Develop a Specific Ideal Customer Profile

Recently I was reading The Mom Test about customer discovery and there was a section on the ideal customer profile. Generally, entrepreneurs approach the market with an ideal customer profile that is much too broad (find a niche to get rich!). Instead, start with a narrow slice of the market, go deep, and then expand or shift the focus as new information is learned.

At Pardot, our ideal customer evolved over time and was as follows at time of exit:

  • 20 – 200 total employees in the company or division of a larger company (typically a small-to-medium sized business)
  • 5 – 50 employees in sales and marketing (shows a dedicated team for acquiring new customers)
  • At least one full-time marketing manager (shows they have a person to run a marketing automation system)
  • Sales people listed in LinkedIn (shows they have a complex sale involving consultative sales reps)
  • Email newsletter signup on website (shows they are doing traditional email marketing)
  • Ads on Google (shows they are spending money on direct response lead generation)

Now, finding companies that meet this profile required effort through a combination of buying data, developing scripts to crawl sites, and manual labor. In the end, the results were tremendous.

Entrepreneurs should develop a specific ideal customer profile and continually refine it.

Top 10 Atlanta SaaS Startups on the 2018 Inc. 5000

Every year I enjoy jumping in and reading the Inc. 5000. The 2018 awards just came out and there are a number of excellent Atlanta SaaS startups on the list.

When reading the list, always remember that growing fast becomes much harder with scale (doubling revenue every year is hard!).

Here are the top 10 Atlanta SaaS startups based on growth rate:

Congrats to all the winners! Onward and upward.

Growth Connection for Leading CEOs

One of the areas I’ve been interested in for many years is how to help CEOs/presidents of the fastest growing companies. Organizations like YPO and EO are amazing for peer learning and personal development, but don’t have a component for high growth companies. Inc magazine has the excellent Inc. 500/5000, and a corresponding conference focused on these fast growing companies, but it’s an annual thing, not a local, on-going program.

Cities have programs like Leadership Atlanta that connect high potential people across all types of organizations from non-profit to business to government to religious in an effort to build community, and train the leaders of tomorrow. These are important programs, but not focused on CEOs during the most crucial period of exceptional business growth.

Over the years, I’ve hosted a number of dinners for CEOs of the fastest growing local companies in order to build relationships, share learnings, and help grow our community. These are worthwhile, and very fun, but sporadic in nature. There’s an opportunity for deeper peer learning, connecting with more experienced leaders that have already gone through hyper growth, and more structured events.

My brother, CEO of SpanishDict, went through the MindShare program in D.C. and felt it was valuable. MindShare bills itself as “an exclusive forum of CEOs from high growth technology companies designed to foster collaboration and innovation among its Alumni Network.” MindShare has been around for nearly 20 years and has had over 1,000 CEOs in the program.

Some questions:

  • Are there programs like this in other cities? Are they worthwhile?
  • What would be the ideal Growth Connection program? Class size? Meeting frequency and format?
  • Should it be limited to just technology companies or is it better to have CEOs from all types of fast growing companies?
  • How do you define fast growing? Minimum revenue in the millions and trailing three year growth rate over certain amount?

Growth Connection is simply a non-profit idea to help the CEOs and presidents in the community connect, grow, and learn while in the crucible of hyper growth. All feedback and ideas are much appreciated.

Why Product/Market Fit Often Takes Years

Last week I did an informal poll asking several entrepreneurs how long it took to get to product/market fit. Consistently, the response was two years. I took this feedback and shared it on Twitter, resulting in a large conversation:

Now, the big question is “why does product/market fit often take years?”

Great question. Let’s dive in.

Most entrepreneurs start with an idea and no customer discovery. After building a product — usually much more than a prototype — they get it in the hands of a few customers only to learn that there’s a major flaw. Perhaps the customer doesn’t really care (a nice-to-have product). Perhaps the customer doesn’t actually need it. Perhaps it’s too early for the market. Regardless, it’s time for a pivot and 6-12 months has already elapsed.

Now, for round two, the entrepreneur employs customer discovery and spends several months talking to potential customers, listening to feedback, and honing in on a new direction. With a direction chosen, the new product is built using regular feedback and input from potential customers so that when a quality prototype is done, the prospect starts using (and paying!) for it right away. After several more months signing up dozens of happy customers, it’s clear product/market fit has been achieved.

Quite often, this research-test-pivot process has to be repeated several times. One of the top entrepreneurs in town did this process four times over several years to find product/market fit, and ultimately it worked out in a big way.

Product/market fit often takes years as it’s mostly trial and error, even with all the great methodologies out there. Settle in for a long journey and know that it’s a critical step in the process.

3 Initial Studio Concept Ideas

One of the more popular questions about The SaaS Startup Studio is regarding what ideas we’re evaluating for our first studio companies. Great question! Before sharing the ideas, it’s important to note that most people would say wait(!), don’t share the ideas because someone could steal them. Ideas are common, execution is uncommon.

Here are three initial studio concept ideas:

  1. Tax Credit Management Platform
    States issue billions of dollars of tax credits per year that are turned around and sold through brokers at a discount to their value so that a portion can be realized immediately. Take the film tax credit it Georgia. Most companies that get the tax credit don’t pay enough taxes to use it all, so they sell it to other tax payers for 90 cents on the dollar (e.g. you get a $500,000 income tax credit based on expenses but only have $50,000 of state income tax bills, so there’s $450,000 left over to sell to someone else). Imagine a SaaS platform similar to Carta/eShares that keeps track of who has what and also doubles as a marketplace to bypass the middleman so that the seller gets more money and the buyer pays a lower price.
  2. Restaurant Ordering and Delivery Routing Platform
    With the rise of UberEats, Postmates, GrubHub, Caviar, DoorDash, and others, there’s tremendous competition to deliver food. Only, the delivery company owns the relationship leaving the restaurant without knowing their customer. Finally, combine that with delivery marketplaces having unique incentives (e.g. sign up a new customer and get $10), driver availability, and quality control creating an opportunity to route orders to the best delivery platform based on different attributes. Imagine a SaaS platform for online restaurant ordering where the restaurant owns the relationship with the customer (build loyalty!) and then routes the delivery of the order to the best service based on business rules (e.g. if UberEats has the shortest delivery time right now, give them the order).
  3. Human Presence System
    Open workspaces have put increased pressure on conference rooms, meeting rooms, and phone rooms. Combine the increased demand with the age old problems of people scheduling rooms too long, scheduling rooms and then not using them, and not being able to find a room ad hoc. Imagine a SaaS platform that connects to off-the-shelf cameras (e.g. Nest Cam) and uses machine learning to figure out if someone is in the room. Then, it displays a visual layout of the floorplan with open and occupied rooms highlighted and it interfaces with resource management systems like Google Calendar (e.g. if room scheduled for 90+ minutes and no person present after 15 minutes, release the room for someone else to book it and record that person as a no show).

These are three ideas we’re currently considering as well as several more (we have a large Google Sheet of ideas). Remember, ideas are easy — the hard part is executing well, finding product/market fit with a must-have product, and timing the market just right.

If you know a potential Studio Entrepreneur, please let us know as we’d enjoy talking.

Rise of Parallel Entrepreneurs

Recently I was talking to an entrepreneur that had sold his company last year. Now, as his next act, he’s working on three new startups, simultaneously. Put simply, he’s a parallel entrepreneur.

Last week I was talking to another entrepreneur and I mentioned the parallel entrepreneur idea. Immediately, he perked up as well saying he had several ideas but things are going too well with his current company to take away any time or attention. Once the entrepreneurial itch has been scratched, and some level of success achieved, a wave of confidence emerges to take on multiple ideas.

Only, compounding scale with one product in a large market is always better than multiple products in lesser markets. Yet, it often takes time — years in many cases — to know just how good a market will or won’t be. Parallel entrepreneurship is so appealing, especially after selling a business, because successful entrepreneurs know how much luck, timing, and market selection plays in the outcome. If several of those characteristics have an uncertain element, and they do, the next logical thought is to start multiple companies at the same time. With several companies going, there’s time to see how things play out, and then double down on the winner(s) and quickly shut down the losers. Hence, parallel entrepreneurship.

For all startup communities outside a certain section of California, parallel entrepreneurship has a real opportunity to accelerate the growth of the startup community. Presumably, parallel entrepreneurship will result in more startups, more capital invested (especially if from successful entrepreneurs with a track record), and, hopefully, more positive outcomes.

Parallel entrepreneurship is on the rise and will continue to grow as more entrepreneurs have strong exits.

How an Employee Stole $50,000 from Pardot

One of the more challenging stories I haven’t told is how an employee stole $50,000 from us at Pardot back in 2012. At the time, we had this great receptionist that was thoughtful, attentive, and a great culture fit. We were running a program where if a customer referred a prospect to us that did a demo, we rewarded the customer with a $100 Amazon.com gift card. To make it more personal, we’d physically mail the gift card to the customer with a handwritten thank you note.

The program had been running a couple months and was growing in success. To take some load off the sales reps that were doing it, we had everything go through the receptionist. Now, things were humming and the receptionist was ordering a number of Amazon.com gift cards on a regular basis, yet we weren’t tracking who requested what and how much was being spent on these gift cards (mistake #1).

The receptionist, being nefarious, tried adding a couple extra gift cards to an order to see if anyone would notice. Nope, no one noticed.

Next, the receptionist figured out that because we were constantly exceeding our Amex credit limit (fast growing company!) we were now paying the credit card bill twice a month such that there was a two week window from when you could put items on the Amex and someone would check the online statement (mistake #2).

Finally, it was time for the big move by the receptionist: max out the credit card with gift cards right before it was about to paid off, wait until he heard accounting made a payment on it, and then go for the kill. Being the receptionist, he took delivery of all the Amazon.com packages daily, so he decided to order a number of expensive personal items, and more gift cards with next day deliver. The very next day, several packages arrived for him and he promptly took them to his car and left calling in with a fake family emergency. We never saw him again.

After putting the pieces together, including analyzing the Amazon.com purchases, the receptionist had stolen $50,000 from Pardot. Naturally, we called the police to report him but there was no interest in pursuing a non-violent white collar crime. He got away free and clear.

As an entrepreneur, this is one of those bummer moments that’s a good learning experience. We didn’t see it coming and we made sure it wouldn’t happen again. In the end, we moved on and it turned out to be a small event in the overall story.

When it comes to money and situations like this, put in some basic processes and controls — don’t make the same mistake we did.