From time to time we have posts from local members of the startup community that provide some great advice from a different perspective. Today’s post is from Dr. Andrea Belz, a long-time member of the Pasadena Angels, a local consultant and one of the brightest people I know (a CalTech PhD–what more can you say).  Although Andrea provides five simple questions to ask when commercializing university technology, these can also be applied to most startups—whether they get their start in academe or not.

     By Andrea Belz

Many entrepreneurs approach Angel groups and VCs with novel technologies and strong technical teams.  Unfortunately, they often “forget” to conduct any marketing research, mainly because they don’t understand how to do it.  Even worse, technical teams with strong resumes may attract plenty of funding, but eventually they may hit the wall (at investors’ expense) once everyone realizes that there is an interesting technology but no interest from the outside world.

This problem can be especially acute when the local community includes a strong research institution interested in technology commercialization.  People often underestimate the gap between the technology’s readiness to exit the university or research laboratory and its readiness for market.  This gap often takes five years to overcome.   Furthermore, technologists almost always underestimate the difficulty in selling anything – the hardest challenge in almost any organization is to get someone to write the first check.

Entrepreneurs should be sure to ask themselves a few key questions before pursuing a plan to commercialize technology, particularly with investors.  Investors can use these questions as a guide to the entrepreneur’s “coachability”.

1. Have you spoken with anyone that might be an end user of the product and lived in their world for a day?
2. Have you listened seriously to his/her feedback without foolishly discarding it (“They just don’t get it”)?
3. Do you tell people about your technology or about the benefits?  In other words, do you sell the drill or the hole?
4. Can you estimate the size of your market and have you found “low-hanging fruit”?
5. If the low-hanging fruit is not the first application you considered, are you willing to shift direction?

The current recession presents you with an opportunity to upgrade your sales team.  Many high quality salespeople are out of work, and base salaries have come down.  If you are fortunate enough to be hiring, now is the time to be aggressive.  If you don’t have open hires, think hard about eliminating poor performers and replacing them with new staff.

We are all struggling to do more with less, as companies reduce their workforces, VCs  (and Angel Investors) get tighter with funding, and customers are stingy with orders.  You can make real progress by upgrading your sales team, no matter how large or small.

In our own hiring and in anecdotes from other managers, base salary expectations are down 20% or more from just a year ago.  More importantly, many skilled sales people have been let go in the waves of layoffs that have dominated the news.  Salaries down, supply up—in short, a buyer’s market.

The opportunity is obvious if you have open positions, but what if you don’t have budget for new hires?  Take a hard look at your current team—we all tend to hold on to underperformers, particularly if they are selling something.  I know I often hesitate to fire that marginal performer, because they do add top line revenue, even if it is not as much as they should.   Now is the time to turn over marginal team members, and upgrade with new hires.

I don’t want to duck the ethical dilemma here.  Firing a marginal colleague in the midst of a severe recession is not a pleasant duty, and will make for some sleepless nights.  There is only a little solace in the thought that you are also creating an opportunity for someone else, hopefully of higher caliber.  The bottom line is that you owe it to yourself and the rest of your team to take a hard look, and then make the tough decisions.  Upgrading now increases your company’s chances of making it thorough the current recession intact.

Every company has to face it sooner or later—selling against that entrenched player in your space.  You know the one.  They are the guys with the industry standard solution; they have every bell and whistle known to humanity.  No one every got fired for picking their solution, even if it is weak in some areas.  What do you do?

There are a few key steps you can take that will maximize your chances of winning, or minimize the expenditure of resources in an unwinnable situation.  I ran into this situation 3 weeks ago, and was reminded again of all the painful lessons (and a few glorious wins) that I’ve gotten at the hands of the 800lb gorillas in several industries.

Step 1: Tell the customer why they should buy your solution

There is no reason for someone to take the risk of buying a new solution, rather than the industry standard, unless there is a big payoff.  Why should the customer take the risk of buying your service or product instead of the safe choice?  You not only need a crisp answer, but one that translates into dollars and cents.  Be prepared to explain your advantage.  Provide examples and references.  Hammer the point home.

In our case, we presented to a large prospect that wanted internet distribution for their product.  We have an excellent network, with far broader distribution than the gorilla.  We drove the point home, and at least 3 or 4 people in the presentation nodded their agreement.  So far, so good.

Step 2: Understand the politics in your customer’s organization

Picking a new, risky vendor is an inherently politically charged situation.  Is there someone allied with the gorilla at your prospective customer?  You better identify them, quickly.  They will try to shoot you down at every opportunity.  Is there a new person on the scene who has reasons to pick an radical new solution?  Some of my best supporters have been young managers who are anxious to do something new and bold.

In our case, the gorilla-lover constantly argued, and continually raised new challenges.  Can you do this?  Can you do that?  What about a call center solution?  The gorilla has one, so where’s yours?  What about the security certification that the gorilla announced last week?  Do you have one yet?  I wanted to throw something at him.

What he didn’t know was that we had an ally on the senior management team.  I had out-flanked the gorilla-lover by having some discussions beforehand.  Without that political support, we would have been on the defensive throughout the presentation.

Step 3: Know when to cut your losses

There will be times when you simply can’t win, and you need to identify those situations before they consume your scarce resources in a losing cause.  Without the support of the Senior Management player I mentioned, my sales effort would have been wasted.  Worse, I could have been drawn into trying to match the capabilities of the gorilla.  There is always a temptation to say “I could build that, too” or something equally foolish.  Why would anyone buy your promise to duplicate the gorilla’s solution over time, when they could by the complete solution from your competitor now?

To win, you need a decisive advantage, but that is not enough.  You need to cultivate allies in the target company that value that advantage, and are willing to take some risk to get it.  If either of those key components is missing, think hard about whether you should proceed.

These are hard calls.  Prospects are few and far between, especially large ones.  Giving up on prospect runs counter to our belief in our business, and can be hard to explain to the rest of your team and your investors.  Know yourself, and pick battles you can win.  Remember, if you engage to early and lose decisively, you may never get another chance at the prospect.  If you choose to fight again another day, you are still in the game.

By the way, we ended up getting part of the business at the prospect I mentioned.  Politics carried the day.  Our Senior Management ally gave us 40% of the business.  Wisely, he chose to test our services, and use our presence to beat down the gorilla’s prices.  Everybody won, except the gorilla.  We got a healthy fraction of the business, and our executive ally looked statesmanlike for testing us in a prudent way.

An industry colleague resigned his position today, after a significant stint at his company. With his departure, his company will actually be losing more than a single employee – they’ll be losing a significant marketing asset, in terms of both institutional knowledge and external influence.

The shame of this loss is that it would have been easy to convert into a marketing win – regardless of whether my colleague stayed at his company or not in the longer term.

Internally, “John” was well respected and well versed in best practices. He saved the company from repeating marketing mistakes. But arguably more importantly, externally, John was socially well connected in the industry. If his company had made even a minimal effort to show John appreciation and respect, he would have been an excellent evangelist for the company during his “off hours”. John’s annual salary couldn’t have paid for the word of mouth marketing that he would have done.

Alas, the company viewed John as a resource, not a person. The result is that despite a civil relationship, and significant contributions by John, he never felt any particular love for the company – and finally resigned in search of more fulfilling work.

What a waste.

The moral of the story: your employees can be your best evangelists. Invest in them first.

I’m not a fan of using Trade Shows and / or lures at trade shows for marketing purposes. So I was hugely impressed by CPC, an industrial coffee kitchen catering company, when they appeared at LegalTech.

Why? On the face of it, their presence made no sense. The trade show was about technology for law firms – servers, software, storage. It was attended by IT professionals. Why should a bunch of coffee-stockers attend?

The answer was of course brilliant, which was that for the majority of small law firms, their entire infrastructure (including facilities, eg the purchasers of coffee-stocking services) reports to the same decision-maker.

Who was at this show, because tech decisions are expensive.

So CPC had just positioned themselves to meet directly with the decision-makers, all at once, in a venue where CPC faced no competition.

Additionally, CPC’s execution was flawless. They set up at the entrance / exit to the main floor, and their booth looked like an actual coffee vendor… but with a big price-board declaring the price of each item listed to be “one business card”.

So picture yourself as a tired executive. You want coffee. It’s there in front of you, it’s free, and all you need to do is trade a business card. And chat with the nice servers, who are also salespeople.

You rest a moment, the coffee is great, the people are nice, and the cost of their service seems quite reasonable in comparison to the technology you’ve just seen.

I believe that CPC sold more at that show than most other vendors there. Brilliant marketing… and not a bad cup of hot chocolate, either.

Why is it that so many marketers apparently can’t calculate the time value of money?

The math involved is fairly simple.

Take, for example, an executive earning $500 per hour.

If you want them to fill out a six-minute survey, that’s $50 of their time.

Do they receive something that’s worth at least $50 (in their eyes) for that six-question survey? If not, why would you expect any significant number of people to take that survey?

As Abraham Lincoln said, “You can fool some of the people all of the time, and all of the people some of the time, but you can’t fool all the people all the time”. So sometimes you can trade time for golf balls (for example, at trade shows, where people get caught up in the hype and alcohol) – but most of the time you need quid pro quo.

[Consider: the type of person whose time value of money is low enough to make your survey-for-golf-balls worthwhile is probably not your target customer.]

My favorite recent example of this sort of situation was Infoworld magazine, a favorite of mine since their gossip column published my comment on Dell’s customer service hotline (“Please hold, we are currently servicing other customers”. Yikes!).

Infoworld will happily send you a free subscription if you’re a “qualified” professional – eg, if they can lease you as part of their advertising mailing list.

To obtain the free subscription, however, you had to fill out a multi-page survey, which ended up taking me about thirty minutes.

I didn’t know it was going to take 30 minutes. In fact, it was 15 minutes into the survey, as I was starting to get frustrated at how much time it was taking, that I calculated the time value of that survey.

I was shocked to realize how much I was “paying” for my subscription. And of course, by the end of the survey, I was filling in random answers just to finish quickly, so Infoworld was actually doing themselves a dis-service with such a long survey, reducing the specificity and value of their list…

So the good news is that they seem to have wised up. Infoworld’s latest renewal survey was just seven questions long. I have to suspect that as a result of their changes, their lists are cleaner, and their volume of subscribers higher as well.

So check for yourself. How much are you worth per hour, and how much are your customers worth? Do you really need to give ‘em the third degree up front? Or can you lure them in a bit first?

My thinking: be patient. Wait for the second date, ok?

Every startup faces the question of who to hire for their first sales position. Do you look for that fantastic VP of sales who is not only a great closer, but also a master strategist? Do you hire that friend of the founder who is young but promising? How do you decide?

Start by considering what you really need. Most startups have several specific needs that your first sales hire must fulfill. Hiring a salesperson is no different than building a piece of technology. Your management team should agree on a specification for the position, and then hire to that spec. Otherwise, you risk “falling in love” with candidates that may or may not bring the skills your company needs.

The likely list of needs:

1. Sales Momentum
Every startup simply needs to begin making sales. Look for someone who has sold a similar product successfully in your space, and who has some small company/unit experience. Dropping a successful corporate salesman into a startup can be a disaster. You need someone who shows evidence of self-sufficiency, not a prima donna. Have they pioneered a new geographic market or launched a new product? Started a new department? Look for the clues. Ask your candidates to cite examples of creating momentum in their past jobs.

2. Raw Sales Talent
Don’t trust resumes—make the candidate demonstrate their sales technique. The best interview “test” I was ever given was being asked to formally present my tentative sales strategy to the entire management team of a startup. I stood up with my PowerPoint presentation, pitched it to the management team, and then took questions on why I choose that approach. That management team got a thorough demonstration of my abilities to make enterprise sales.

Ask your candidate to give you a sales pitch—either for their current product or a rough version of the pitch they’d use for your product.

3. Market Intelligence
Your first sales hire is going to bring back critical market feedback on your product as he sells. The right salesperson will be a very important member of your product development team.

Check their abilities by talking to past or current clients. Does he/she listen well? Can the client describe a situation where the salesperson went “above and beyond” to make their product really work for the client? Talk to at least 2 clients and find out.

4. Process Building
Your first sales hire is going to build version 1.0 of your sales process. They will develop the sales message, build pipeline tracking and forecasting, and lay the foundation for scaling up the sales team as you grow.

The right candidate will be able to show you examples of how they have done each of these tasks in the past. Can they give you a crisp “elevator pitch” for their current product? How accurate has their pipeline reporting been in the past? Look for examples.

The overarching message is this—hiring a sales candidate is no different than building your product. Build a spec, and hire to that spec. Don’t be afraid to test your candidates—have them do presentations, talk to clients, find out why they win and lose accounts. Don’t become obsessed with finding the (probably mythical) perfect VP that you will keep on the team for all time. Just find someone who can get the job done right now.

Parting thought—“Hiring with Your Head” by Lou Adler will help you formulate your thoughts. You can find it at Amazon.

Every sales team has one—that lovable guy or gal who works hard, is cheery, and never quite delivers their full quota. You never get around to firing them because they are delivering some sales and everyone likes them.

If you want to succeed, fire them now.

Every six months you should fire your worst performers in every category, particularly sales. Jack Welsh of GE popularized this approach during his tenure, eliminating the bottom 10% of all staff once per year. (Google “Topgrading”—there is a whole industry built around the concept.)

This is a tough discipline and will feel harsh when you do it. You don’t have a choice. If your startup is like the ones I’ve experienced, you are short of time and money. You are not running a training program, nor are you there to make your team feel loved. You are at your company to drive success.

Underperformers drag down a sales team. They are a living example that poor performance is somehow OK. What message are you sending to your strong players if you tolerate poor performance? Either replace them or split up their territory among your high performers as a reward.

I saw a company that I’ve been following do this earlier in the year, and the results have been enlightening. They fired a weak performer and didn’t replace him. Sales went up, even as salary expenses went down. The VP Sales divided up his territories, and the more effective teammates generated results where he couldn’t. Needless to say, they were pleased with the extra commissions they earned.

The salesman who was fired? He went to work at a larger company where he was a better fit. When the company last heard from him, he was on his way to earning six figures in the new environment.

If you accept that Marketing is fundamentally a process of education and awareness, of leading the right people to the right products, then it’s obvious that marketing isn’t a standalone function.

The truth is that everyone who deals with anyone outside the company is doing marketing for the company, whether they want to or not. Heck, I deliberately wear competitor logos when I travel, because I know that I can be a real jerk after getting no sleep on the redeye – and I don’t want my occasional poor behavior associated with my company.

Given that basic concept, it astounds me how many companies seem to ignore customer service as an aspect of marketing. Doesn’t it seem somewhat foolish, not to say masochistic, to spend so much time and effort driving customers to your company just to insult and lose them in subsequent face-to-face interactions?

As an example of right and wrong, let me point out two particularly notable examples I recently encountered.

Right: I recently adopted a desktop videoconferencing solution, and as I tried several, I encountered Sightspeed.com – a commercial service. Now, without commenting on the service itself, I’d just like to point out that when I had trouble with an order, their team responded quickly, solved the issue, and sent me a Sightspeed T-Shirt and Hat. Now, I’m not in favor of toys… but given that I do wear those items (and they asked prior to sending), and the items featured their logo, graphic, and explanation of their business, well, they just created a walking talking billboard. Nice job, folks!

Wrong: At the other end of the spectrum, we find Target stores – where their outsourced customer service “hotline” is so bad that the Target manager I had call with me was (literally) in tears. Now remember, she’s a store manager! Following up with their online team (an entirely separate company) yielded an offer of a discount on future purchases. Not likely, given our experience. Be bold, Target – offer credit anywhere.

The moral of the story? Marketing is everywhere. Sightspeed amplified their marketing ROI by turning me into a champion – while Target just threw away the dollars they’d spent getting me and others into the store (given my big mouth and predilection for talking about poor marketing). So be careful out there, folks. Spread the word – or your customers will do it for you.

One of the easiest ways to kill a startup is to throw away money on the wrong marketing programs. The good news is that there is a single question that will prevent disaster: “How does (fill in the blank) marketing program contribute to sales right now?”

If your head of marketing can’t answer that question and articulate a plan to measure results, don’t fund the program. If you get some hocus-pocus response about “brand marketing”, consider getting a new marketing person.

In an early stage company, the only brand marketing that matters is building a product that produces satisfied customers. THAT drives your brand—not PR, not advertising, not clever websites.

The only purpose of marketing in an early stage company is to assist the sales effort. Build the tools you need—a clear marketing message, functional website, and basic materials. Get them in the hands of your sales team, and get feedback on what works. Plan on iterating many times to get the message right, and test as many ideas as you can manage. Experimentation and refinement are the keys.

One Pasadena Angels funded company, Bluebeam, does a great job in this area with their website. They have a very practical website (www.Bluebeam.com) that is focused on driving both online and enterprise sales. Bluebeam’s CEO, Richard Lee, can tell you with great precision that X dollars spent on PPC marketing will yield Y dollars in online sales.

Their website is a great model for early stage marketing—free trials, customer testimonials, links to press articles, etc. All focused on driving sales and explaining the product line, with no extraneous text or graphics. They constantly update the look and content of the site to reflect recent achievements.

Make your marketing count. Focus on results.