The lighthouse from Sunstone
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Doing the hard stuff
TL;DR Sales people have an incentive to go after low hanging fruit. Building a business depends on doing the hard stuff. Don't be fooled into thinking hiring sales people is an easy way through.
I have two kids who are both now at University. There are many fantastic things about having children and watching make their own way in the world. One thing that is not often mentioned is the opportunity to learn. Even when you think you taught someone everything they know, they can surprise you.
My son has just started the final year of his computer science degree at Heriot Watt University. Having lunch with him before he started back, he offered me a startup business lesson that is both simple and profound.
As close as I can remember, here is what he said:
“The thing that always strikes me about sales people is they have a big incentive to do the easy stuff. You know, sell to the easiest customer first because that gets them their commission. Call people who are easy to persuade rather than people who really need your product. That kind of thing. Surely in a startup, you need to do the hard stuff to get going?”
Note this is also framed as him asking me a question. Nice to be respected. But he is the one offering the insight here.
The Wisdom of Youth
Regular readers will know that I am uncomfortable about using the traditional sales model for a company that is trying to innovate. For the avoidance of doubt by traditional I mean people whose sole job is sales, selling in person to enterprise customers and receiving commission as a significant element of their reward.
There are lots of reasons for this but Duncan nailed the core problem in a way that I struggle to articulate. Listening to what he said, leads me to two key points:
There is another problem hidden below the surface. Finding and hiring sales people for early stage SaaS is hard. There is a reason for this. Good sales people have an instinct for what sells and what doesn’t. This makes them good at picking jobs that they can succeed in.
So if your SaaS smells like it will be hard to sell, the good guys will turn up their nose. When you do recruit, you find yourself with sales people who talk a good game but don’t deliver.
The Chairman's View
I know that you know that doing the hard stuff is a necessary foundation for success. That lesson is the subject of one of the best business books around - The Hard Thing About Hard Things.
Don’t kid yourself that sales is an easy way out. Even a 23 year old student know this.
The bleeding obvious
TL:DR You need to find someone that gets value from your product and persuade them to buy it. Without this there is no business. Apologies if this sounds patronising but please don't ignore the bleeding obvious.
I have listened to three pitches this week and had feedback on one more. These are actual quotes:
From the feedback. The entrepreneur "was struggling to articulate a commercial strategy.”
During one of the pitches. Me: “Have you thought who will actually use your product.” Entrepreneur (after a bit of flannel): “That’s useful feedback, I should go away and think about that.”
From another pitch. “We know (XXXX) is the largest market but we haven’t included this in any of our plans or numbers.”
And the last pitch. “Our initial target market is proving slow to respond. So we have found an adjacent market which is smaller but faster moving. This has enabled us to get some sales and prove the concept.”
Guess which entrepreneur was most likely to secure investment? And guess which one does not need funding right now?
To save you trying to find the trick in this question, the answer in both cases is the bleeding obvious. The last quoted.
Its the customer stupid
Its a bit of a struggle to write anything else in this article. The point is so clear that making it feels patronising, unnecessary and dull. You need to know who the customer is for your business.
At the very early stage, I can live with a plan that says “I don’t know who the customer is but here is how I am going to find out.” Provided that finding out is the number one priority on your schedule.
There must be a clear customer focus. This means:
The Chairman's View
I apologise to the 100% of readers who feel they know all this stuff. All of the entrepreneurs above have received some form of funding. Either public or private or both. All of them have been coached in their pitches by experienced investment managers. One of them was also coached a little by me. Somehow the message is getting lost.
You need to find someone that gets value from your product and persuade them to buy it. Without this there is no business. Without answering this question, everything else in your pitch is a waste of time. Everything else you do is a waste of both time and money.
Please don’t ignore the bleeding obvious.
TLDR Personal growth and development should be an integral part of your business. It applies to founders and entrepreneurs as well as your team. Use this simple framework to help you fulfil your passion. Watching your team and grow and develop is the most fun you will ever have
When I listen to founders and entrepreneurs, the most common questions are about growth, investment and people.
People covers the widest range of different areas. When to hire? Who to hire? What skills are needed? How much to pay? Improving team performance. Setting objectives. Paying bonuses. Managing people who don’t deliver. Relationships with cofounders. Working with investors. Handling non executives and advisors. That’s at least 10 problems and four or five different groups of people.
There is one person missing from every question on this list. You. You are an intimate part of every decision you face as an entrepreneur. That applies to people, growth and investment. Yet when I listen to you, I hear almost nothing about personal growth and development.
An unbreakable addiction
This is a bit strange for me. I spent most of my career working for an organisation where growing and developing myself was an integral part of the culture. Over thirty years it became an unbreakable addiction. I can’t make any decision without thinking about what I will learn and how I can improve.
Its sometimes difficult to explain to people. I worked in that firm for many years before I realised it myself. I advised clients from many industries and saw few organisations that took a similar approach. Even our peers and competitors did not set much store by it.
We did. Hiring, performance evaluation, promotion, admission to partnership. You could not take a step with out demonstrating that you had developed as a person and had plans to grow further.
A simple framework
Its impossible to replicate culture. Its made up of other people sharing unique experiences in a other times and places. However, I thought it was worth sharing one of the threads that held our commitment to personal development together.
At every stage from graduate to senior partner, we used a consistent framework. It was built on a set of core qualities. And we had a simple, shared scale for evaluation.
The framework was divided into 7 broad, overlapping areas.
The idea is to understand your strengths and weaknesses on each of these points. You make a self assessment on a four point scale:
Making it real
The same scale was used for all regular feedback. On assignment reviews, by whoever carried out your performance evaluation, by promotion boards and by HR. The balance shifted over time. More emphasis on acquiring technical skills early in your career. A shift to leadership abilities at more senior levels.
Against each rating, the assessor would put evidence. Evidence had to be examples where the skills had been used in practice. This was a requirement. It applied to self assessment as well. It was always interesting to compare the self assessed evidence with the examples given by other observers.
The core qualities and the scale remained consistent long term. Everyone used them so we all developed a common understanding. A few simple features contributed deep and lasting advantages.
Different perspectives on the same person measured against the same scale is a powerful tool. It helps maximise performance and engagement.
A scale aimed at the next level of responsibility baked ambition and potential into all our dealings with people and teams.
The emphasis on skills ensured a continuing pursuit of excellence and improvement. You cannot deliver this in a culture of targets and metrics.
The Chairman's View
I hope there is something anyone in any business can learn from these principles. If you are part of a growing startup, I would argue they should be part of your life for 3 main reasons:
Its been a pretty good weekend. The sun shone. I watched our resident vixen and her six cubs gambolling and scrapping on the front lawn. A game of golf with good friends and a decent score. A long run in perfect peace on Fenwick moor.
These are times to reflect and think about ambitions for the future. A lot of positive thoughts spun through my head. One topic which stuck is advice. I loved Vicky Brock’s Entrepreneur Agony Aunt podcast on the subject of Telling Good Advice from Bad. Leah Hutcheon is one of my favourite people and its a question which nags at me.
Almost every week I listen to an entrepreneur describing some bad advice they have received on the journey. And I have spent most of my career giving advice. So I feel I should be able to help. Its a difficult thing to get right and I have no doubt I have pointed plenty of people in the wrong direction over the years. (I was going to write there that its a tough job but in all honesty, its not.)
So how do you tell good advice from bad? There is no answer to the question. Thinking about the people and the context will help you decide.
The "bad" guys
Its kind of obvious that bad advice comes from bad people. If you are dealing with someone you don’t trust then ignore their advice. In fact, don’t deal with that person full stop.
Most times its not that easy. I see four situations where bad motives lead to bad advice.
The "good" guys
With the exception of the rare first category, these are not bad people. But advice with the wrong context or approach does not help your business. So how do you spot the people who are right to help you?
Here in Scotland at least the good news is that love is all around you. Scotland is a great place to live and work so we have more than our fair share of smart, experienced business people. And I know there are plenty happy to help anyone on the entrepreneurial journey.
But advice is a two way street. Finding a good advisor is half the solution. You also need to ask the right questions and listen to the answers the right way.
The right kind of advice
First you need to seek the right kind of advice. Kind of obvious - sorry. There are two basic types. Specific advice from an expert on a defined topic. And mentoring, problem sharing advice that helps you make better decisions.
At the risk of sounding like the script for a four box model, there are also two types of advisors out there. Some are old guys like me that have been around and giving advice for a long time. The other type are successful entrepreneurs. There is no doubt that people who have been there and done it, often more than once, have a unique and valuable perspective.
Its quite easy to define a specific professional who fills a gap in your knowledge and can suggest how to proceed. Lawyers, accountants and so on are in the phone book. Take a little care to look into specific experience and pick someone relevant.
Mentoring is sharing
Finding a mentor is much harder. Mentoring is a personal relationship. For me it is also a two way deal. I learn at least as much from mentoring someone as they can learn from me.
This is why I talk about being lucky at this stage of my career. Working with people like Leah Hutcheon, the Mallzee founders and Paul Reid is a great learning experience.
Don't forget the insiders
In addition to the two types, there are two others that too many people ignore. The best advisor just might be your customer. Or it could be someone on your team. Your customers and your team are closer to your business than any advisor.
The Chairman's View
Advice is only advice. Its an opinion on the best course of action not an instruction manual. You still need to make the decisions. There are three top tips to keep in mind:
EIE18 - Its awesome and its personal
Friday 20 April 7.30pm. Back from a long run in my most tranquil place. The red, gold and black Rosemarkie beach. My brain speed is still a hundred miles an hour. Thoughts forming and then breaking into splinters every second. I am still coming down from the adrenaline rush of EIE18. If you are reading this and spoke to me Thursday night or Friday morning - apologies. Chat was indiscriminate, overflowing stream of words and ideas.
This is an unusual feeling for me nowadays. One of the depressing aspects of experience (ie old age) is that not much feels new or thrilling. Too often I think I have seen it all before. So its a tribute to the tiny but brilliant team at Informatics Ventures. Ronnie, Steve, Danny and Jane pulled off an event and an experience with quite an impact.
As a result, what follows is a bit random. It my first attempt at reflection based on the few fragments of my own thought process I could catch. I have tried to translate them into English but not to impose any structure.
More than a day
As a company you live the EIE idea of more than a day. The scale of support and learning the team put together is incredible. Not everything works for everyone. But I bet each person that pitched came off stage reflecting on a few key things.
I guess if there’s a theme to this post its that personal experience. We tend to judge the event by its whole impact. But each individual entrepreneur benefits and grows in their own way. Trees not forest if you like.
A minute in time and a cold beer
I have done a lot of pitching and presenting. I am really comfortable speaking to bigger audiences on much more complex topics. I thought I had reached the stage of my life when rehearsing was not only unnecessary. It actually took away from my performance.
Having a fixed time of one minute changes that. You need to rehearse and practice. You need to simplify and clarify. You need to hook your audience. You will feel the pressure.
(Feedback note: Whoever you are, when you step off that stage you are ready for a cold beer.)
Values not details
Attention to detail is often evidence of professionalism and excellence. True excellence comes from values. The EIE team don’t have the capacity to get every single detail right. Yet the event is still world class. Detail alone is not enough, its values that count.
Maryanne Johnston is the personal pitch coach. I was in a proper grumpy old man mood the day I worked with MJ. (Apologies again Maryanne). She didn’t let it bother her, gave me the attention and coaching I needed and got the results (I hope!) The quality and confidence of the people on stage was a tribute to her coaching.
EIE has jumped about a bit during its 10 years. The ’18 staging was held in the McEwan Hall. After refurbishment, it looks beautiful. The combination of stunning architecture, history and connection to Edinburgh Uni is perfect. I hope they are able to keep it there.
EIO - O for Opportunity - Money isn't everything
I have never been a big fan of the last word in the acronym - Exploit?! The purpose of the event is to connect companies with investors. That’s cool. I spent the day listening and talking on behalf of a company. I took away a whole lot more than connections to potential investors. How about a name change?
Resources, sponsors and telling the story
I have already mentioned a couple of times, the EIE team is small. Each and every one of them does a great job. And the whole event is a perfect illustration of a forgotten principle. The best innovation comes when resources are most constrained.
Once you have a great product though, opportunities - that word again - open up. I am grateful to all the sponsors. But this thing is so good. We could be pulling in the really big names. Why not Google or Goldman Sachs or GE?
To do that we need to tell a story. And it needs to be different from the Scottish norm. Too often I hear about what Scotland needs from the rest of the world. EIE is something which would be a great opportunity for anyone. So let’s make it about what we can give not what we can get.
Nearly forgot - Triscribe
I was there pitching Triscribe. We are building analytics based on electronic prescribing data from NHS hospitals. Our software tackles problems like prescription errors and antibiotic usage. Its part of a global digital health movement. Data has the potential to bring more benefits than any amount of new drugs over the next 10 years.
I walked away more convinced than ever that Triscribe can do great things. I hope plenty of other entrepreneurs did the same.
NOT The Chairman's View
I applied for EIE18 to help Triscribe. But it was also a chance to put myself in other's shoes. The footwear of the entrepreneurs and founders I am lucky to spend most of my working time with.
Its been a profound learning experience about myself. That will make me a little bit better in all the roles I play. A perfect highland morning on the incomparable links at Royal Dornoch has cleared my mind a bit. Enough to write this post. Time will help me absorb it more.
My thanks again to everyone who makes it possible.
Everything is an experiment
Tech entrepreneurs love data. That makes sense but in a startup there is no reliable source of data. Every decision is made with a hundred unknowns. Instead of seeking false assurance in benchmarks and the like, keep it simple and flexible. Remember that everything is an experiment.
I spent a couple of hours on Thursday last listening to two early stage entrepreneurs. It was in a virtual board format run by Edinburgh Innovations. One company had leapt forward since I last saw them by winning their first big overseas contract. The other had slowed down as a free competitor emerged in a key market area. I could come back in two months and the roles might be reversed again.
On the train home I chatted with a good friend and experienced entrepreneur who is working on a new business idea. His challenges were the same as the newbies we had seen earlier. Is there a market for this product? How should he price it? What features are needed for an MVP?
His solution was natural and right. Get out and experiment with potential customers. The idea of a startup experiment crystallised in Eric Ries famous book The Lean Startup. Its a strong concept and has found many uses. Yet it only begins to describe the experimental nature of a new business with a new product aimed at solving a new problem. In this world everything is an experiment.
Product and Market
The experiment idea is built around testing for product market fit. For most startups product and market are the twin obsessions. That is as it should be. There is no other way of validating your idea. You must build some sort of product and find some people willing to pay for it.
The hard part is judging the outcome of these experiments. Have you found a real market or just a few early adopters? Which features do you need to expand you customer base? Will big companies pay more for your product?
In every case you are making choices based on limited data. But those decisions are life and death for your business. Its easy to forget all the other unknowns that affect your chances of success.
The biggest distraction from your focus is not uncertainty about product or market. Its money. How much runway do you have? When will your next round close? Which investors do you want to work with? How fast will sales turn into cash flow? Can you meet the payroll next month? Is it worth pursuing that large but slow enterprise customer?
None of this feels much like an experiment. Don’t be deceived:
Investors will tell you they invest in teams above all. Getting to MVP, raising money, growing all depend on finding and building a team. Chances are everyone in that team is an experiment of sorts.
Many founders have never run a business before. A fair number have never built or sold a product either. Even an experienced entrepreneur may be new to the market. And as the business grows, the role of CEO is quite different from that of entrepreneur.
Everyone you hire brings some of the same edge. Its one of the reasons why early stage companies are keen on “proven” performers in areas like sales. Trouble is no-one is proven in this situation. You don’t know the exact job definition. You don’t know who you are selling to, what you are building or the answers to a thousand other questions.
That’s why I prize the ability to listen, learn and grow above having a CV that ticks all the boxes.
Between solid evidence and pure guesswork
So at every moment you have a series of experiments running in product, market, money and people. They all interact with each other in multiple ways. No matter how well you design your starting hypotheses, you are not going to know for sure what is working and what is not.
Some things can be so messy they feel like a complete guess. That’s not a comfortable feeling so you bury yourself in all sorts of data. And find that there is no clear evidence. How do you make decisions in that environment?
What not to do
One temptation is to reach for benchmarks. Google is a great management consultant as well as a top doctor. A quick search seems to tell you what is expected of a startup SaaS business.
I am not a fan of benchmarking. To be specific, I hate using benchmarks to set targets. Its negative and counter productive.
Don’t get me wrong. If you can find a proper, comparable data source (not easy!) then comparing your outcomes to that source can be useful. But only as a way to ask the right questions. As soon as it becomes something to aim at, you are damaging your business.
The Chairman's View
There is no data led, evidence based solution to big strategic choices. This is true however big and established your business. Roger L Martin explains this in the Big Lie of Strategic Planning. If that is too academic for you watch this 3 minute video about Honda instead.
In an early stage SaaS or any startup every choice is a big one so everything becomes an experiment. You are in the world of emergent strategy. This is fancy language for making decisions based on three things:
A startup is not a comfortable or safe environment. You have to stay focused and flexible. There is no formula. Build a strategy based on conscious choice. Keep it simple but never believe it is perfect or even right. Be prepared to change in response to new learning from all those experiments.
"A user interface is like a joke. If you have to explain it, it's not that good"
Martin LeBlanc, Founder IconFinder
You build SaaS products for people not companies. You sell to people not companies. SaaS for the enterprise is only different because you have a lot of people. All with the same logo on their business card. You get one large sale for a lot of yesses. Selling to SME is one small sale for each yes.
One of the health problems my wife has faced is with her kidneys. We are very lucky that she has had excellent treatment. In the end a kidney transplant has allowed her a full recovery.
She is still under the watchful eye of the renal unit at our local hospital. This gives her access to something called PatientView. It allows her to look at results of blood tests and some other specialist medical information. An example of digital health in action.
My wife has been using the product for several years so is familiar with how it works. But on at least two occasions in the past year she has been asked for help by doctors or pharmacists. They don't understand the system or the data. Think about that. A software product designed for patients that is not even intuitive for medical professionals.
Its a common problem. A recent survey by Digital Health focused on the IT priorities for the NHS. There was a sting in the tail. On social media one tweet called out the elephant in the room “most clinical systems in clinical settings are unusable by clinicians”.
The same disease afflicts B2B SaaS and software of all kinds. Even some of the best are vulnerable. I find Xero simple to use but I am a qualified accountant. I always have a suspicion that the layman does not have things so easy.
There is not shortage of advice on good UX design. Good people are hard to find but not that hard. The root cause is much more basic. Too much software is designed for companies not people.
"You want to deliver to the world what you would buy at the other end."
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.