In the past few years, I’ve seen plenty of Stanford grads and Uber alumni get Series A funding with little to show beyond personal reputations and pretty slides. Now that capital markets have softened up, however, early-stage startups looking to raise Series A and beyond need to be obsessed with one thing—getting customers, as soon as humanly possible.
That is easier said than done, of course. Tech buyers are struggling. Networks of friends and advisors have more urgent priorities that are "not you." Email open percentages, cold call response rates, meeting quality, deal closures, and willingness of buyers to pay—these metrics seem to be down across the board.
Don’t despair. This can be done, and if you are a founder, I would like to help you. So— how do you get your first five customers in a downturn? For starters, start acting like a professional B2B sales organization well before you even hire your first sales rep. Here’s what I recommend:
1. Find an active need
Here’s the hard truth: Customers are not going to buy from you because you have a great deck, because you are charming, or because you said any magic combination of words. Do not fall into the trap of thinking that you can convince customers to buy from you with great marketing and sales.
The only people that are going to buy from you right now are those who have “an active need” for your solution. What I mean by that is: “Their hair is on fire, they know they have a problem, and they are highly motivated to find a solution!” With budgets being cut, these are the only prospects with the organizational will to cut through the red tape and make it happen.
Your job is to find those prospects and then focus on accelerating the sales process with them. Ignore everyone else.
2. Lean into LinkedIn
Email is a terrific medium and it probably should be part of your marketing mix, but when you’re new on the scene, spraying out cold emails and praying for a response won’t produce the results that you need. That’s why I recommend to founders that they subscribe to LinkedIn Sales Navigator and make it their principal channel for business development.
This is a time-intensive approach, mind you. With all of the other things on your plate, you’ll need to block out a devoted chunk of time every week when you focus purely on outreach. Pick 50 targets at a time, follow up with them two or three times after the first contact, and then move on if you don’t get any traction– always keeping a list of 50 active targets.
3. Qualify your prospects
You’re underwater, burning through a single oxygen tank. Now more than ever, it’s important that you grasp how very expensive and valuable your time is. Not every person you speak to is qualified to buy from you. When you make contact with a prospect, be prepared to ask the really hard questions very early in the conversation: “Are we solving a high-priority problem for you? If I do what I say I can do, will you pay me the amount I am asking? In addition to you, who else is involved in making a decision? How soon would you buy and deploy if everything works out??”
In any meaningful purchase by a customer organization, there are multiple people involved. There are users, influencers, approvers, decision makers, and economic buyers. You want to understand who all these people are in any opportunity you are pursuing. But the most important person for you to target in your outreach and throughout any sales cycle is your “champion”— the person with the motivation and the influence to sell on your behalf internally, when you’re not there.
For your outreach, define who those people might be and target them. Once you have a sales opportunity, figure out who your champion is quickly—they’ll be a powerful influencer or decision maker. If they’re not, don’t hesitate to cut them off and move on. The last thing you need is a long, fruitless sales cycle that sucks up your precious resources.
4. Personalize your messaging
One of the reasons that you should be very selective about your targets is that your pitch should always be personalized to the recipient. Before you contact a prospect, do your homework and orient your messaging around that individual’s most likely active need. These are very busy people who get approached every day with irrelevant products and services. You must give them a compelling reason to talk to you.
Look for recent news releases, blog posts, and job posts from the company that reveal where their focus is. If they are a public company, read their earnings reports and analyst interviews. Once you understand where they are, communicate how you can offer them something of value from your knowledge or contact network. Make the conversation about mutual discovery and value sharing, not just about selling them something.
One caveat to this—don’t try to write every single message from scratch. That will take more time than you have to invest. It is better to create “canned” messages for pain points that your product solves, and then modify those templates according to your target’s particulars.
5. Demonstrate your ROI
Somewhere in the chain of command between your champion and the C-suite, someone needs to justify purchasing your product based on its ROI. Leaving it to your buyer to spell out the return on investment is lazy and risky. During a downturn, when many organizations put a moratorium on new software purchases, your ROI must be rock solid to get the green light.
Remember—your buyer is busy. If you leave it to them to demonstrate ROI, they might not do it at all. If they do find the time, there’s no guarantee that they are any good at building a quality ROI study. It’s not something that most engineering and sales managers do very often.
Offer to help them build their ROI. You are more motivated, you know your product better, and you can therefore deliver a higher quality analysis. Where and how much expense will you save them? How much time will you save them, and what is that worth? How much more money will you help them earn? How will you help them improve security, predictability, and risk, and how do they value those? Get these answers from your prospect, use their numbers, and then craft an ROI report that reflects what you know your product can really achieve.
6. Finally—be flexible
As a VC-backed startup, you always have to be thinking about your next round. Whether they fully express it to you or not, your backers want to see that people out in the real world will actually pay for your product, and then deploy it. That’s where the rubber hits the road.
For most early-stage startups and VC’s, however, the dollar amount is not nearly as important as simply proving that your product solves a real market need that customers are willing to pay for. For your first five customers, what matters most is that they really use your product. A $50,000 or $100,000 deal out of the gate would be amazing but it’s also not going to make or break your business. Having nothing to show, however, puts you in a very bad fundraising position.
You should push hard to get prospective buyers to pay you "real money" for your product. But if that’s not possible within their current budget restrictions, you can say "for this first year I’ll give you our product at a deep discount (or maybe even for free), on the agreement that you will pay $X next year.” Be creative. It’s super important to understand that getting your first five customers is not the same as scaling up your business. You have permission to do unscalable things at this stage.
Without a doubt, it is a difficult time to be a tech startup. But don’t be discouraged. Plenty of great tech companies were started in downturns. Customers still have problems that need solutions. Setting the bar higher today merely encourages you to build something that the world cares about.
And that is something truly worth being obsessed with.