This year has been off to a big start with some major changes happening in the market. And so it happens, startups are sitting in the splash zone. I had the opportunity to discuss with George Arabian, Managing Partner from [Steelhead Ventures](www.steelheadvc.com/) about the new state of the market and what that means for startups that need to think about revenue. Steelhead is an early stage MicroVC fund that invests at the seed stage often when initial product market fit is reached and revenues are either just beginning or are in the early stage of scaling. With a founder centric lens, they like to look below the surface of what makes that founder tick and if that founder has a vision to get to market.
With his background in scaling companies (3 IPOs, 2 exits), George Arabian joins founders at their earliest stages, before many have yet to go through the difficult process of scaling. From the early days of Wi-Fi to Web 1.0 and mobile , he has been instrumental in working with founders to scale both domestically and Internationally..
George and I discussed what the changes in the market in 2016 would mean for early stage companies. Despite some public market corrections, funds are still flush with cash. The end result is that there is a clear trend that the (investment) world is getting more results oriented.
George wants to see companies really assess their priorities and implement intentional processes for success. “What early stage companies need to understand the most right now is the type of discipline that goes into growth and revenue. It’s not that many of the companies don’t want to focus on this, but the truth is that there are tremendously rigorous processes that goes into making this [discipline in growth] happen. Previously, there was this expectation that money will be there as long as you get the product right. Over the last two years in particular, we have not seen this amount of capital inflow in a long time at the early stage. Given the flow of capital that many start-ups have been able to have access to [in the past year], assuming start-ups will continue to get access to capital is incorrect.”
George further describes: “It’s a slow evolution, but we need to be focusing on processes for sustained revenue growth and customer acquisition. One principle [Steelhead] champions is to be intentional about what to do and what not to do. And often times, the critical decision is what NOT to do at the early stage.”
#Well, what does good discipline in growth look like?
##1. Data Driven Understanding
In order to reach a state of sustain revenue, it is imperative to focus on rapidly testing and LEARNINGS from multiple digital channels in order to collect data that drive insights into your what is converting your customers from prospects to buyers. The key is to establish infrastructure that allows you to rapid test channels, messaging, content/landing pages, direct sales outreach etc. as well as paid media like Facebook, Twitter, email drip campaigns, so that you learn by DOING, not what your think you know so you can discover what is working that you might not have known or assumed previously.
##2. Death to Traditional Silos
George brings up the critical point that companies need to move away from traditional silos of revenue: sales and marketing, social media vs. paid media etc. There needs to be a heavy emphasis on reducing silos and putting together a high-level execution strategy around a solid understanding of revenue. And this means using data and non-traditional organizational structure to get a detailed understanding of a “Day in the Life” of your buyer/customer. Specifically, two frameworks:
* A. **The Customer Buying Process** – what are the specific steps in your customer buying process – what does that cycle look like?
* B. **Your Buyer Profile or Persona** – Understand a day in the life of your targeted buyer(s), What do they do from the moment that get up to the moment they go to sleep – what are the pains, concerns, joys, where do they get their information etc.
Today, things have changed so quickly- with the advancement of marketing automation and data analytics, the capabilities to rapidly track campaigns results in real time offers unprecedented ability to rapidly learn and ADJUST your revenue efforts and channels. These tools when combined with a revenue strategy that is not tied to one silo (sales, social etc.) has a resounding effect for effective revenue growth and channel building.
George hammers the point home that founders MUST be intentional when rolling out their revenue plan. Once signals for product market fit are clear, a well thought out revenue plan is a critical function of growth. You must be clear on what customers you will take, but more importantly, what customers you WON’T.
The advice George gives to founders considering their first customers is to build a rigorous early adopter profile. Likely, there will need to be strong buying signals and a willingness to take a risk. Evaluating customers against this profile should be baked into one’s sales and marketing efforts. Often times, these customers will self-select themselves with indications of real interest and engagement during a buyer curation process.
Everyone talks about churn as the primary metric of customer engagement, as well as monthly retention and consistent growth, which matter now more then ever. This is important once you have an established base of customers and are scaling but George further specifies that in the beginning of the customer acquisition process, it it’s the alignment of a well thought out revenue EXECUTION strategy that is based in a firm understanding of the decision makers you are targeting. This is a key driver of growth in the early stage. Some key questions: a) are your targeted customers responding to your messaging b) are they moving forward in the buying process etc. So being able to tell this story a much more holistic story, around the customer buying process is important to investors. Expectations are quickly rising, that you have a good handle on this as you go for your next round – late series seed/A round.
George cites **NeoReach** (a Steelhead Ventures and FOUNDER.org portfolio company) as an example of a company that has been intentional about building and continuing to build great processes. [NeoReach](www.neoreach.com) is an influencer marketing company that provides technology for Fortune 1000 brands to run influencer campaigns. George describes, “With [NeoReach’s] focus on satisfying larger brands, rather than a lot of smaller companies, they have been intentional about where they want to go. They have a lot of leads coming in every day, but they have been very intentional in choosing what not to do. They have stayed focus on revenue by catering to larger brands and they have done a great job of determining this and staying with this strategy as they began to scale.”
It’s hard to predict the flow of capital and the mood has shifted to real metrics around growth, whether that is revenue or user growth. What will make the difference is the intentionality from the team in driving that growth home.
Now more then ever, founders should be intentional. Know what customers you will not take. Keep a close eye on month over month revenue growth. Break down silos and work on something you love.
**Learn more about [Steelhead Ventures](http://www.steelheadvc.com).**
**Learn more about [FOUNDER.org](http://www.founder.org).**