to remember from your presentation? What would you like them to do or want to do? This is important because if you can decide what you want people to take away from your story, it becomes easy to look at your story, presentation, or pitch and decide what information in the story doesn’t support your takeaway goal.
With some of my Founder Coaching clients, one of the big issues they start with is not having enough time to cram all of the things they want to say into the amount of time that they have to say it. They want to cram 30 minutes of story into a 10 minute window. More often than not, when we start looking at the story and look at the intended takeaways, it’s easy to see that a lot of the story content has nothing to do with the takeaways.
The issue with that is that the audience’s brains have limited storage capacity. Generally speaking, they will only remember a fraction of what you include in your story. If you dilute your story with a lot of words that don’t support your intended takeaway, there is a good chance that your takeaways will get muted. Think about a glass of your favorite drink (pick something other than water). That drink is your story with a focused goal of takeaways and emotional responses. Now imagine that each additional thing you add to the presentation is adding water into the glass. Each drop dilutes what you get from that drink. The same dilution happens when you add non-essentials to your story.
How can you help them see what you see?
I covered this one a little bit in the section about audience, but there is a special case that deserves its own section.
Founders are creators. They are the parents of a bouncing baby business that is going to grow up and conquer the world. They are proud of what they are building and see their business from a place of unadulterated love and excitement.
Some founders (clearly not you), fail to imagine that outsiders don’t implicitly know the same things they know. Sometimes the audience doesn’t “get it”. Some of those times, it’s because you didn’t tell them something they needed to know so they would “get it”. Something that sits in your head and seems so obvious to you that you think you don’t need to include it in the story. When I sit down with founders, I often hear great insights and information that somehow didn’t get into the pitch. When I ask why, it’s usually because the founder just assumed that “everyone knows that”. If your story hinges on key information, don’t assume that everyone knows that info.
Remember when you couldn’t see the typos in your term paper and needed someone else to put “fresh eyes” on it and help you see what you couldn’t? Founders should speak with people unrelated to their business and discover what people need to see to share their excitement..
And this doesn’t just go for pitches. This applies to all stories. When you tell someone about something that “John at the office” did today, ask yourself if you’ve given them enough context about John to understand and appreciate the story. Is John your boss, friend, company jerk, new hire, etc.? People don’t always know what you know. Make sure that the things they need to know are in the story. Context and insight are key.
The fact is that good storytelling takes more than a single blog post to teach. But whether you work with a storytelling coach or not, I will say with some certainty that if you are mindful about the things mentioned above and make a few tweaks to all of your stories, you’ll start to see how storytelling should be a tool in every founder’s arsenal.
Before I go, I have to pay homage to one of the great founder/storytellers, Steve Jobs. He understood the power of stories to affect hearts and minds. Here is a video of his iPod launch in 2001. Clearly the man knew what he was trying to achieve. There’s no reason you can’t do the same.
The Go to Market strategy is one of the most critical elements in a startup’s arsenal. You can have an awesome product or service, but without a good Go to Market (GTM) strategy, you might not get that product out into the world before someone else steals your thunder. You certainly won’t build a business. And while the GTM is critical it seems to be one of the things that many first time founders don’t fully understand. The Go to Market strategy isn’t something that you should start thinking about for the first time when you’re creating an investor pitch deck, but should be part of your internal company playbook. Every activity of the company in the early days should be aligned with the GTM. If you don’t have one, you can’t have that alignment.
A great GTM will:
- Impress investors
- Help you validate your market/idea/product
- Help you get to Product/Market fit
- Be a competitive advantage
- Generate revenues
I understand why so many founders are confused about go to market strategies. For a lot of first time founders, this is something new and the info on the internet isn’t consistent. When I ask people to tell or show me their go to market strategies, I’ve had bright people reply with 2 and 3 word answers like “Growth Hacking” or “advertising, marketing, and sales”. Those are not go to market strategies. They are categories of activities that are too vague to act on with no more info. The answers might not be wrong, but they certainly are not enough.
So what is a go to market strategy and how should you go about crafting yours?
Before I go on, I want to remind you that this is not about what you should put in your GTM slide on your pitch deck. This is about your actual “go to market” strategy. What ends up in your pitch deck is “just enough” to convince investors that you actually have a plan to get users to adopt your product. A large percentage of the GTMs I review seem to suggest that “if I build it, they will come”, or that “serendipity” is an acceptable GTM strategy. Spoiler alert, those are not good answers.
What is a Go To Market Strategy?
Let’s keep this simple. A Go To Market strategy is exactly what it sounds like. It’s a plan that shows how you are going to go from where your product is today and get it in the hands of your next group of users/customers. I say “next group” because if you don’t yet have customers, your GTM will be about how you get to your early adopters and how that will lead to later users. If you already have initial customers, your GTM will be more about how you will grow from your base.
You should have 2 versions of your GTM, one that you can use to execute and one that you will use when communicating with people outside the company like investors or potential strategic partners. The latter version, for the outsiders, will be a distilled version of your internal strategic document. The internal execution version of the GTM is your road map and will help align everyone on the team. GTM’s are not meant to be vague or general. That’s why “growth hacking” is not a good GTM strategy.
Your go to market strategy should address the main stages of what is known as the customer journey. Although the specifics of the customer journey vary a bit between consumer and enterprise companies, there is enough common ground to use to craft your GTM strategy.
Using a high level customer journey, your GTM should answer the following questions:
- Do you know who your users/customers/stakeholders are and how to reach them? For enterprise, this means knowing the decision makers and the buying process.
- How will you make your users/customers aware that your product exists and potentially solves their problem better than the legacy solutions or competitive products?
- How will you reach them to deliver your message? Inside sales team? Personal networks? Trade shows? And why will they listen?
- Once they are aware of your product, how will you get them to trial/test your product/service? Why will they take a chance on your unproven solution? How will you make it easy for them to “try you”.
- How will you make it easy for them to adopt your solution? Will you train them? Can they self install/sign up? Will you transfer their legacy data for them?
- Will you make it easy for people that see your message to share your message (virality/referrers)?
- Is pricing part of the enticement to trial? (14 day trials? Freemium?)
- Do you have some advantage that you can use as part of getting in front of potential buyers (ex. Certification from a regulatory group that is difficult to get, or a relationship with a trade organization that will advertise you)
- Do you have a special strategic alliance that helps you get awareness?
It all starts with the the target customer
The most important part of your go to market strategy is having a clear idea of who your target customer is and an understanding of their experiences and motivations. A consistent weakness I see in GTMs is either a weak understanding of the customer, or a vague one.
A vague description of the customer for consumer businesses might be “women 25-35”. For enterprise, it might be “SMB’s”. These are vague because these groups are so large and varied that it’s not likely that they all have a common pain point that you are going to solve.
A weak description might be one that describes a somewhat narrow group, which might seem focused, but where the group’s characteristics are loosely connected to whether or not they have a common pain point, like “sole practitioner dentists in the Bay Area” when the problem you are solving is about “helping dentists market more effectively”. I can’t tell from the description of the group if Bay Area dentists consider marketing to be a pain point many of them have.
Any good description of your target customer will not just describe who they are, but what they want and need. It will describe when, how, and why they experience your problem use case. It will describe their motives for taking a leap of faith… or not. It will show that you understand who they are and some of the thinking that influence their behaviors.
You should have 2 levels of target users (at least). There is a larger pool of people who are likely to be experiencing the problem you are solving. Then there is the smaller, laser focused group of people that are almost certainly feeling pain, know they have a problem, and are looking for a solution. Those people are your spear tip. They are where your GTM starts and how you validate that your solution is valued.
Take a moment and think about your product or service. If you had to describe the potential early adopters, the people who will be thrilled that you have arrived, how would you describe those people?
So now you know who your GTM is targetting. And you have the questions above to help you draft the considerations of your plan. So what else do you need to do?
There’s actually a lot more to do that I can cover in one article, but here is how you make your GTM better than most…
Doing this will level up your GTM
Think about why people in your ideal-target-market group, after being shown your messaging and your product, would NOT become customers. To do this part correctly, you need to step outside of your founder-centric enthusiasm. You need to forget why you love your product. You need to stop assuming that everyone will instantly want to give you money. And at the same time, you have to assume that you have GOOD reasons not to buy.
I know. It’s insane. But play along. Make a list of the reasons. Some might include:
- They are worried that you are a scam
- They don’t want to share their information with an unproven stranger
- They like the fact that their imperfect legacy product is integrated with their other systems
- They may not want to take a risk on your product because if it fails, they might get fired
- They might not have the pain you think they have at the level you expected
- They may worry about the effort they have to make to adopt a new product
- They may not want to lose all the work they’ve stored on the old system/app
- They may worry that you won’t be around in a few years
- They may not like the combination of features you created
- The innovative new UI you thought would wow them is confusing to them
I could fill a whole page with more examples, but the point is: think hard about what it will take to get people to make a change. Change is scary and takes effort. Change has a learning curve. Change might not work and is risky. Inertia is the biggest competitor most startups will face.
So when you are thinking about your GTM, you need to think about how, at each step, you address these very real and very valid concerns.
After you make your list of “reasons not to buy” go back to your GTM and think about elements you can add to your approach, your ads, your sales scripts, your product, your guarantees, etc.
Adding these steps when you are developing your Go To Market strategy will not only give you a better chance for success, but it will prepare you to answer the hard questions that you’ll get when you are ready to fundraise.
In addition to starting and scaling companies of my own, I’ve worked with numerous coaching clients to help them craft their strategy and story in their early stages. In addition, I am part of an angel investment group’s selection committee and a frequent pitch panel judge. As a result of those roles, I see and review dozens of startup pitches and plans each month and know which ones give investors confidence and which don’t.
I’ve been working in or with startups for the last 25 years and am the CEO of The Founder’s Forge. The Founder’s Forge was created to provide an amalgam of business coaching, personal coaching, founder advisory and mentorship, fundraising strategies, and startup foundation education for early stage founders and first time CEOs. We focus on giving founders the tools they need to: execute effectively, avoid common mistakes, get clarity and focus, and do all of that with less stress and better relationships.
To see if Founder Coaching would be a value add for your particular circumstance, click here to schedule a free discovery call.
When pitching to investors, it’s OK to tell them what you are doing
This morning I had the chance to review 7 pitch decks from companies that were looking for seed financing. Of the seven decks, most of them failed to get the thumbs up from the angel group I work with. Some part of me wishes that the reason they didn’t get the thumbs up was because their ideas weren’t worthy. But the fact of the matter is that I think that most of the ideas have a lot of potential. So I thought it would be worthwhile to talk today about one of the reasons why those good ideas didn’t make it to the “consider” pile.
Simply put, at the end of the presentation, we weren’t sure exactly what the company did.
With all of the information that is floating around about pitch decks, one of the things that continues to surprise me is how many decks seem to skip the most obvious question: “What does your company do?”
What does your company do again?
Hopefully, when you read that last paragraph your first thought was “you’re kidding”. But the fact is that I see a fair number of presentations from smart people, that leave me scratching my head a bit.
Maybe the problem is that some founders don’t understand the question. The question isn’t “What does your company do?” as in “We make the world a better place”, but more like “What actions does your company do or how does your service interact with people in a way that impacts the world better than the existing products or services?”.
So somewhere in your presentation, either in the deck or in your script, you need to help the audience understand what makes your company unique and effective in solving a problem.
But maybe the problem isn’t that the founder doesn’t understand the question. Maybe the problem is that they didn’t want to reveal their “secret sauce”. There are still founders out there who are worried that if they give away too many details about what they do, that everyone is going to steal their idea. So their strategy is to be somewhat vague. For the record, being vague is not the best path to getting funding.
More than that, if your entire competitive moat is that “no one knows what you are doing”, you’re probably not fundable. Investors look for businesses that are defensible and teams that are in a unique position to execute. If all it takes to compete with you is the knowledge of what you do, then you should consider starting a different company unless there’s room for a large number of competitors in your market.
I’m not suggesting that you include a highly detailed description of your tactics and technical detail in your presentation (yawn). Besides potentially being boring, too much detail eats up precious time in your presentation window. What I am saying is that you need to say enough to make it clear that you are doing something different that has a high likelihood of making some particular thing faster/better/less expensive.
Lastly, the third explanation for why panelists and audiences still don’t know what a company does after the presentation is because some founders just don’t “speak plainly”. I’ve written before about founders that get caught up using jargon, but sometimes founders try to tie together so many big or sexy sounding words, that the audience just doesn’t understand what the company does. The clip below from the show Silicon Valley is supposed to be a parody, but the truth sometimes is closer to this than it should be. The clip is only 20 seconds long, so go ahead and watch it. I’ll wait.
It’s OK to talk to me like I’m a child (in this case)
The bottom line is, if you don’t accomplish anything else during your pitch, you should make sure that the audience understands what it is you are doing or are going to do. The good news is that it’s easy to do that with 2 easy steps.
The first step happens when you are putting together your presentation. Start by thinking about the problem you are solving. Then think about your product or service. Write down how you would explain to an 8th grader what you are creating and why it will help solve the problem. For this first pass, avoid using any language or words that an 8th grader wouldn’t understand. Don’t worry about how long the explanation is, at least not initially. Focus on being clear, straightforward, easy to understand, and simple. Whatever you write down is “what you do”. We’ll call this your “WYD statement” or your “WYD” for short.
If your first version of your “what you do” statement takes you more than 30 seconds to read, then you’ll want to edit it. This isn’t your elevator pitch although this could be a part of your elevator pitch. The difference is that your elevator pitch will include who your product is for and how your product will help. Instead, your WYD is really about what actions your company makes or how you provide a specific solution. It’s just the “what”, not the “who”, “why”, or “how”.
One example might look like this:
“Rather than launching taxis from a central hub, we use big data to determine the best places to locate idle cabs so that we can get taxis to most customers in around 5 minutes. We also use data to provide accurate quotes before the customer commits to the ride and our app gives the customer real-time updates on the status of their taxi.”
Speaking at a normal speed, that example would only take somewhere between 15 and 20 seconds to say. But there is enough in there to differentiate the company from the status quo and provides obvious benefits to the user. There’s no jargon in the example, just plain English. Like a resume, it uses active verbs. What do we do? We use data to locate… We use data to provide quotes… We use data to give updates. If you want to know how the data helps us do all of that, we should set up a meeting.
You don’t need to explain the specifics of the algorithm. You don’t need to explain how GPS works. You don’t need to tell me how you decide which car to send. On the flip side, you don’t want to simply say “we disrupt how you get a ride”.
Test your “What you do” statement to make sure it’s clear
Once you have a decent “what you do” description drafted, you’ll want to take it for a test drive. By that, I mean that before you test the description in front of investors, test it on some other people first. Find a friend or two that are not in your industry and not part of your startup team. If you have friends that would fit as part of your target audience, they would be the best. But being part of your target market isn’t necessary. And I’m not kidding about the 8th graders. If you can test your statement on a real 8th grader, then, by all means, do it.
Start by telling your friends the problem or problems that you are setting out to solve. If they are part of your target market, ask them if they feel the problem is a real pain point. Then read your WYD to those friends and then ask them to explain, in their own words, how your company helps to solve the problem. I say “in their own words” because you don’t want them to just parrot back what you said. You want to see if they understand what you do. If they can give you back a pretty good description of what you do, mission accomplished. Bonus points if they understand how your activities or service actually impact the problem. If, after hearing the problem and what you do, they don’t understand how your company reduces or solves the problem, then go back to Step 1.
The way you frame the problem you claim to be solving is as important as the solution. Make sure that there is an intuitive connection between the two. In the example above, imagine that the presentation had described the problem as being that “Taxicab rides are too expensive”. The WYD statement I used in the example wouldn’t necessarily have any impact on the cost of cab rides. In fact, with more data, a company might be able to charge “surge prices”.
The wonderful thing about an effective WYD statement is that you will use it over and over again in a wide variety of conversations. You’ll use it to fundraise, to recruit, and even to attract customers. So it pays to take a moment to make it as clear and compelling as you can. And for goodness sakes, don’t forget to include somewhere prominent in your presentation.
(Originally published on ThePitchGuru.com)
If you have made any efforts at all to put together an investor pitch deck, then no doubt you’ve heard that one of the critical slides to include is the infamous “Traction” slide. Traction, when you have some, is an amazingly powerful component in your presentation. Strong, well-presented traction can make up for a lot of weaknesses elsewhere in your pitch.
When I am out in the world attending demo days, pitch nights, or working with accelerators, I see founders putting up a wide array of information and calling it traction. Putting up “not-really-traction” information on your traction slide just highlights the fact that you don’t have real traction, so avoid the temptation to fill the gap with fluff.
Many founders don’t seem to understand the true significance and importance of traction. From what I see out in the startup ecosystem, some founders don’t think about traction until they are starting to put together their investor pitch deck. That’s way too late. I’ll explain why that is after I give you a quick primer on traction.
…some founders don’t think about traction until they are starting to put together their investor pitch deck. That’s way too late.
If you Google “define startup traction” as I did before writing this, you’ll get a mixed bag of answers. For example:
In a 2013 article in Entrepreneur Magazine, Martin Zwilling said this: “First of all, a definition: Traction is evidence that your product or service has started that “hockey- stick” adoption rate which implies a large market, a valid business model and sustainable growth. Investors want evidence that the “dogs are eating the dog food,” and your financial projections are not just a dream.”
A 2010 article in ReadWrite says: “Traction means having a measurable set of customers or users that serves to prove to a potential investor that your startup is ‘going places.’”
An article in Inc. Magazine says that Naval Ravikant, a co-founder of Angel List defines traction as “quantitative evidence of market demand.”
I could list more, but the point is that there is no fixed definition of traction in the startup world. And it makes sense that a fixed definition would be difficult since there are different types of startups, different types of investors, different business models, different funding stages, and on and on.
But I won’t let that stop me from adding the definition that I give to the companies that I work with. I define startup traction as:
“Any event, trend, or outcome which shows the successful execution of a startup’s business and marketing strategy, and which validates the company’s assumptions and projections. In other words, any proof that the market thinks you have a great product and that you can actually execute.”
The biggest difference in my definition is the link to execution. Traction is proof that you are executing. A lack of traction is the opposite.
“Traction” is “Proof”
When you browse the internet for traction info, you will see a ton of articles about things like “how much traction is enough” or “what’s the best way to present traction”. Since those articles are plentiful, I’m not going to answer them here. What I am going to do is to put traction into context so that it’s not this separate thing created just for funding. Hopefully, I can also make it easy for you to know what is and what is not traction.
As I mentioned earlier, if you are starting to think about traction when you are putting together your pitch deck, that’s too late. In my definition of traction, I mentioned your business and marketing strategy. That’s because your business plan includes a list of events, activities, milestones, and outcomes that are all stepping stones on your path to unicorn-dom. You need to negotiate partnerships, acquire customers, achieve specific metrics like customer acquisition costs, generate user sign ups or downloads, get customers to reorder, etc.
Before you start building the business, those are all just plans. Your strategy. When those things start to happen the way that you predicted, they change from being plans to being “traction”. So traction isn’t just something that you think about when you are getting ready for funding. Traction is just your plans actually happening.
That’s why investors want to see your traction slide! They want to know that your plans are not just plans. They want to know that you are able to Get Shit Done. What that also means is that you are not just running your business and then looking back to see if you can find traction to include in your deck. It means that if you are trying to build a company, that you are trying to get traction each and every day. It means that you and your team are managing the business to achieve traction. It means that traction is your operating roadmap, not something that you look at in the rear view mirror.
Because traction is a strong indicator of your ability to execute, that means that traction should be limited to things that you influenced or made happen. So a change in regulations that benefits your company is NOT traction. Another important element of traction is that it shows third-party validation of your plan. We already know that you believe in the company, but traction shows that other people do too. So bootstrapping your company is NOT traction.
Other things that are NOT traction include: (I’ve seen these in pitch decks)
- Hiring a big name law firm that takes on any startup.
- Issuing a press release that doesn’t get picked up by meaningful media
- Hiring a development firm or other vendor at their typical market rate
- Hiring inexperienced people who get paid
- Moving into new offices
Those things are nice, but they don’t actually show that third parties or customers are validating what you are doing or planning to do. They are not things that you would have included in your business plan that are critical to your success. They don’t show that your business plan is likely to be highly predictive.
I can’t think of a situation where anyone had too much traction in their presentation.
To figure out what you should include as traction in your pitch deck or investor presentation, you have to start with what’s in your plan. What are the milestones that you need to achieve to know that you are on track? What metrics do you need to hit to have a viable business model? How quickly do you need to acquire customers to hit your targets? What channel or distribution partnerships do you need? How much media are you hoping to get? What are your big media targets? What conversion rates do you need? What average transaction value? How much virality are you counting on?
Some, if not most, of your traction items will be quantitative. For those, you want to show that momentum is building or that the economics are improving. So keep track of the historical numbers as you go. Set operational targets to show strong growth. If your growth metrics aren’t showing strong percentage increases, don’t expect investors to be excited.
Now from that list of planned activities or milestones, pick the 4 or 5 things that will be or are the main drivers of the business. Then track the progress of those things relentlessly. That list will be the basis of your traction metrics. Not just in your initial pitch, but in your follow up newsletter updates to investors. Those follow-ups will keep you on the investors’ radar. They will also show investors that you are an execution machine. If the early parts of your forecasts are being hit, it will give them some level of confidence in your ability to hit more.
I know I said to focus on 4-5 things, but the reality is that if you have more than 4-5 great traction metrics, use them. I can’t think of a situation where anyone had too much traction in their presentation. Frankly, if you have “too much” traction, the money will find you.
What do you do if all you have is your plan and nothing has actually happened yet? You start making things happen. If you don’t have anything that can show that you aren’t the only one that loves your idea, then you will have a really hard time getting funding.
Bootstrap to get some early validation of your plan. Use some of the Lean Startup tactics, like MVPs and Customer Development interviews. Do some low budget advertising to show that you can hit decent acquisition costs. Start having conversations with potential partners and get some conditional commitments. There’s a lot you can do before you raise money. The critical thing is to understand that today’s activity is tomorrow’s “traction”.
Build something great.
(Originally published on ThePitchGuru.com)