Always Be Selling (Or. . .Why You Need to Kiss Me)
February 8, 2011 4 Comments
A couple of weeks ago I put a lot of work into due diligence on a deal that I was really excited about at first glance. Two super-talented young entrepreneurs who had developed an incredibly innovative solution to a pervasive challenge that brand marketers face. They had invented a new market, and while there were a million questions, at first glance I thought there was a real chance that this could be an important and highly valuable company.
But through the process of getting to know the company and the team, they made a number of missteps that left me questioning whether or not they had the discipline and focus to be successful in the gut-wrenching challenge that is building and scaling something out of nothing.
What did they do? In short, they ran a sloppy process. They forgot to send me follow-up material a couple times. A couple times they rescheduled calls at the last minute. They scheduled what should’ve been two focused, deep-dive conversations for times when they knew they’d be driving to the airport to catch a flight and thus unable to dig into a spreadsheet.
Each incident was something that in isolation I would easily look past – after all, they’re hard charging entrepreneurs who are trying to keep a hundred balls in the air. But in the aggregate, a series of pink flags added up to a red flag that overwhelmed an otherwise really interesting opportunity. I passed on the deal.
One of the most widely understood mantras of entrepreneurial success is Always Be Selling (or Closing, as Alec Baldwin so elegantly reminded us in Glengarry Glen Ross, above). Yet for some reason, it’s also one of the most poorly and incompletely followed mantras. Too many entrepreneurs seem to think that it only applies to interactions with customers and prospects.
In short, It doesn’t. If you’re going to succeed at building an important, high growth startup, you’ve got to be selling everywhere, to everyone, in virtually every minute of your day. Investors, prospective employees, random people you meet in bars. You never know who you meet that might have the ability to impact your business. But I want to focus on why it matters when talking to investors, because I think a lot of entrepreneurs underestimate the importance of the process part of fundraising.
Evaluating companies and their potential is a very hard thing to do, especially when deal dynamics are such that it has to happen on a compressed timeline. I, like most investors, look for clues anywhere I can get them. Online chatter about competitive dynamics and the market’s response to the product, offhand comments from employees that hint at the founder or CEO’s ability to manage the business, pricing and receivables patterns that hint at the depth of relationships with customers, etc.
In a diligence process, perhaps the most important thing I have to evaluate is the CEO’s ability to sell. If I invest, and he can’t close sales, partnerships, or key employee hires, we’re all in trouble. Being a startup CEO is a non-stop sales job. An effective CEO must have innate instincts and skills around storytelling and listening combined with incredible diligence and persistence.
So how do I evaluate that? Sure, I talk to existing customers, I watch what happens to your sales pipeline over the course of our discussions, etc. But the single biggest data point I get is how well you sell me.
What could be a better indicator than that? When a company is raising money, there are few, if any, more important tasks on the CEO’s to do list than that sales job. So if the CEO can’t tell me a compelling story, doesn’t listen to and understand my interests and biases as an investor, and/or isn’t running a tight, disciplined process, I have to start questioning either (a) her prioritization or (b) her skills at managing a sales process. Failure on either will lead to missed opportunities down the road. If your instincts don’t kick in and have you running a venture fundraising process like a real pro would run a major prospect sales effort or C-level recruitment process, then I’m left with no choice but to conclude that you might be ineffective in those efforts, too.
Some entrepreneurs get really irritated, misreading this and believing that VCs expect the fundraising process to involve a lot of kowtowing and ring kissing. While there may be some of my peers who treat the process that way, I suspect those entrepreneurs are for the most part missing the point.
We don’t actually want our butts kissed – we just fully expect that you will kiss the butts of your key prospective customers and employees, and kiss them hard. And one of the best ways to learn how good a kisser you are is to see how it feels when you kiss us.