Startup Sales School - Important Lessons to Close Sales and Survive in a Difficult Economic Environment

People often ask me:

"Paul, are there things I can do or techniques I can apply to sell my company's products and services more effectively?"

Selling for a startup is not easy. That's because you're not only selling a product, you have to be "selling" someone on your company at the same time. Doing all of that in the context of today's difficult economic environment only increases the pain involved.

But selling effectively is essential if you want your startup to become profitable and to survive. And the good news is that the age old lessons that worked in good times, work just as well in bad times (if not better!). Selling is not a science. It's part science, part art, and part experience. But at the end of the day, there are some key things to remember when selling for a startup:

• Connect. This is critical. You can't connect with someone as a customer, if you don't connect with them as a human being first. It is important to build relationships with your potential customers. Talk about their family, take them to lunch, take them golfing, etc... In other words, spend face-to-face time with them. You can't connect on a human level over the phone or over email. It just doesn't work. If that worked, business travel (and airlines!) would disappear tomorrow. It hasn't. Just accept that effective selling requires face time.
  
• Be Persistent. People are busy. The C-level decision makers you'll be selling to are most definitely busy. Don't be shy or afraid to remind them of what you can do for their business. Don't be shy to stay on their case. This is a fine line, but people tend to err on the side of caution. They accept the fact that they're at the bottom of someone's pile and don't want to risk becoming obnoxious. You're better off trying to stay at the top of the pile (at the risk of being slightly obnoxious), because then you at least give yourself a chance at closing a sale. It's a fine line that requires experience to walk effectively.
  
• Understand Your Audience. It should be obvious that you need to understand what your customers want or what their pain is. But too many startups make the mistake of communicating their value in terms that the customers just don't understand. Your customers are not like you. Chances are the decision makers are older, more experienced, and don't understand the Twitter/Flickr/Ning/Facebook/Digg/etc analogy you're using. Or they just don't understand the technology. It's not to say that they will never understand, but if it takes you 30 minutes to get them to that "aha!" moment, then you've lost your chance. It needs to take no more than 5 minutes. So, speak their language. Speak to business people in business terms. Don't bog them down with techie space cadet messaging.
  
• Always Be Closing. Ok. So I stole this one from Glengarry Glen Ross (see video below). But the message rings true. Effective selling is all about making your customer say the word "yes". Always create opportunities to get commitments from them, no matter how small or seemingly insignificant. Once you get a customer saying "yes", it snowballs. It's no use having a potential customer who has expressed tremendous interest in your product if you can't close them. Get them saying "yes" and you'll see how much easier closing becomes.

Canadian Entrepreneurs Need to Toughen Up or Face Extinction - It's Not Personal, It's Just Business

People often ask me:

"Paul, why do VCs seem so scary?"

I gave a speech in Ottawa a few weeks ago, focused on the 7 things that entrepreneurs needed to understand about VCs and the startup business. It was direct and honest. And while I spend most of my time talking to entrepreneurs, it was the first time I had structured my thoughts in that way, and it was the first time I would be delivering it to a Canadian audience.

The result was surprising. Many entrepreneurs in the room were shocked - at the candidness of the delivery, and at the content itself. If Canadian entrepreneurs want to survive these tough times, that is a very bad sign. Here are some of the lines that attendees gasped at:

• "...I am not your friend..."
• This is absolutely correct. Your investor is not your friend. In fact, your investor SHOULD NOT be your friend. Entrepreneurs get very emotionally attached to their businesses and to their people. That passion and emotional drive is what makes entrepreneurs great. However, that emotion can also cloud an entrepreneurs judgement in difficult situations. It is far better for the business to have a VC who is somewhat removed, and can look at things objectively, rather than worry about his friend. Of course, this doesn't mean that VC and entrepreneur don't have to get along. I spend a LOT of time with my portfolio companies and only invest in people that I know I would love to work with. If you asked them, I think they would say the same about me. I shouldn't have to be your friend to get your business - we just have to make a great team in terms of working together.
• "...greed is good...all I care about is making my 10x return..."
• This once again, is absolutely correct, yet lost on many Canadian entrepreneurs. My only motivation is the desire to make money. It's what I'm paid to do. No breach of ethics, just a focus on returns. In tough times, this becomes even more significant. VCs today want to build real businesses with real business models. 
• "...cash is more important than your mother..."
• This is true in good times, and even more true in bad times. The startups that survive are the ones that focus on cash flow. Cutting costs to conserve cash, and doing whatever it takes to build the top line. VCs all over the world have had discussions with their portfolio companies in the last few weeks about cash. In the startup game, cash is truly more important than anything else. You may love your mother very much (as I do), but she won't help your business survive. If you want to build a great business, focus on cash.

I love Canada, I love canadian entrepreneurs, and I want to see the startup environment here flourish. When we invest in companies, we often see ourselves as a founder, and get involved accordingly, working every day to help our entrepreneurs build their businesses. But when I give the same exact lines to US entrepreneurs, they don't even blink. They understand the beast. That understanding makes them tougher and more resilient to downturns. That understanding makes it easier for them to raise funding. 

Canadian entrepreneurs need to start building that toughness. The world is a scary place, with competition and failure lurking around every corner. Be afraid of your competitor, not the VC who wants to make a huge return (and you very wealthy in the process). Be afraid of the investor who tells you everything you want to hear, not the VC who gives you the big picture perspective by removing the emotion factor and can help you make the tough decisions. 

Get tough, and you'll survive.

Patience is a Virtue - Long Wait Means Lots of New VC Whisperer Features

People often ask me:

"Paul, what happened to you in the last couple of months? We're dying for some news from the VC Whisperer!"

Based on the first phrase in the title of this post ("patience is a virtue"), many of you are probably expecting a post commenting on the recent economic downturn. It's true. Companies need to be more patient now, and plan for patience. But more on that in a future post...

Instead, I'd like to recap what has occupied my time in the last couple of months, and what changes are coming to the VC Whisperer:

• The VC Whisperer is in fact my alter ego. My other side is a real VC. Praized Media (www.praizedmedia.com) is one of my portfolio companies. In the last couple of months, they have announced a couple of major features, that I think make the product that much more exciting. Here are some of them:
• They've just launched a very cool service called Praized Answers (http://answers.praized.com). It allows you to find the best places, by simply asking a question, and collects the answers from your community automatically. 
• Praized also has an iPhone app that is currently in beta and nearing launch any day now. Stay tuned for that. Very cool stuff.
• The VC Whisperer is launching a sister site - VC Places (www.vcplaces.com). VC Places will serve as a local directory of places recommended by the VC Whisperer and by readers of the VC Whisperer. VC Places will focus on merchants that are appealing to VCs, entrepreneurs, and others in the global startup/business community. Go check out VC Places here and vote on your favorites! As entrepreneurs, VCs, and business people, let the VC Whisperer community know what your favorite places are. VC Places is powered by Praized.

Stay tuned for more posts from the VC Whisperer, more insight into the VC world and VC mind, more help for entrepreneurs, more commentary on VC deals, and favorites lists at VC Places. 

I Almost Died - The Importance of Key Man Insurance

People often ask me:

"Paul, why do VCs seem to make such a fuss about key-man insurance?"

I've said it before and I will say it again. People matter most.
Thus, VCs often insist on key man insurance, because they fund people, not ideas. They simply want to protect their investment. VCs who insist on key man insurance feel that you, as the entrepreneur, are critical to the success of your company.
I've been very sick for the last week, and it made me realize how critical key man insurance can be. While I was out of commission, many things just couldn't get done. If my illness was more serious than just a flu, my business would have been at risk. When a founder/CEO gets hit by a bus, a lot of domain expertise and experience is lost. From an operational standpoint, it's also a huge distraction and disruption to the business.
A VC friend of mine from MIT has an interesting view on key man insurance, which I will leave you with.

"We want to make it (key man insurance) high enough to protect ourselves, but not so high as to make us want to knock you off."

Keep it in mind when VCs talk to you about key man insurance. Don't fight it, understand that VCs just want to protect themselves and think that you are important.