Investors are out there, looking for that next great idea, the unicorn start-up that will deliver strong returns on their funding. It’s a huge challenge for a new business to pull together the plan, promise and proof that will secure funding from venture capitalists, investors, and angels. When you’ve heard that, on average, 9 out of 10 start-ups will fail, how do you discover the magic formula that creates start-up success?
I had a wonderful conversation with Jenelle Sobey, co-founder and CEO at RIDDL, and Partner and former Managing Partner of Code + Mortar about her experiences as a consultant, investor and ultimately as a founder in the world of tech start-ups.
Jenelle admits right away that “everyone’s story is going to be different when it comes to building a company.” However, someone with this much experience has valuable insights into how to enable startups to start strong and keep going.
New businesses need to be agile and flexible. Which seems to be at odds with careful planning and projecting. Even still, Jenelle told me she’s still in favour of the business plan exercise.
“We’re often told not to do a business plan is because (things aren’t) going to go to plan… but at least you have a hypothesis documented that you’re trying to move toward, and at least it gives you what you’re testing against. So if you made a lot of assumptions in your business plan about what you think the right sales or marketing strategies are going to be, it’s documented. You can use those to circulate across your team so everyone’s rowing in the same direction, and then you just test against them. If they fail, they fail. If you identify better sales strategies that weren’t in your business plan, of course that’s going to happen, but it gives you a good foundation for getting started.”
And speaking of sales strategies, I learned that of all the activities competing for her attention, when it comes to prioritizing time, Jenelle chooses, every time, to focus on sales.
“Sales clients, customers… I believe that needs to be your core focus as a founder every day. That can then translate into marketing and products, but at the end of the day, if you’re focused on, ‘how are we selling this and building a better customer relationship and experience?’ then you’re focused on building a business.”
I love how focused Jenelle is on top-notch customer experience. Those are the metrics that she keeps a close eye on.
“You think that you can develop a solution, but the reality is, until you’ve got people using the product, in their hands, and paying for it, then you don’t really know what those urgent, nuanced pain points are, how they’re going to use a product daily, how it’s going to improve their, their work, how you make them look good, what motivates them to use the product. There are just so many questions that, even though you think it’s a solution you don’t know until they’re using it.”
Of course, before you even get a solution into people’s hands, you may need R&D funding to begin. I asked Jenelle what she has discovered about what investors want to know.
“People are focused on, does the idea make sense? And do I think that this is a person that is capable? i.e., knows the subject matter, has a good team in place to be able to possibly deliver upon all of these … Selling the vision is really about simplifying it and helping people connect: ‘The problem is this, it affects these people, this is how I’m going to solve it with this solution, and here’s how we make money.’ So that’s different from selling a grandiose, big idea of what it could be. You have to sprinkle in some of that, but an investor really cares about, how am I going to make money and on what timeline.”
Sometimes the big vision for your company is really promising, but still years out. It’s still important to show investors that you’ve planned all the steps in getting there.
“…for us, you know, we’ve probably got a 10 year trajectory where we’re not going to have enough data, or the right data, or enough of the product built. You have to sell the vision in that instance. Because you build your product and your company in phases. So in phase one, we’re selling this, in phase two we’re selling this, and we’re building with the intention of getting to a very specific point. And if the vision is more attractive than phase one of the business, and more lucrative, then you definitely want to sell the overarching ‘here’s where we’re headed’.”
Part of that vision, and possibly the most important part from a CEO’s standpoint, is your people. Early on, you’re selling the team as much as the solution,” says Jenelle. And she reminded me of a wonderful lesson so many of us have heard along the way: great leaders aren’t well-rounded, as much as well-surrounded.
“It’s not just about hiring smarter people; it’s about finding people who are good matches and support to you…. Building a company from the ground up requires a strong foundation in the relationships between everyone, because there are definitely going to be hard times… You see this more and more often, where people are hiring old friends or they’re bringing on founders who they’ve courted or gotten to know for a really long time or there’s just a natural chemistry…if you’ve got those ingredients of trust, buy-in to the leadership of the company, and then full commitment and understanding around purpose… for us, it’s turned into a magical team.”
It sounds like a clear vision, a strong customer feedback loop and that magical team are the formula for start-up funding and success.