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Five steps of startup go to-market


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Product market fit is achieved by finding the successful intersection of product iteration, competition/market and go-to-market strategy. Finding product market fit (PMF), however, is hard when these three factors confound problem solving in the search for PMF.

Fortunately, competition tends to be roughly constant over the period in which a startup is solving for PMF. To control between product iteration and GTM, go-to-market can be broken into five sub-steps in any of which product changes are small enough not to confound. This allows GTM tactics and strategy to be tested and proven or disproven.

The five steps are first sale, founder sales, first sales person, sales leadership, scaling sales - each a distinct stage that can be tested and measured. There are metrics abound to measure sales performance, but many - including funnel conversion metrics, LTV and CAC - are fuzzy and imprecise in the early stages of a startup. What matters is whether a software business is adding adequate net new revenue per cash burned as measured by monthly increase in MRR per monthly net cash burned. Cash efficiency should go up at each successive go-to-market step.

Published in: Software

Five steps of startup go to-market

  1. 1. Five steps of go-to-market @guyhturner
  2. 2. 2 Confounding aspects of product market fit Product Iteration Go-to-market Strategy (GTM) PMF Focused here today How do you diagnose/solve PMF with confounding? • Expect competition to stay roughly constant or maybe irrelevant in the early days • Break up GTM development into baby steps to hold product roughly constant at a given GTM step Competition
  3. 3. This is what going-to-market (GTM) feels like 3 You VS. How do you add structure to developing GTM?
  4. 4. Five steps disaggregate the GTM gauntlet 4 First sale Founder sales Sales people Sales leader Scalable sales  MVP   Early PMF  PMF 
  5. 5. Don’t blindly wield the sword, test and measure 5 Test Measure • Adjust one variable at a time(ish) – product, seller, channel, etc… • Set time and $ constraints • Funnel conversion metrics and CAC/LTV are useful to watch, but fuzzy early on • In the end, best metric is sales per net burn!!!
  6. 6. Measuring sales cash efficiency 6 Δ net MRR Net Burn η = Example <2% bad, 5% okay, 7% great, >10% best in class • Last month had $5K in MRR, this month $8K • Burned (net) $60K • η = = = 5% ($8K - $5K) $60K Δ net MRR Net Burn
  7. 7. -$5 M $ M $5 M $10 M $15 M 0% 2% 4% 6% 8% 10% 12% 14% Cash Efficiency (η) Net Value Created ($M) Why this metric? Get richer faster 7 How much value does a startup at $100K MRR create in a year depending on cash efficiency? Note: Assumed valuation multiple on revenue goes from 2x at no growth to 7x at 15% efficiency based on market experience 3% Increasing value creation above ~3% cash efficiency Value destroying
  8. 8. First sale – find A customer for your MVP 8 Testing for Watchouts before moving to next step • Will someone use product? • Will someone pay for product? • What is missing in product? • Your mom doesn’t count as a customer; friends maybe • Anyone can find A customer
  9. 9. Founder sales – find more customers for MVP 9 • Will multiple people use the same product? • In what segments does the product resonate? • What is missing? Need to have or nice to have? • Selling to all of your friends doesn’t count • Significant customization for different customers • Abnormally low LTV/CAC ratio (<<3) and/or low η Testing for Watchouts before moving to next step
  10. 10. Sales people – get others to sell your product 10 • Value of product without “founder passion” • Level of sales experience required (Jr/Sr, inside/outside) • Early coding of repeatable sales process • Trying to skip this step! • Got lucky or unlucky with one sales person (test w/ 3-4) • Abnormally low LTV/CAC ratio (<<3) and/or low η Testing for Watchouts before moving to next step
  11. 11. Sales leader – someone else to lead sales 11 • Broadness of PMF • Level of leadership required to achieve repeatability • Productive marketing demand gen channels/strategy to feed larger sales team • Sales productivity dropping  you forgot to feed funnel! • Abnormally low LTV/CAC ratio (<<3) and/or low η • Sales leader 30-60 day forecasts consistently >30% off (person or process issue?) Testing for Watchouts before moving to next step
  12. 12. Scalable sales – get bigger faster 12 • Maintaining cash efficiency with big spend • Land and expand + ability to grow average contract value • Ability to hire and train large sales team • New sales/marketing channels • Optimization of potential value from customers (leaving $ on table?) • Need to verticalize sales teams • Need to add enterprise sales when historically inside sales (moving up market) Testing for Watchouts before moving to next step
  13. 13. 13 What to expect when you put it together First sale Founder sales Sales people Sales leader Scalable sales Cash efficiency (η) < 2% 2-5% 5% 7% >7% Net burn* per month ($K) $50K $50K $75K $100K $200K *Burn shown for non-coastal companies. Might be 2x on coasts. Implied Δ MRR per month $1K $2K $4K $7K $14K Look for increasing efficiency before increasing burn and moving to next step  MVP   Early PMF  PMF  GTM Stage
  14. 14. Thank You + Q&A @guyhturner @hydeparkvp 14