Finding a first customer to buy your product and building a sales team to sell it to everyone else thereafter were the topics put to a panel of entrepreneurs at the 2004 Entrepreneurship Conference.
Finding that first customer is "the relentless pursuit of credibility," said Steve Papa, CEO and co-founder of Endeca, which sells enterprise search software.
It took six weeks for Papa to sign up a first customer, but it was a whopper: Fidelity Investments. Noting that it can be difficult for a start-up to land such a big name account, Papa said it helped to have "very credible people" on his team who were familiar with the environment that companies such as Fidelity compete in.
The downside of that deal, Papa continued, was that Fidelity wanted to keep the agreement secret for competitive reasons, so Endeca couldn't effectively leverage it as a reference account. The second customer took much longer—one year, Papa said.
Jeremy Allaire, whose Allaire Corp. built server software and development tools, said the nature of the Internet helped him make his initial sales in 1995. Customers could download his first $500 product and try it out before buying. Even with no outside capital, the company broke even the first year. Allaire is currently technologist-in-residence for VC firm General Catalyst Partners.
Avner Schneur, CEO of Emptoris, a maker of sourcing and procurement software, faced a daunting task for any new business: selling to the enterprise in what is typically a long sales cycle. The dilemma, he said, was, do you give away the product to the customer in exchange for a reference? In the end, he said, a good strategy is to offer the initial customer a lower price, with the agreement that the customer can be used for marketing purposes.
Making the sale
Noting that first sales often require the direct involvement of the start-up's CEO, moderator Peter Bell, founder and managing director of Stowe Capital, and a co-founder of Storage Networks, asked panelists how much time they spend in sales today now that their companies are older.
Papa said his emphasis has shifted from generating sales to building a company. But Maurizio Arienzo, CEO, SmaL Camera Technologies, said he is constantly trying to develop sales in new markets, even though the company now has a sales staff of a dozen people. SmaL sells components for creating small cameras such as those that appear in cell phones. A new market he is pursuing is the automobile business, which is expected to incorporate cameras into vehicles at a rapid pace over the next ten years.
Bell asked the executives how they paid their start-up sales staffs, given that it takes a while for sales to ramp up and cash to flow in. And how do they mitigate against a bad hire, whose lack of productivity might not become evident for months?
Papa said that early on sales people were recruited with a longer draw—six months instead of the more traditional three, to give them income. But after about nine months, Endeca execs were able to spot "patterns of success" among the better sales people, and use that as a model for who to fire and who to recruit. The problem: sales dropped during that time of staff turnover.
Your first sales team is crucial for obtaining feedback from potential customers, information that can be used to improve the product, Allaire said.
Another key is to make sure that the right people are being incentivized to sell your product, Schneur added. Emptoris products are resold by IBM sales staff, but those people also sell a variety of other products during a call. Schneur said he would like to work out a way he could reward the IBM rep directly for sales of Emptoris products, but IBM has resisted the idea.
What could panel members tell the largely student audience about landing a job in sales? Arienzo said the biggest key is to understand the business model of the potential employer, and to also ask yourself: Is there a market for this product? Are they good products? What is the quality of the executive team?
Finally, he said, "put compensation last" on your list of priorities. Take a job where you will learn the ropes from people who are good teachers.
Papa said that one thing business schools don't teach well is how to sell. To get that experience, Papa encouraged students to take jobs with large companies such as IBM that invest heavily in training and mentoring young sales people. Or, you can take Arienzo's suggestion and offer your services for very little base salary, and then learn on the job.
Another advantage of going to a large company at the start of your career, added Allaire, is that you will likely be exposed to more selling models than you would experience at a smaller concern. This is especially true in software, where new pricing and licensing schemes are seemingly being born every day. If you can bring creative thinking about this aspect of the business to your next employer, you will have value, he said. 