go to market timing

Good morning Predictable Revenue community,

Hey all, 

Today’s email is a shorter one because I’m on holidays. It was going to be longer and sent earlier but we got stuck at the bottom of the ski lift yesterday and had to wait for lightning to clear. Here’s a link to the customer development sheet I mentioned in the last email.

One thing that came up in some of the responses from last week’s email was that finding product market fit, founder led selling, and building your first sales team could each be their own books. I totally agree. There are many books on each of them and my goal is to help draw a line that connects all three subjects and share the mental models I’ve developed for each one. 

I recently started learning to skate ski. I’ve ice skated, downhill skied, and cycled nearly my whole life and I figured skate skiing would be a perfect combination of my three favourite things. It is, but that doesn’t mean I’m good at it yet. I like to learn by experiencing things so I bought all the gear and showed up on the mountain, no lessons. My only training had been a few youtube videos so naturally I looked like Bambi when I first strapped the skis on. It is a different world than ice skating or downhill skiing. Fortunately, the community is super helpful and I’ve had two individuals ski past and offer me some really helpful feedback on my technique. Elbows in, heels together, and commit to each stride. It made me think of the book because learning to be an entrepreneur is even harder. Getting into an accelerator doesn’t guarantee someone is going to show you the right way to do things (though YC’s library is pretty solid). In most cases, there won’t be a right way to do things, only a mix of options with different tradeoffs. That’s where mental models come in, they show you how one person sees the problem you’re facing. 

One of the hardest things to figure out in the early days is when to invest in go to market. If you want to raise that next round there are certain growth expectations. This pressure to grow pushes founders to invest money into go to market efforts. Premature scaling is one of the biggest killers of companies and it’s largely a timing issue, investing in growing your company before you have strong product market fit. Strength of PMF is important because it acts as a multiplier of every $1 invested in growth. Strong PMF can multiply that dollar by 3-10x whereas weak PMF can multiply it by .1 to .0. If it’s a timing issue, how do you figure out when to invest? 

The funnel efficiency of your customer development process is one place I like to look. Some of this is from the bottom of my last email so I thank those that made it that far and apologize for the repeat content. When I look at any funnel, I like to measure the volume (number of deals moving through it), the velocity (how quickly a deal moves from top to bottom), and conversion (the % of deals that make it top to bottom). A snapshot in time only tells you so much so it’s the trends that will help you see the full story. 

Here are the stages (cribbed from Dave’s talk): 

• Acquisition - when you tell people about it, they're interested in learning more

• Activation - when you invite them to check it out, they sign up and use it (accept your offer)

• Revenue - they give you at least a little money for your product

• Retention - after they sign up, they use it regularly

• Referral - they get so much value that they're telling their friends

My initial experience with Carb.io, it had strong product market fit, was putting 5 people into the top of the funnel and 7 customers came out the bottom. 5 customers from the people I interviewed plus 2 from referrals from the initial 5 which meant my funnel efficiency was 140%. Over 50 interviews that efficiency number dropped to around 80%. Contrast this experience with Athlon, a side project I worked on in the fitness habits space, where our pipeline efficiency was closer to 15%. We didn’t continue to work on Athlon. 

Your numbers will be different based on the type of buyer you’re selling to and how they purchase products. I happened to be selling Carb.io to sales leaders that were able to make quick purchase decisions and were very likely to make referrals. 

Are you tracking your customer development interviews? If so, I’d love to hear how you’ve done it.

Collin Stewart