Transcript Customer Development & Acquisition

Bryan Jurewicz
Entrepreneur/Executive/Advisor
Accelerating Growth, Funding & Exits
Bryan Jurewicz
@BryanJurewicz
Experience
 CEO - GradeBeam.com Construction Communication Network
 Database/Qualifications/Documents/Messaging/Bidding
 500,000+ Construction Firms & Millions of Monthly Transactions
 GradeBeam.com Acquired By Textura 2011 & IPO 2013 (NYSE:TXTR)
 Partner - LeanTech Group
 Maximizing Valuations, Funding, Mergers & Acquisitions
 CEO - ROI Magnet
 Strategic Growth Consulting & Outsourced Executive Leadership
 Mentor - 1871
 CEO Mentor – Junto Institute For Entrepreneurial Leadership
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Badger Pride
 Graduated UW ‘97
 Studied Engineering & Business
 4 Year Football Starter
 Academic All American
 Helped Barry Alvarez Build Success
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Rose Bowl ‘94
Hall of Fame Bowl ‘95
Copper Bowl ‘97
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Lean Startup Revolution
 Business Plans Are Dead (Use Business Model Canvas)
 Steps Before Building Product, Team & Expenses:
1.
Be Laser Focused On Problem & Solution!
2.
Who Is Customer?
3.
Narrow Value Proposition (Don’t Be Everything For Everyone)
4.
Create Future Valuation Hypothesis & Work Backward
(Target Market x Small % x $Revenue x Valuation Multiple)
5.
Build Business Model Canvas
6.
Build Financial Projections
7.
Estimate Funding Needed
8.
Determine Future Ownership %, Potential Valuation & Exit
Opportunities
9.
Begin Customer Development
10. Iterate/Test/Iterate/Test
11.
Pivot?
12. Begin Building Business
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Steve Blank’s Customer Development
Alexander Osterwalder's Canvas
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Physical vs Digital Businesses
 From Ted Feierstein’s Entrepreneuron presentation:
 National Science Foundation exploring lean startup.
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60% success vs 18% in raising equity funding
 Use Customer Development:
 Talk to potential customers & test hypothesis.
 Regardless of your business product/service.
 Before spending time/money building the business.
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Ideal Business Model
 *Legitimate Problem/Pain
 SPIN Selling (Situation = Pain = Implications = Needs)
 Large Target Market
 Disruptive Solution
 *Must Have Value Proposition
 *Attractive Customer ROI (5X+ Benefit Ideal)
 *Scalable & Capital Efficient Strategy
 *Measurable Real Time Success Metrics
 *Proven Success & Limited Execution Risk
 Maximized Pre-Investor Valuation
 Excellent Risk-Adjusted Investor Return Potential
*Customer Development & Acquisition Requirements
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Know Your Revenue Model!
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Products
Subscription
Freemium
Lead Generation
Commerce
Social Network
Marketplace
Payments
Gaming
New Media
Search
Audio/Video
Rental
Royalties
Bryan Jurewicz
How does your
company provide
value & earn
revenue?
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Customer Development/Acquisition & Business Models From Disruptive Companies
• Free Individual professional
Toe-Hold
With Initial
Killer-App
bios/personal web site;
• Professional network
connections.
• 100 million+ members in 200
countries adding 1 million new
members per week.
Scale
• Premium subscriptions- 3 levels.
Monetize
•
•
MultiDimensional
Biz Models
(27%)
Hiring Solutions: Sell analytics to
F2000 HR depts. (41%)
Marketing Solutions –Targeted Ads
(32%)
• B2C; B2C2B (online);
• B2B (offline)
• Ad Model
• Easy-to-use low cost project
management and
collaboration tool
(Basecamp); pay-as-you-go,
unlimited use.
• 5 million people collaborating
on 4 million projects.
• Built trusted brand
(product/company)
• Release more products (4)
• Free cloud-based data storage
service.
• 25 million individual users
across the globe in LT 4 years.
• Free (2GB);
• Paid monthly subscriptions for
50GB; 100GB, 350+ GB
cross/upsell
• B2C
• B2B
• B2B2C
• B2C
• B2C2B
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GradeBeam.com Case Study
 $Millions Invested & Built Platform
 2001 Launched @ $100/Year Subscription & .Com Crash
 3 Month Direct Mail Campaign = 500 Customers
 2002 Raised Price = $250/Year (+Revenue & 90% Renewal)
 Print & Email Marketing, Direct Sales & Events
 2003 Raised Price = $350/Year (+Revenue & 70% Renewal)
 Email Marketing, Direct Sales & Events
 2004 Multi-Tiered Pricing (+Revenue & 80% Renewal)
 Email & Telemarketing, Direct Sales & Events
 2005 Raised Top Tier Pricing (+Revenue & 85% Renewal)
 Email & Telemarketing & Direct Sales
 Investor Funding Ceased & Forced To Cut Staff/Bootstrap/Self Fund
 2006 Held Pricing (+Revenue & 90% Renewal)
 Email, Telemarketing & Independent Contractor Sales
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What Was Missing/Learned?
 Customer Development
 Proven Business Model
 Customer Acquisition Channels
 Customer Acquisition Metrics
 Customer Acquisition Costs
 Successful Financial Model
 Pricing
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GradeBeam.com Success
 2007 Sales Model Proven
 Cash Flow Breakeven
 2008 Fundraising & Sales
 Secured Hyde Park Angels Investment
 Real estate collapse forces contractors to do more with less.
 2009 Funded Sales Model (2X Revenue)
 Added 5 Sales Reps & Metrics
 2010 Rebranded & Strategic Partners (2X Revenue)
 Social Media, SEO & PPC
 Reseller Agreements (Associations & Complementary Services)
 2011 Acquired By Textura (5X Gross Revenue Multiple)
 Proposed Textura Strategic Partnership
 Textura Proposed Acquisition
 Negotiated sale, successful exit & ROI for all investors.
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Steve Blank’s Customer Development
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Customer Discovery
 Founders Get Out Of The Office
 Interview Prospective Customers
 Listen to customer pain.
 Know/learn the competition.
 Present your understanding of problem & solution.
 Do not waste money building products. Use PowerPoint!
 Ask how much your solution would help:
 Time/Efficiency/Sales/Costs/Profit/ROI?
 What do they spend now to solve this problem?
 Do they have budget for this?
 Are they willing to pay what your price or more?
 More Interviews!
 Leverage learnings, iterate/pivot & repeat until proven!
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Customer Discovery
 Problem/Solution Interview Example
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Municipalities
Owners
Architects
Engineers
Associations
Construction Communication Fragmentation
Documents
Documents
Documents
Documents
Documents
GC
GC
GC
GC
GC
Subs
Subs
Subs
Subs
Subs
Subs
Subs
Subs
Universal Construction Communication Network
Owners
Municipalities
Maintai
n
Archive
GC
Design
Close
Out
Export
Engineers
Architects
Notifications
Security
Import
Accountin
g
Database
Database
Project
Qualifications
Qualifications
Viewers
GC
Translators
API’s
Integrations
GC
Management
Email
XML
Fax
Contracts
GC
Messages
Messages
Bids
Estimates
Documents
Documents
Subs
Subs
Subs
Subs
Subs
Subs
Subs
Subs
Customer Validation (Acquisition)
 Prove you can acquire customers without staff/operations.
 Do not prematurely scale!
 Founders focused on getting 1st sales!
 Use scientific method to test customer acquisition channels.
 This is growth hacking. Not a launch!
 Small scale testing/iterating until proven.
 Do not get a fancy office or a big salary!
 No overly expensive marketing!
 Sell interviewed prospective customers first.
 Build repeatable marketing & sales process/metrics.
 Determine ultimate financial & business model.
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MVP (Minimal Viable Product)
 What’s the minimal solution needed to get customers?
 Stay focused on initial value proposition!
 Eliminate everything not critical to early sales!
 Minimize costs & time to market!
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Marketing & Sales Channels
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Search Engine Optimization (SEO)
Pay Per Click (PPC)
Social Media
Email Marketing
Press Releases/PR
Telemarketing
Strategic Partners
Direct Mail
Enterprise Sales
Conferences & Events
Banner Advertising
Print Ads
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GradeBeam.com
Channels & Customers
Building
Success
One
Common
Platform
Tens
Sales
Reps &
Channels
Sales
Reps
Website
GB
Partners
Architects
Owners
Hundreds
GC Clients
Direct
GC Sales
SEO
PPC
Hundreds of
Thousands Thousands
Sub Clients Companies
Accessing
GradeBeam.com
Subs
Invited
Project
Access
Direct
Sub
Sales
GC
Partner
Clients
Sub
Partner
Clients
GCs
Invited
Subs
Invited
Planroom
Access
Millions
Transactions,
Insights, Analytics
& Client Scalability
Geography:
•North America->Global
Construction Phases:
•Bid->Construction->Close->Manage
Project Data:
•Qualifications, Financials & Ratings
•Contractor Searches & Views
•Contractor Relationships & Regions
•Contractor Recommendations
•Contacts & Messages
•Document Activity
•Bidders, Quotes & Awards
•Contractor CRM/Revenue Forecasts
Industry:
•Economic Activity
•Regional Markets
•Trade Segments, Costs & Pricing
•Crowd Sourcing
•Targeted Marketing
•Group Discounts
Channel Strategy Metrics Example
Conversion to
Campaigns
Impressions
Interest
Member
Subscriber
$'s Invested
Cost/
Member
Cost/
Subscriber
User Contests
23,400,000
819,000
286,650
8,596
$100,000
$0.35
$11.63
Pro Sponsorships
13,477,000
235,844
82,544
2,478
$60,000
$0.73
$24.21
Strategic Partner
256,000,000
704,000
176,000
1,760
$10,000
$0.06
$5.68
3,850,000
59,167
19,719
592
$60,000
$3.04
$101.35
384,616
192,311
5,770
$250,000
$1.30
$43.33
Inbound Marketing - Social
1,158,290
115,829
3,473
$22,000
$0.19
$6.33
Inbound Marketing - Content
1,191,663
297,913
8,932
$22,000
$0.07
$2.46
275,000
41,250
825
$31,084
$0.75
$37.68
18,347
735
$22,000
$1.07
$29.33
1,230,563
33,161
$577,084
Content Providers
Digital Advertising - PPC
E-mail
100,000,000
Inbound Marketing - Referral
396,727,000
4,827,580
Metrics & Terms
 Customer Acquisition Costs (CAC):
 Incremental costs to sell customers.
 Typically marketing, sales & associated expenses.
 Costs Of Goods Sold (COGS):
 Costs to serve customers without marketing/sales/R&D.
 Gross Profit: Gross Revenue – COGS
 Gross Margin %: Gross Profit/Gross Revenue
 Non-Recurring Revenue (NRR): One-time fees that are not paid upon renewal.
 Monthly Recurring Revenue (MRR): Monthly continuing revenue owed by customers.
 Annual Recurring Revenue (ARR): Annual continuing revenue owed by customers.
 Annual Revenue Run Rate: Current Month’s MRR x 12
 CAC Payback Period: Months to recover CAC = CAC/(MRR x Gross Margin%)
 <6 Months Great! 6-18 Typical. 18-36 Needs High Upsells & Retention. >36 Bad!
 Churn: Annual % Lost ARR or Cancelled Customers <10% Good
 CLTV: Customer LifeTime Value
 Simple Calculation = ARR/Churn
 Detailed Calculation = Net Present Value of Recurring Profit Streams – CAC
 Burn Rate: Monthly Cash Flow Loss
 Runway: Months company survives @ current burn rate without funding.
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Metrics Example
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Marketing Resources
 Internal vs External?
 Are sales 100% dependent on marketing?
 Anyone on your team marketed in your channels before?
 Hiring proven internal resources is hard.
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Can you find them?
Do you know a good one when you see it?
Do they know digital marketing & your industry?
Can they talk about proven methods, metrics & achievements?
Can they hit the ground running?
 Digital: SEO, PPC & Social Media = Analytical Science
 Consultants can validate digital strategy before hiring.
 Digital marketing requires weekly if not daily attention.
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Google Analytics
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GradeBeam.com Activity 11/15/10
GradeBeam.com Activity 11/15/10
Organic Search Engine Optimization (SEO) Stats
Monthly Search Average 14,992 visitors
April Searches 18,309 visitors
YTD Cost Per Click Average $0.07
April Cost Per Click $0.05
Google Adwords
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Pay Per Click Advertising Stats
Other Digital Marketing Tools
 Compete.com
 Alexa.com
 Moz.com
 Hubspot.com
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Competition
Hire Sales Team?
 Where do you get leads & do you have enough?
 Do your customers need to be touched to get a sale?
 Can you sell customers yourself?
 Do you have a proven ramp up sales process?
(scripts, metrics & marketing collateral)
 Sales Director?
 Should create/improve sales process/success without reps.
 This hire can make or break a company!
 Interview Tips:
 Role play & 1st interview telesales over the phone.
 Don’t let a candidate sales rep sell you!
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Sales Metrics?
 Compensation:
 50% Base + 50% Commission (3 Month Probation Period)
 Base: $50K - $100K Annually
 Quota: $700K - $1.2M Annually
 Telemarketing = minimum 40 prospect touches per day.
 Hire 2 sales reps at a time for camaraderie & competition.
 Do not hire >2 reps till ARR > $1M (learning curve) & CAC < 50%
(efficiency).
 Sales Rep Profile:
 Self motivated hunter with minimum 3 years experience.
 Willing to cold call & accepts rejection.
 Knows when to move on to next prospect.
 Avoids Seemores, navigates to decision maker & qualifies prospects.
 Good sales reps have jobs & manage their own desks!
 Preferably in your industry with similar sales process & existing contacts.
Bryan
 Inside is very different than outside sales!
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Strategic Partners
 Larger Companies With Market Penetration
 Complementary Services
 Future Acquirers
 Resellers
 Distributors
 Associations
 White Label
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Customer Creation
 Launch!
 Early adopters are easy customers.
 Can you cross the chasm?
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Execution Requirements
 Financial Model, Cash Flow Projection, GAAP P&L
 Monitoring Metrics vs Forecast
 Accounting Resources, Tools, Controls & Reporting
 Executive Dashboard/KPIs
 Google Analytics
 Goals & Business Processes
 Organizational Chart, Roles &Responsibilities
 Employee Knowledge of Strategy & Success
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Company Building
 You can’t do everything yourself!
 What kind of leader are you?
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(Example/Director/Motivator)
Know what type of culture you want to create.
Hire Slow & Fire Fast!
Marriage: building a company is like raising a child.
Get right people on the bus vs cut throat
moneymakers.
Try to surround yourself with people smarter than you.
Build mentor training processes.
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Raise Funding?
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Know what drives revenue!
Financial model calculated with revenue drivers.
Valuation Now & Future
What happens to your cap table?
 Don’t give away more than 30% per round.
 Potential Exit Opportunities?
 Fundraising Takes Time!
 Minimum 3-6 Months
 Serious time away from company growing.
 Many investors will want to watch.
 Your funding competition is other startups.
 Know Investor’s Goals
 Exit early, go big or go home?
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Pre-Funding Checklist:
Backable Team: Visionary, Hacker & Hustler (Ideally been there/done that.)
Post MVP Early Production Product
Multiple Target Markets
Early Product Market Fit
Scalability
Proven Sales Channels & Success Metrics
Vetted Financial Forecast
Path To Profitability
Funding Needed
Use Of Funds Budget
Funding Success Milestones & Goals
Runway Estimate
Pre/Post-money Valuation
Estimated Future Funding Needed
# of Funding Rounds
Potential Exit Strategies
Forecasted Enterprise Valuation
Calculated Return
Bryan
Multiple Investor Leads, Contacts & Relationships
Jurewicz
Marketing Documents
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Terms, Structure & Preferences
 Loans/Convertible Notes/Equity
 Blocking Rights
 Preemptive Rights
 Co-Investment Rights
 Pro-Rata Rights
 Dividends
 Discounts
 Caps
 Etc….
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Exit?
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Know your market, growth potential & valuation.
Quarterly SWOT Analysis
Better to be bought than sold.
Today’s strategic partner could be tomorrow’s acquirer.
Create pain for your competitors.
Go big or exit early?
 What are your realistic exit opportunities/timeframes?
 What are your & your investor’s goals?
 Can you carry the long term load/risk?
 Will you get pushed aside?
 IPO requires >$40M funding!
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Thanks!
 Questions?
 How can I help?
Bryan Jurewicz
Entrepreneur/Executive/Advisor
Accelerating Growth, Funding & Exits
 Connect with me…
Resources
SEO/PPC Tools:
 Book - Ultimate Guide To Google AdWords (Perry Marshall)
 Google Analytics/Moz.com/Alexa.com/Compete.com/Hubspot.com
 Andy Crestodina & Orbit Media Blog
http://www.OrbitMedia.com/Blog/Marketing-SEO
Startup Classes:
 Udacity – How To Build A Startup (Steve Blank)
https://www.udacity.com/course/ep245
 Business Model Generation
http://www.businessmodelgeneration.com/onlinecourse
Startup Books:
 Business Model Generation (Alexander Osterwalder)
 Four Steps To The Epiphany (Steve Blank)
 Lean Startup (Eric Ries)
 Startup Owner’s Manual (Steve Blank)
Bryan Jurewicz
@BryanJurewicz
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