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go to market strategy

  • Amanda Castellino posted an article
    Learn how applying the 80/20 rule can improve investment outcomes! see more

    Ever heard of the 80/20 rule in business?

    The 80/20 rule, also known as the Pareto principle, states that 80% of the results come from 20% of all causes (or inputs) to a given event. In business, one goal of the 80/20 rule is to identify and prioritize the inputs that are likely to be most productive. For example, once CEOs have identified the factors that are critical to their business success, they should focus their efforts primarily on those factors.

    Park City Angels member Ted McAleer joined our Keiretsu Forum Northwest & Rockies Roadshow to discuss go-to-market strategies for helping emerging startups avoid failure. He believes that the failure of the entrepreneur is the failure of the investor, a risk that can be avoided by simply developing a well-thought-out strategy, with metrics and performance indicators at all stages.

    Here are the 3 most common reasons for startup failures, according to CB Insights:

    Product Market Fit – 35%
    Ran out of Cash – 38%

    Wrong Team – 20%

    In addition to the first three reasons, we have an insightful blog from investor and entrepreneur Rob Neville where he dives into the many reasons why startups fail. Let's talk about reason number one.

     

    • Identifying a good Product Market Fit

     

    Product-market fit describes the degree to which a company's target customers buy, use, and tell others a reasonable amount of a company's product to sustain the growth and profitability of that product. So why is it so important to implement it? Why do so many angel investors need proof of product viability before investing in a company?

    This is because an entrepreneur & their team can't focus on other strategic goals such as increasing or upselling existing users until they develop a product that people are willing to pay for. In fact, these initiatives can be seen as counterproductive, if they haven't determined that there is enough market for their product to sustain themselves and make a profit, it can backfire. When you work with entrepreneurs, whether they're in early stage, seed, or late stage, you need to do an audit with them. Ask them the following questions about their product or service: Is this idea a good idea? Is the business model viable? And how can it be scaled? Here are some more questions and tests you can use to ensure that the company you are interested in has a good product-market fit.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    If they haven't done these three tests, you really don't know if the idea they're after is good. If the idea is good and they pass all three tests, then you move on to the business model viability. Entrepreneurs can often build products, but it's important to know if they understand the market and industry. It is also important to note that entrepreneurs often do not represent the entire competitive landscape. In fact, they should study it better and understand if the product or service is a niche product in a certain region, or if they really have the ability to scale it.

     

    How does a good go-to-market strategy impact product market fit?

     

    The challenge with go-to-market strategies is that the timing of entry depends on technology. The term "Minimum Viable Product" or MVP is a product with enough functionality to attract early customers and validate product ideas early in the product development cycle. In industries such as software, MVPs can help product teams gather user feedback as quickly as possible to iterate and improve products. So, you will see that the product has gone through different versions during the initial stages of its release, namely MVP v1, MVP v2, MVP v3, etc.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    If an entrepreneur continues to build a minimum viable product without customer feedback, it is likely that the product will never be successfully launched. The bare minimum for a truly viable product is to get people to interact as betas, then strategize how to convert those betas into paying customers, and then expand those paying customers to what Ted calls non-discounted, full paying customers. By systematically executing this process and regularly providing customer feedback to the development team and improving the product or service, a company can gain confidence in its product-market fit.

     

    • Managing the company’s cash flow

     

     

     

     

     

     

     

     

     

     

     

     

    Another big thing you need to consider as an investor is that startups may run out of cash. When a startup has gone through the co-founder, family, and friends’ stage and is now coming to an angel investor, it is necessary to determine your role in the company, especially if the product or service is technology-based.  It's also required to thoroughly research the company's financials to understand how much money is raised in each round and how the money is being spent. As you continue to work with entrepreneurs, make sure they understand what happens to the CAP table when the company structure changes.

     

    • Creating the perfect team structure
       

    Angel investors often feel that they do not want to be on the board of directors of the companies they invest in. This is because, you stand to undertake a lot of fiduciary responsibilities, and when you invest in many companies, having too many board memberships can take up a lot of your time! One thing all investors can agree on is that in a go-to-market strategy, having a solid advisory board is crucial. For example, if you are interested in a company, and you are in conversation with the co-founder that is raising a pre-seed round. It is important to know the background of the co-founders. Do they have expertise in customer development and product development? Because if they don't, they will fail. In recent years, there have been many entrepreneurs aged 21-30 without much leadership and management experience. This is where angel investors can join as advisory board members, developing policy recommendations and helping young entrepreneurs make the most impactful decisions.

    If you are planning to invest in a startup and want to evaluate their workflow, or are a board member of a startup and want to improve their current process, here is a quick guide to the steps each department needs to follow to ensure a smooth process within the organization:

     

     

     

     

     

     

     

     

     

     

     

     

    Sometimes you meet visionary entrepreneurs who are good at product or customer development but don't know how to build or lead a team. Building and leading teams effectively are what most seasoned investors have achieved in their day. Angel investors play an important role in a company's go-to-market strategy and overall company growth by counseling these young entrepreneurs. The advisory board or core team must have members with a thorough understanding of all of the company's business functions. Take note! Never add too many ‘leader of leaders’ to a company's advisory board. This means that almost every seasoned angel investor can be considered a leader of leaders, but when you put too many angels into a startup team, the hierarchy pyramid collapses. Organizational balance is key to its success, so how can this be achieved?

     

    Achieving organizational alignment in a startup

    This is another essential element of a go-to-market strategy. An entrepreneur and the core team must understand the importance of strategic planning. Here are a few KPIs suggested by Ted for each team, they can be further developed as the startup scales.

     

    • Mission: Define why the company exists
    • Vision: Aspirational outcome determines the description of long-term success
    • Strategic Objectives: If achieved, results will lead to the realization of the vision
    • KPIs: How to know if results are being delivered, it also forms the basis of the company and its partners' scorecards
    • Strategic Initiatives: Short-Term Attack Plans and 14/30/90-day plans to achieve quarterly goals
    • Structure: how the company uses its human resources and how we organize our partner resources
    • Budget: How a company uses its financial resources

     

    Here are also a few principles that startups can adopt:

     

     

     

     

     

     

     

     

     

     

     

    Going back to the Pareto Principle, Ted noted that creating organizational alignment and a metrics-based strategy provides the 80/20 focus to the business. It supports a company's decision-making process, facilitates the performance of all business functions, and most importantly, enables smooth communication between internal and external stakeholders. As you go through multiple funding rounds, you may find that the company's metrics improve quarter-to-quarter. It's important for every part of the business to have at least one metric. To define metrics, make sure they are smart, specific, measurable, and achievable. Don't get overwhelmed in the process, take it step by step, making sure the entrepreneur and their team are in sync, it's a surefire way to achieve common goals and be successful.

     

    About the Speaker

    Ted McAleer has been working with Utah’s Startup community since 1999. He is currently the VP of Operations at Rebel Medicine and prior to this Ted was VP of business Development at Braveheart Wireless, an IoHT Medical Device startup. From 2015 to 2018, Ted was the first Managing Director of PandoLabs, a business incubator and accelerator based in Park City, Utah where he worked with over 100 Entrepreneurs and their companies and developed a methodology for scaling companies from 2 to 20 employees that he captured in PandoLabs Institute. From 2006 to 2014, Ted was the 1 st Executive Director of USTAR (Utah Science Technology and Research Initiative), the State of Utah’s signature technology - based economic development initiative. Prior to USTAR, McAleer spent 5 years in a variety of leadership roles with Campus Pipeline, a Utah - based venture - backed EdTech startup that raised $80+ million during the “dot com” era. Click here to watch his keynote.

      

  • Amanda Castellino posted an article
    Understand the go-to-market strategy and product-market fit before investing. see more

    What are the biggest challenges facing start-ups? In our blog "The Top Reasons Why Start-ups Fail," we discussed some of the main reasons start-ups fail. A common theme that caught our attention and was one of the main reasons for failure was the lack of a proper go-to-market (GTM) strategy and product-market fit.

    Go-to-Market Strategy & Product-Market Fit are the two core components that investors should consider in order to reduce investment risk:

    When framing a go-to-market strategy, it is important to assess whether a company is focusing on the right target group and entering the market at the right time and whether the market is saturated. The last thing you want to do is invest in a company launching an unprofitable product. Similarly, product-market fit describes how well a company's target customers buy, use, and tell others about a company's product in sufficient quantities to sustain the growth and profitability of that product. Achieving product-market fit is the key to a successful business. This means that there is a market demand for the product and people are willing to pay for it. Eric Vest delivered his keynote address at the May 2022 Keiretsu Forum Northwest & Rockies Roadshow, discussing the go-to-market strategy and scope of emerging start-ups. With over 25 years of entrepreneurial experience, the core theme of his presentation is understanding how to reduce risk in a portfolio through go-to-market strategies and product matching from an investor's perspective.

     

    Go-to-Market Strategy

    Simply put, a go-to-market (GTM) strategy is a step-by-step process of introducing new products and/or expanding existing products into new markets. Any good strategy should be able to answer the following questions: What are you selling? Who are you selling it to? What problem does it solve? How and where will you sell it? In which markets will you sell it? What are the needs? Who are your competitors? How did you get interested?

    Bringing a product to market can be challenging, no matter how advanced the technology or how good the team is, developing a strategy that considers every possibility is the only way to ensure that you avoid mistakes and create a strong path to success for your company and investors.

     

    Go-to-Market Strategy Framework
    An efficient go-to-market strategy should include the following:

     

     

    Defining the Ideal Customer Profile (ICP)

    As an entrepreneur, the first and most important step is to figure out your overall target market. You need to define who your target market is, what problem you are trying to solve and create the ideal customer profile (ICP). It is important to create a more specific target audience who will gain value from your product and will eventually become the driving force for company sales.

     

    Research competitors

    Once you have an idea of ​​your target market, you need to dig deeper into your new market strategy and look at the competition and underserved parts of the market. When you do, you'll also begin to understand whom you can actually compete with and how to effectively differentiate yourself from them.

     

    Develop your messaging

    A good messaging strategy includes many key points that provide information about your business and the value you add to your customers' lives. Once you've identified your market, created the ideal customer profile, and researched your competitors, you need to develop a messaging strategy for your business. Your strategy should include your positioning, value proposition, and mainly should align with the company values and the strategic narrative you have decided upon. The company messaging while strongly related to your brand and product should be distinctive enough to be differentiated from your competitors.


    Setting your targets

    All good GTM strategies have clear models. You can build these models within the capacity/budget you have.

     

    Choosing your tactics

    To implement ICP, you need to use multiple strategies at the same time. This includes data, marketing strategy, content planning, and partnerships. These 4 components must be further developed according to your strategy.

     

    Providing feedback

    Establish feedback processes across all marketing, sales, product development, and other core departments to ensure key learning outcomes are implemented into the GTM strategy. To create this cycle, you need to hold individuals in your organization accountable for different parts of the strategy. If these people report their progress in regular meetings, you can overcome stumbling blocks together.

    Eric now says he sees start-ups from an investor's perspective, and he sees them very differently. He believes that good strategies come from experience. All components of an entrepreneurial strategy are mostly based on theory, and only an investor with experience in the field can judge whether the strategy is good or bad. Simply put, a GTM strategy is a roadmap that measures the viability of a solution's success and predicts its performance based on market research, past examples, and competitive data. Finally, he points out that good product-market fit plays an even more important role if investors want to reduce the risk of investment failure.

     

    Product-Market Fit
     

    Eric explained that in his experience, it all boils down to the product being a good fit for the market. Whether it's a group of founders or young entrepreneurs, as an investor, you need to take a close look at their deck and examine many different areas to see if it makes sense. They need to assess whether the business model is good, whether the market is large enough, and whether they have a competitive advantage.

     

    What is it?

    Product-market fit happens when you successfully identify your target customers and offer them the right product. After the product-market fit is achieved, the next step is to scale by researching to find more customers in the target market. Establishing product-market fit is a critical task for a new start-up.

     

    So where does this concept lie?

    Entrepreneur and investor Marc Andreesen, who is often credited as the developer of the concept, believes that product-market fit means finding a good market for a product that can satisfy that market. See the pyramid below to see how product-market fit connects the two sides of a company.

     

     

     

     

     

     

     

     

     

     

     

    How can an entrepreneur achieve a good product-market fit?

     

    • Make sure the strategy is well thought out

    A key element of a go-to-market strategy is that it must make sense as a whole. Eric explained that the distribution model plays an important role in the overall strategy, but it is a component that investors often overlook. Especially when it comes to selling, it is important to keep friction as low as possible

     

    • Learn how to achieve product-market fit

    Learn how a team or individual entrepreneur will achieve product-market fit. It doesn't guarantee overall success, but the right product-market fit can help reduce the risk for emerging businesses.

     

    • Teams that focus on product-market fit are more likely to succeed

    Achieving product-market fit and winning customers should be the goal of everyone in the company. Everyone from the CEO to the team that interacts with customers should work together to find the right product for the market, as this ensures a great chance of success.

     

    ABOUT THE SPEAKER

     

     

     

     

     

     

     

     

    Eric Vest is a strategic and M&A advisor, specializing in laboratory informatics and all technologies related to biotech, pharmaceuticals, clinical trials, public health, and healthcare. He has a unique skill set that combines deep domain expertise with:

    1) 25+ years as an entrepreneur, operator, and board member with three verifiable exits.
    2) Rich experience working with private equity and venture capital (buy-side and sell-side).
    3) Many years of fundraising at seed, early-stage, and growth-stage levels

    He works as an advisor or board member, mainly assisting private equity firms, their portfolio companies, and other growth-stage organizations who are trying to plan for an exit, raise capital, or make acquisitions. Click here to watch his keynote address.  

  • Amanda Castellino posted an article
    How entrepreneurs can better structure their go-to-market strategies to attract investors. see more

    What makes an investor decide to write a check? An impressive pitch deck? The company's go-to-market strategy? Market valuation? Is it the strength of the team or the passion of the CEO?

    Investors typically evaluate hundreds of areas when planning to invest in a company. As an entrepreneur seeking funding, consider what needs to be done to attract them. What factors will make them invest in your business?

    Roger Shanafelt has been on both the entrepreneurial and investor side of things. He joined our Keiretsu Forum Northwest and Rockies Forums in May and shared his views on a company's go-to-market strategy and scale. His approach is to focus on the customer and have a customer-centric mindset. He states that if you meet them where they are, and draw them into your product or solution, you are more likely to get them to engage with your offering.

    Investors evaluate thousands of pitch decks over their lifetimes. If you want to secure funding, here’s what you need to spend a considerable amount of time perfecting:

     

    A Go-to-Market Strategy for your product and/or service

    Roger defines it as a tactical action plan that outlines the steps needed to succeed in a new market or with a new customer. Its purpose is:

    • To help you articulate why you're bringing your product to market, who it's for, and how you're going to tackle the task of getting customers to engage and make a purchase.
    • It forces you to think about all the problems your customers will face when presented with your product.
    • It acts as a tool for coaching teams that is comprehensive enough to add value, yet flexible enough to be updated as feedback is received.

    The main purpose of a GTM strategy is to help you (the entrepreneur) develop the reason why you launched your product in the first place! It helps you define whom it's for and keeps users engaged. It also forces you to think deeply about the issues your customers face when presented with your product. In turn, it helps to guide your team to successfully market and sell. Accepting feedback from users and your team is critical, as the feedback received will only help you refine your strategy. At this stage of your entrepreneurial journey, be sure to set expectations, meet them, and even exceed them.

     

    So, what should be the core components of an entrepreneur’s pitch deck?
     

    A well-explained product-market fit

    It is very important to customize a product or service according to the needs of the customer. Your product should solve the problem they face. Start by digging deep into the "why" this product was developed, what are the real problems and what are the real benefits? How can you verify that the users want it?

    Roger shared an example of his learnings with the company, DocuSign, where he recalled that they needed to connect the company to something bigger than just dealing with paper. The strategic solution they were looking to advance was the electronic signature market. They figured to solve this issue; they would need to strategize the use case first. So, they initially focused on getting into financial services, specifically the process of issuing home origination loans for refinancing or mortgages.

    This is an example of industry-specific product-market fit. It is important to understand the use case and be able to translate it into a value proposition. Roger recalls a colleague saying that when you talk about your technology, if the first thing you talk about how different and unique it is, you miss the opportunity to adjust its positioning in the market, especially with the competition. Investors often look to see if entrepreneurs fully understand their position in the market, who they are and how they are different from everyone else.

     

    Key questions for entrepreneurs:

    • What problems does the product solve for people?
    • How do you validate requirements?
    • How do you know that your users want and need it?
    • Have you tested and validated the idea with real people?
    • Is there a clearly articulated value proposition(s)?
    • Where does the product fit in the market?
    • How is the product priced?
    • What is the long-term thinking about strategic objectives?

     

    A comprehensive target audience

    It’s important to pay attention to what issues your problem will solve. As an entrepreneur, it is imperative that you have the ideal customer profile well thought out. You should have a solid understanding of attributes such as demographics, geography, industry, income, and number of employees. And if your product is a technology, do you understand the right tech stack to go after? Because you design the sales experience in the customer-buyer journey, you want to let everyone on the buyer journey understand your product and how the solution can make your customer's life easier. Investors commonly look for the maturity of that understanding in the entrepreneur when assessing their knowledge of who the target market is.

     

    Key questions to consider:

    • Who is experiencing the problem that the product solves?
    • How much are users willing to pay for the solution?
    • What pain points and frustrations does it alleviate?
    • What is the ideal customer profile?
    • Who are the buyer personas?
    • Who is involved in the buyer's journey?

     

    A plan to beat the competition and generate demand

     

     

     

     

     

     

     

     

     

     

     

     

     

    Roger said that when he looks at the buyer’s journey, he usually sees in the deal flow that most early-stage companies divide the buyer’s journey into three categories: top of the funnel, middle of the funnel, and bottom of the funnel. He doesn’t see this approach as a very sophisticated model and prefers to see entrepreneurs think more about the “flywheel buyer journey” of marketing-sales partnerships. This approach helps customers at different stages, some in the beginning and some deep in the buying process. The flywheel buyer journey focuses on meeting users where they are, whether they are strangers, potential customers, or existing customers (hopefully promoters).

     

    Effective distribution model

    Roger explains that marketing and sales dynamics are the most important factors in understanding how you will enter the market early. When he wanted DocuSign to be a verb like Xerox was to copy, he set an example and wanted people to say DocuSign to e-signature and knew it would take a long time to develop it, so they focused on direct selling, going-to-market strategy, and promoting DocuSign's usage strategy for the benefits of electronic filing.

    As an entrepreneur, you need to understand how it fits into your strategy and connect it to how you build sales and demand. He also places a strong emphasis on-demand generation. That means getting the attention of people in need, whether they're a potential client, to help them find our product or solution so we engage with them where they are.

    Investors also should have a thorough understanding of the demand generation of the company. Where does it come from? And what are the channels? Does the entrepreneur understand the cost per lead and customer acquisition cost? Do you understand conversion rates? Is the process repeatable and scalable?

     

    Key pointers to consider:

    • Marketing vs Sales Dynamic
    • Demand Generation
    • Sales

     

    On the sales side of the equation, we're looking at what is the selling/staffing model. Is it self-serve, inside, field, channel, or a combination of all? This is where the buyer journey comes in, how many people, and whom do you need to talk to in your ideal customer profile to ensure that they will go through that buying journey. In a way that is ever increasingly enjoyable and the delivering trust as they go through the sales cycle. Are there any friction points, and if there are what are they doing to deal with them? Conducting pilot programs will also help you get access to data and that can affect and help improve your process. It is always good to have a good handle on your sale cycle and constantly review the numbers to ensure that they are improving over time. That will ensure the success of your company in the long run.

     

    About the Speaker:

    Roger Shanafelt has over 25 years of building high-performing sales teams with a broad range of marketing, business development, and engineering experience in a variety of leadership positions at software/SaaS organizations such as Home Network, Exodus, Loudcloud, Myrio, DocuSign, and Fullcast. His go-to-market approach applies his ability to rapidly identify patterns in the sales cycle of successful customer acquisitions, defining success metrics, instrumenting technology platforms to report on said metrics, then collaborating with cross-functional teams to build and continuously refine a repeatable and scalable sales process from lead to renewal. Click here to watch his keynote address.