One of the most vocal champions of the concept of strong teams was TechStars CEO David Cohen, who famously said the first things his company looks for in early-stage companies is “team, team, team, market, idea.”
Throughout my career, I’ve had the privilege of working with hundreds of outstanding technology startups. I have seen firsthand what it takes to scale beyond the advice of having a strong team. I have worked with and guided organizations in multiple industries, ranging from blockchain to cannabis to advertising technology to legal technology to payments. Across all of these verticals, there are several indicators of success that are common to all.
In particular, I have learned that if you are not growing fast as a startup, you are dying a slow death. There is no in-between. Many venture capitalists are not clear with their portfolio companies about the type of growth they expect to see. The best kind of growth is when a company becomes what I call a “category king.” This means that they carve out a unique market niche, attract consumers and investors and then completely monopolize that niche. This is next to impossible to accomplish without global ambitions.
Beyond strong teams, venture-backed technology startups must master five lines of effort if they hope to become global organizations that establish and dominate new categories.
Sales And Marketing
First, startups must perfect their sales and marketing strategies. For too long, tech companies have tended to isolate sales teams and treat them as if they are somehow less important than product teams. As a result of recent poor initial public offering performance, however, I’ve observed that there has been a shift toward expecting portfolio companies to actually turn a profit. This cannot be done without a strong sales and marketing strategy.
Startups must relentlessly follow the money with every decision they make. The best way to do this is to make sure sales has a seat at the table for all important discussions. Of course, startups must first decide what constitutes a sale so they can generate revenue. Not to be overlooked, however, are logos and case studies displayed prominently in marketing materials as well as testimonials and user feedback. These important components can usually not all be obtained from one customer, hence the need for a strong sales process.
A well-developed influence strategy is about much more than just how to post on Instagram. Startups that want to be successful need to find a way to position their brands at the top of the intellectual discussion in whichever vertical they are in. A strong board of directors with significant industry experience is essential here. In addition, a startup advisor can be a great resource to help alleviate customer and investor concerns that are inevitable for an early-stage company (this is especially important in the B2B space). Academics can provide intellectual credibility, especially in highly technical industries. Lastly, don’t forget about reporters and bloggers. Consumer startups, in particular, should develop a strategy to reach respected and influential bloggers in their industries.
An investment strategy that intertwines with the sales and marketing and influencer strategies is the next crucial line of effort. Regardless of the fundraising round, startups must be able to clearly describe how they will use the funds they raise as fuel for a fire that’s already burning. In particular, it’s important to articulate how funding will allow the startup to leverage influence to get early traction, as well as how it will ensure the startup will achieve two to three key performance indicators that increase valuation in order to raise even more money in the next round.
The fourth line of effort concerns a logistics and operations strategy. It all starts with the right legal structure and the right location. My company’s portfolio organizations are currently located in Silicon Valley, but because of the high costs of living and talent acquisition in the San Francisco Bay Area, we have started looking at other strong cities such as Chicago.
Startups can be located anywhere as long as they can attract and maintain both talent and capital. Both of these resources are becoming more and more distributed, and ultimately it is up to the startup to explain to investors what their hiring plan is and how they can continue to raise capital as needed.
The last line of effort is the most obvious. Startups must have a strong product that has been developed and coded by their own teams. I would not be in the venture business if I did not remind you that it must have a large potential market and be clearly differentiated from the competition. However, the mantra “start small, think big” is important and always seems to be forgotten. It’s OK to start with a minimum viable product as long as there is a clear roadmap to scalability.
The difficult part about planning and executing all of these lines of effort is that they must happen simultaneously. Prioritization is key, and leaders must be intentional and disciplined with how they spend their time in order to advance all lines of effort and achieve success. In my experience as a startup founder, mentor and advisor, I have found that it is only the companies that can manage and grow all five lines of effort at the same time that are ultimately successful. Those who master just a few might show early promise but ultimately fail to gain traction and end in failure.
No single person or founder is an expert in all of these lines of effort, which leads us back to David Cohen and his emphasis on teams. Startups that focus on and prioritize build strong, diverse teams with an emphasis on dominating all five lines of effort are, in my experience, the ones who ultimately become the Apples and Googles of the world.