Startup sales – the investor perspective. An interview with The Accelerate Fund

Recently, we spoke with two local investors about their perspectives on startup sales.

Brad Johns is a Partner at Yaletown Venture Partners.  Yaletown invests in emerging-growth technology companies that focus on industrial and enterprise customers. The firm won the CVCA Venture Capital Deal of the Year award in 2017. Yaletown is also the manager for the Accelerate II Fund, a $10M fund that matches investments made by individual angel investors in early stage technology companies.

David Edmonds is currently the Industry Chair with The A100. In that role, David works with Accelerate Fund II by providing company and community support to improve the performance of investee companies. David is also a tech entrepreneur himself, having founded and/or led many successful companies, and is an active angel investor and board member.

Accelerate Fund II made its most recent investment last week in Edmonton based TestFire Labs and their AI powered meeting application, Hendrix. They also completed investments in Visio Media (Edmonton), Fred Sense (Calgary) & Passportal (Calgary).

How important is sales to early stage ventures – compared with building a great product, hiring a great team, etc? 

David: It’s critical, but not just for the obvious benefit of generating cash flow. Companies that take a lean approach and get out in their markets early have a huge advantage; they are able to observe and learn the real-world problems of their customers, and ensure that the products they develop will address them.  In short, they can’t get to Product-Market Fit without that feedback. In addition, founders must “sell” all the time – to articulate their vision to early adopter customers, to be able to recruit top talent into their new and unproven company, and to land financing from potential investors. So, I’d argue that sales is required in order to build a great product, hire a great team and land funding!

Brad: Agreed. Although I’m an investor, we all know the best source of financing is sales revenue. At the Accelerate Fund, we are looking for startups that have some early revenue. This is important to us because revenue represents market validation, and is evidence that the founder and/or his or her team will be able to execute on sales.

What are the top mistakes you see founders and startup teams make when it comes to sales?

David: The biggest gap I see is the founder’s not investing enough time out of their office, talking to potential customers and partners.  Companies can waste months – or years! – developing products for which there is no market opportunity, because they have failed to truly understand the market requirements and opportunity. Early evangelical sales can be a great way to get “out there” and learn what your customers want. And founders have to get comfortable selling instead of talking about features.

Brad: First, I’d say startups and founders aren’t sufficiently analytical about what is working in sales, and what isn’t, so they lack a critical feedback loop that would help them achieve better sales outcomes. Second, I think they need to really understand their business model economics, and ensure their sales and customer acquisition approach allows them to scale profitably.

Why do so few founders have the experience to succeed at sales?

Brad: We don’t learn how to sell at university or college and typically get these skills working for a company. Given the lack of larger technology companies in Alberta, most founders have not had the opportunity to gain the necessary skills and are not well-prepared to sell. They lack the fundamental knowledge of what works, and they don’t have – or seek to develop – a methodical sales process that will allow them to scale. This is particularly true when the company makes its first few hires, and has to transition the knowledge from the founder (who led early sales efforts).

What do you look for specifically in your portfolio companies?

David: It’s all about the ability to scale sales. I look for well-defined sales targets, a clear plan for how they will get there, and a sales process that will give them predictable revenue.

Brad: We also look for a strong pipeline and sales metrics that they watch and can report to their board. Founders should know what metrics to watch to ensure they identify problems early, and can adjust or fine-tune to achieve the goals they’ve agreed.

Any final advice for Alberta startups?

David: Focus first on getting to Product-Market Fit. Founders and founding teams need to take a lean approach and ensure their product solves a real problem, before scaling their sales and their business.  Second, ensure you have the needed sales, marketing and product skillsets to be able to lead your company through those tough early days.

Brad: As you build your team, hire fast and fire faster. It’s competitive out there, particularly for talent. You’ll need to ensure you have a solid process in place for recruiting great talent, onboarding them so they can be effective, and having clear expectations as to performance and effort. And if they don’t work out, have the courage to make team changes quickly so you don’t slow down your progress.

This post originally appeared on Alberta Enterprise Corporation’s Start Alberta portal.