John Furrier: Early Stage Venture Marketing

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December 15, 2004

Early Stage Venture Marketing

Marketing and Sales are just as important for an early stage venture as having a great product team. Successful early stage companies go to market with a "good enough" relevant product and listen and assess the market...then after reading the "market telemetry" focus hard core on innovating around the customers and broader markets needs.

Brad Feld, respected VC blogger from Mobius, makes this point perfectly in his post "Early Stage Marketing and Sales"...

I've been involved in over 100 companies. None of them ever have made their operating plan on their first year of product ship. Occassionally they outperform, but they almost always underperform for some reason. The reasons are often logical and non-fatal, but the dynamic that gets created is one where the business is always "behind plan." This sucks.

I made the strong point that I actually care LESS about "making our 2005 revenue plan" then I do about learning why people are interested in what we do, why they turn into real prospects, why they become customers, and why they buy more stuff from us. I know - with certainty - that our 2005 revenue forecast is wrong - we just don't have enough data to have any precision on it. So - I want to learn the "why" in 2005 - not that "what."

We do have a sales force to comp, a team to motivate, and a plan to achieve. So - the "what" is important. However, in my experience, the way to calibrate things is to set up the operating plan so you are in a position to increase opex as you are successful vs. having to back off spending (or hiring) if you fall short of plan. I'd rather go to a board meeting mid-year where the management team says "we've hit our revenue ramp so far this year so we want to pull some head count adds forward" vs. the meeting that says "we missed our revenue ramp so we're holding off hiring folks in the plan." The nuance is subtle but the dynamic is important - as you succeed, you get to apply more resources; if you don't reach your goal, you haven't assumed more resources (e.g. we can't hit the goal because we need the resources.)

It also reinforces the focus on the "why." If we fall short of plan, we'll focus on "why." If we exceed plan, we'll rejoice, talk about "why", and add more resources. However, we won't spend a lot of time agonizing over "what we should do because we missed plan."

The first full year of product ship for a software company is a very defining year. I've seen way too many of my VC cohorts believe that the operating plan and forecast is gospel and spend all their time in year one of product ship (and usually year two of the business) focusing on the quantitative financial metrics rather than understanding how things actually work in the business. Financial planning is imprecise early in a business - a smart executive team understands this and sets the right expectations and parameters around it."

Good post Brad. Good marketers don't try to "boil over the ocean" but focus on entry and then scale ....successful firms always come out with a "good enough" product to enter the market and then their savvy sales/marketing folks are tied directly into the development team like hand and glove...so versions 3.0 and beyond tend to be stronger and ussually market dominating.

December 15, 2004 in Silicon Valley | Permalink