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As a founder, you are always trying to move faster to make key hires, win customers, get press, hire core execs, and launch product features. Your goal is to consistently hit key milestones that will propel your company forward. With all of this and more on your plate, one of the most common instincts for founders is to start generating revenue as fast as possible. It feels great when someone wants to buy what you have built (or plan to build)! Revenue can be seen as the ultimate validation that your strategy and product are working. But not so fast! If you rush into this phase too quickly you can fall into what I describe below as “the false hope sale cycle,” and waste precious time, resources, and energy.
At Unusual, my partners John Vrionis and Jyoti Bansal have perfected teaching what we call the Customer Discovery phase. I want to spend some time highlighting just how critical this step can be early in your company’s journey.
Skipping customer discovery can be painful
In my current role as an investor, I speak to founders who are anxious to start bringing on customers and revenue as quickly as possible. They believe this is the fastest path to product-market fit (PMF), and subsequently, the best way to start executing a successful go-to-market (GTM) strategy. But this can be one of the biggest early missteps — generating early revenue does not always mean that you are on the path to product-market fit. Revenue can even trick you into thinking you have PMF, costing critical time, and eventually forcing you to go back to the drawing board.
At SessionM, my third startup, I was an established founder and had a seasoned founding team of leaders who had access to a strong list of prospective customers. In light of this dynamic, we believed in our early days we could rush the process and go right to signing up paying customers. The fact that people were willing to pay relatively large amounts for our product felt phenomenal. But, these were “friendly” customers who were willing to sign up for our nascent product based on our background and relationships. Relying on friendly contacts instead of doing cold outreach that is truly unbiased provided us with false validation. We ultimately learned that early success from a revenue standpoint had fooled us into believing we had achieved long-term product-market fit.
Key lesson: Without running a rigorous playbook around customer discovery and doing cold outreach, you will be in reactive mode and unable to answer the critical early PMF questions — what is the consistent pain point? Who is the desperate buyer? Why should they buy from us and why will they buy now? If you don't have clear answers to these questions — do not pass GO!
Try not to cave into revenue pressure
As an entrepreneur, you have probably heard all the usual advice — you’ll need to be comfortable taking risks, persevere through adversity, adapt your strategy, and pivot when necessary. What is not discussed as often is that you will feel significant internal and external pressure to start generating revenue quickly.
Pushing the sales lever too soon can have real consequences, creating a whole new set of challenges that ultimately waste time — your product strategy can get hijacked by individual customer requests, your sales team can start selling disparate solutions to hit short-term quota, and your engineering team can be whipsawed around to meet customer deadlines. Early validation from a revenue standpoint can push your company into a space it is not ready for, usually creating technical debt that must be solved eventually and only gets more painful down the road.
Optimizing the time you have in between funding rounds is one of the most challenging tasks that a founder/CEO has to navigate. That said, it is important to remember that once you start the revenue treadmill it is very hard to decelerate growth — you have to keep running. Fast.
Key lesson: While you will undoubtedly feel the revenue pressure, set clear expectations upfront with all stakeholders. Do not make revenue an early goal until your product strategy is truly ready and you have the right foundation to build from.
“I just need a great sales leader”
First-time founders often tell me that they just need a great salesperson to really grow their companies. If a company has rushed into starting founder-led sales, more often than not this cycle follows — this will be familiar to some of you!
The false hope sales cycle
- Founder skips the unbiased customer discovery phase and starts leveraging their contacts or introductions from early investors to find a few customers. High fives all around — the founder gets a few customers; their team and investors are thrilled. With the assumption that more customers will come, the founder thinks the company is on the right path.
- Oh, sh%t moment! After the friendly introductions dry up, sales begin to stall, and no new customers come. Founder realizes that once revenue starts you have to keep growing quarter over quarter. Founder concludes: “I am not a sales professional, I just need a great salesperson!”
- Considerable time is spent convincing a sales leader to join the business, but given how early the business is, the best leaders are too expensive and/or not interested.
- A new salesperson struggles with the same issues, and no new business closes. The salesperson gets frustrated, the founder gets frustrated, and the salesperson leaves. Conclusion: We made a hiring mistake — we just need a better sales leader!
- Spend time hiring a new sales leader, only to find out that they are not the answer either.
- 2-4 quarters are wasted. The founder eventually realizes this is a PMF problem and goes back to the drawing board to start customer discovery.
Key lesson: If you have revenue prematurely without validating your hypothesis through a properly executed customer discovery phase, you likely don't have PMF and will fall into the time-wasting false hope sales cycle outlined above.
Lars Albright is a successful repeat founder of enterprise software companies. He sold his last two companies to Apple and MasterCard respectively. His last startup, SessionM, was a pioneer in customer engagement and loyalty for leading Fortune 500 brands. As a partner at Unusual Ventures, Lars leads investments across fintech and vertical SaaS. To hear more about his third startup, SessionM, check out the Startup Field Guide podcast on Apple and Spotify.
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