Last week, I caught up with an entrepreneur who shared insights on the importance of connecting with the local startup community and fellow founders. Having experienced the ups and downs of business, they now find themselves in a position to network and build an entrepreneurial network as things are on the upswing. This conversation reminded me of my own experiences when I moved to Atlanta over 20 years ago and the effort it took to meet local entrepreneurs. At that time, the startup community was fragmented, spread out across the region, and primarily linked to a couple of local universities and a few networking groups.

Reflecting on the importance of the startup community and the outcomes from many years of participation, I can unequivocally say that the value derived has far exceeded the effort invested. One example that comes to mind is from 2006 when I attended a local networking event for interactive marketers. While standing in line to check in and pick up my name badge, I ran into my college classmate, Adam Blitzer. We hadn’t seen each other in a few years, and reconnecting at that random event led us to start Pardot together. A similar instance occurred in 2012 at a startup event, where I shared my experiences. After the meeting, Rob Forman approached me looking for his next opportunity. I connected him with Kyle Porter, and together they did amazing things as the co-founders of Salesloft. In both cases, it was regular community-building events that facilitated networking and led to great outcomes.

Today, there are many more programs, events, and organizations that bring the community together, uniting different verticals and stages of entrepreneurship into a robust environment for networking and support. Reflecting on my journey, my main recommendation for entrepreneurs is to find and build their own community. If there’s a gap in the market, address it by building your community. I believe that the human element of the entrepreneurial journey is often underestimated by first-time entrepreneurs. By neglecting this aspect, they miss out on valuable opportunities. Entrepreneurs would do well to engage with their local startup community and build relationships with fellow founders.

Last week, I caught up with an entrepreneur, and we discussed milestones for his startup. In this case, they had raised a seed round, and have been building the product for several months. The big question we discussed was: What does it take to raise the next round of financing, and what milestones should we be aiming for? We talked about the pros and cons of aiming for a recurring revenue target or a certain type of customer profile target. But ultimately, at this stage of the journey with no revenue and no paying customers, the most important thing is to sign 10 unaffiliated customers who pay something as the next milestone.

The reason this is so important is that right now, there’s a belief from market trends and some customer discovery that there’s a need for the product and solution. With no paying customers, it’s difficult to prove credibly that there is, in fact, this market opportunity. Instead of aiming for $1 million of revenue or some larger aspiration, it’s more important to get 10 unaffiliated customers that love the product. They will be a testimonial for the product and willingness to pay, even if it’s far below what the market will eventually command.

With these paying customers, it’s easy to extrapolate out how a small but fast-growing market achieves scale in the next 5 to 10 years. Ideally, there will be a huge number of potential customers. By having the customers pay at least something, even if it’s a beta, it demonstrates that there’s real skin in the game and a meaningful problem being solved.

Too often, entrepreneurs try to sign free “customers” in an effort to get the product used, and that usually doesn’t work. It’s much better to have the customers pay at least something so that they’re bought in and provide honest feedback. As an entrepreneur in the early days, it’s easy to get caught up in fundraising and selling a vision. But the first huge milestone is signing up 10 unaffiliated customers who love the product. It sounds simple, but it’s incredibly difficult.

Last week, I was reminded of the importance of believing in others even more than they believe in themselves. I was catching up with an entrepreneur, and we discussed our different projects and what we’re currently working on. He shared how he was assisting another entrepreneur who was early in her journey. Upon digging deeper, it was clear that the entrepreneur was onto something, but market timing and external forces were making the process more challenging. She had been plugging away for a couple of years with little progress, but in the last 12 months, she had made tremendous strides. My friend’s belief in the entrepreneur, serving as a regular sounding board and confidant, had made a real difference.

I was reminded of my early years as a software entrepreneur when I truly thought building a great product was all that it took. I had no concept or understanding of the role that sales, marketing, and distribution play in the success of a product. Fortunately, I was connected with a much later-stage entrepreneur who took me under his wing and believed in me. We talked about the entrepreneurial journey, the highs and lows, what works and what doesn’t work through the customer acquisition process—what it took to find potential prospects, nurture those relationships, turn them into customers, and finally help them become raving fans. At the time, I was so myopically focused on product development I didn’t see or understand the bigger picture of what it took to succeed. His mentorship and belief in me was life-changing.

In hindsight, I believe one of the best things an entrepreneur can do is to find a mentor, coach, or friend who believes in them even more than they believe in themselves. Of course, entrepreneurs are often confident and visionary, but even with that, there is always a need for help and mentorship. Finding a person who genuinely cares and believes makes all the difference.

Last week, I connected with an entrepreneur and we dove into a common scenario that occurs when a startup is doing well. The founder, skilled at selling, had signed up dozens of customers over the years. The business was thriving, so the founder decided to hire an outside head of sales to help grow the business. However, this new hire, who came from a large company, failed at the startup. At his previous company, the sales leader had an existing process, team, and brand. Despite having significant industry and sales experience, transitioning to a startup resulted in a failure.

Hire a Process-Oriented Sales Assistant and Document the Current Sales Process

My recommendation is to hire a process-oriented sales assistant as a first step. This assistant would help the founder make founder-led sales more efficient and productive, and most importantly, codify what works and what doesn’t. Essentially, the sales assistant would act like a product manager for the sales motion, helping the founder alleviate some of the manual work he was performing. This person would also document the sales process and start building the framework of a sales playbook, translating what the founder has been doing for years into written form. As a precursor to hiring a dedicated sales team, much of what already works in founder-led selling would be translated and documented.

Hire a Sales Leader to Build a Team

After the sales assistant has shadowed the entrepreneur for some time and codified the sales playbook, it’s time to bring on a sales leader. The sales leader should focus on building a repeatable, scalable process, whereby the different milestones in a sales process are defined, and the inputs, like cold calls, emails, trade shows, and marketing qualified leads, turn into scheduled demos that then progress into proof of concepts or proposals, and so on. The sales leader is part sales coach and part process manager. Often, entrepreneurs seek to hire a unicorn that not only does the process but also sells and is a product expert. It’s much easier and more successful to find a sales leader that’s focused on building and running a process, not being able to do everything.

Conclusion

Transitioning from founder-led sales to a hired sales team is often a difficult process. Failure rates are high with new sales hires, and many of the lessons have to be learned over and over again. Once product-market fit is achieved and the business is working, the next step is to hire a process-oriented sales assistant to take all the lessons learned, document them, and start mapping out the sales process. With this in place, then it’s time to hire a sales leader to build a team focused on running a scalable process and delivering results.

Last week, I was catching up with an entrepreneur who is in the middle of a fundraising process. He has received a couple of verbal offers and a few outlines of potential term sheets. One of the obvious differences between the investors he’s been talking to are how the investors operate. Generally, I like to think of it in two broad categories. 

The first category includes investors who focus on the upside, what could be, and how big the opportunity is. In the first bucket of investors, it’s easy to hear in their commentary and see in their term sheets that the terms are very clean and simple. The idea is that we’re in it together, and if it goes great, everybody wins; if it doesn’t work out as expected, then that’s just how the cookie crumbles. Typically, the most famous investors in venture, the ones that have had the biggest wins, operate in this manner.

The second set of investors focuses on achieving some minimum threshold return with significant downside protection. In the second bucket, the focus is more on generating 3-5x their money in 3-5 years with solid downside protection. Downside protection is typically revealed in term sheets through things like participating preferred preferences, cumulative dividends, minimum returns, and funding tranches based on milestones. There’s nothing wrong with these other than they have to be accounted for when thinking through the different scenarios of potential outcomes of the business as well as the type of financial sponsor desired.

The key is that there are two major categories of investors, whereby one is focused on unlimited upside, and the other is focused on a minimum return combined with downside protection. When fundraising, entrepreneurs should understand the two categories of investors and think through the pros and cons of being upside-focused or minimum return-focused.

One of the things I really enjoy reading is founders’ stories and lessons learned. We all have our own experiences, and when entrepreneurs capture them through books, blogs, and articles, I always enjoy reading their insights and takeaways. Lately, we’ve had two very successful entrepreneurs publish new, super in-depth content around their lessons learned, and they’re excellent. 

The first entrepreneur is David Politis. I met David many years ago through the local Atlanta startup community when he was working on Vocalocity. After a successful run there, he started a company called BetterCloud and eventually sold it to Vista Equity.

Startup Founder Survival Guide: 50+ Rules to Live By… Learned the Hard Way

• Finding and hiring the best people
• Managing and motivating your team
• Raising money
• Getting the most out of your advisors and investors
• Product strategy and development
• Engaging and delighting your customers
• GTM motion and focus
• Operations
• Growing, evolving, and staying sane as a CEO

The second entrepreneur is Ryan Allis. Ryan is somebody that I had heard of many years ago through the Raleigh-Durham startup community. He started a company called iContact and had a great exit to a publicly traded company. Recently, he’s been promoting his new venture to help SaaS entrepreneurs, and as part of that, he published a great resource called the SaaS Growth Playbook. 

The SaaS Growth Playbook

• 1,200 slides
• Focused on B2B SaaS
• Part one – SaaS Growth $0 – $10M ARR
• Part two – SaaS Scaling $10M – $100M+ ARR

Entrepreneurs would do well to read both the Startup Founder Survival Guide and the SaaS Growth Playbook.

Last week, we had the opportunity to honor Marc Gorlin as the newest member of the Georgia Technology Hall of Fame at the annual Georgia Technology Summit (well done, Marc!). As part of the ceremony, we were asked for our thoughts on what it takes to be a successful entrepreneur. Of course, the most common ideas like grit, resourcefulness, and resilience are always part of the equation. One of the comments I made referenced an old adage we hear in the startup world: “Chips on shoulders equals chips in pockets.” 

This saying suggests that a person with a chip on their shoulder has something to prove. They carry a weight, a burden that they need to show they can achieve or excel at, especially when others doubt their capabilities. This characteristic is something we look for in entrepreneurs.

The phrase “chips in pockets” originates from poker, where a poker chip represents value or money. Therefore, the more chips you have, the more money you possess. 

The startup adage “chips on shoulders equals chips in pockets” means that entrepreneurs with something to prove increases the chance that investing in these types of entrepreneurs results in better financial outcomes. So, the next time someone asks, “What does it take to be a successful entrepreneur and a successful angel investor?” Remember the saying: “Chips on shoulders equals chips in pockets.”

Last week, I was catching up with an entrepreneur who used a term that really stood out to me. While speaking of his new venture and the opportunity ahead, he said, “The big unlock was a change in industry regulation.” He explained how this change in industry regulations made his new tech venture not only viable but also presented a huge opportunity. This conversation made me ponder other “unlocks” that led to new opportunities and ventures ultimately becoming winners.

Thinking about Pardot, our “big unlock” was the shift from offline to online for B2B buyers. Before, B2B marketers were mostly engaged in marketing tactics around trade shows, direct mail pieces, magazine ads, and other forms of traditional media. As the world went online, led by consumers, business buyers naturally started to spend more time on the internet for their business purchasing decisions. Thus, the shift from offline to online was the big unlock for Pardot, providing email marketing, landing pages, CRM integration, drip programs, and everything else connected to running online marketing campaigns.

Considering Salesloft in a similar vein, more and more companies were shifting to inside sales, with a heavier emphasis on internet-led motions around email, social media, phone calls with conversational intelligence, and Zoom meetings to sell their products. The shift away from field sales, where sales reps meet with prospects face-to-face, to internet-led selling, where the sales reps were primarily working from home or from the office, and needed a new platform, created a huge opportunity for more tools and systems to help ensure and maximize the productivity of those efforts.

Continuing down that same vein, there’s a local startup in town called FinQuery, previously called LeaseQuery. A big change in the accounting standards required companies to better account for all of their leases and long-term liabilities they had signed up for in a way that was more transparent and more reflective of the actual costs to the business. FinQuery built software and services to help solve this problem, which became required because of the industry changes.

Entrepreneurs would do well to think about the “big unlock” that makes their new venture possible. The “big unlock” makes it so that now is the time to build this next company. Sometimes it’s only a modest change that makes a startup work, but the vast majority of the time, there’s some big trend, innovation, or societal shift that creates an unlock for a wave of new startups. Find the unlock and walk through the door.

Last week, I had an initial meeting with a first-time entrepreneur. He mentioned his goal was to raise just one round of financing and then conclude his fundraising efforts. Reflecting on this conversation, I’ve realized that I’ve been hearing similar sentiments more frequently. While it might be anecdotal, I believe entrepreneurs are increasingly exploring ways to be more capital-efficient and to retain control over their destiny throughout their startup’s lifecycle.

Typically, when a startup raises funds, it aims to maximize growth and capture market share, often entering a cycle of seeking additional funding every 12 to 18 months. This cycle can continue indefinitely, and if growth slows or there’s a significant shift in the market’s interest in that type of startup, the consequences can be severe. Experiencing the abrupt halt of this fundraising “treadmill” can be extremely challenging. Entrepreneurs, recognizing these risks and driven by a desire to have a greater control of their journey, are now considering alternatives.

Options such as customer value financing, revenue financing, or other debt mechanisms are being evaluated as means to grow the business without the need for additional equity capital. Even when further capital is necessary for acceleration, entrepreneurs are seeking ways to achieve more with less. They are leveraging more tools and technologies, including artificial intelligence, to attain greater economies of scale and generate higher revenues per employee.

Focusing on capital efficiency and alternative growth methods, particularly the emphasis on customer funding and increasing sales, is becoming more prevalent in the tech industry. This trend towards optimizing resources and exploring diverse funding avenues is likely to gain popularity over time. More entrepreneurs will strive to only raise one round of financing their whole journey.

Last week, I was reminded of an important idea in startup land. I was catching up with a friend, and he made the comment that when competitors go big, don’t automatically go bigger. 

This reminded me of our experience at Pardot in building a B2B marketing automation platform. We were the scrappy upstart based in Atlanta, competing against heavily funded competitors on both coasts. Everyone kept telling us to raise money to capture the market and outcompete our rivals. While they raised over $100 million each, we kept our heads down, bootstrapping the business and focusing on a core segment we felt we could win. 

We defined the segment as the lower, mid-market, with a focus on delivering the most bang for the buck. At the time, we positioned it as the highest amount of money we could charge to a mid-level or senior marketing manager, such that they didn’t have to get sign-off from finance or anyone else in the organization. We eventually arrived at $1,000 a month for the base package, allowing customers to put it on their credit card and us to deliver a great experience. At that price, we lead with a customer acquisition, onboarding and customer success process delivered over the Internet. 

In this B2B marketing automation space, it was unusual that there were several great outcomes across the different competitors, where the big incumbents in complementary spaces acquired their way into the market. Our competitors were going big, and instead of us going bigger, we went more niche. Human nature is to immediately want to one-up the opponent. Entrepreneurs would do well fight that urge and evaluate all the options.