There is an old saying that 50% of all advertising is wasted. But, which 50%?
Well in high tech sales and marketing, applying to the startup, 95% or virtually all of it is a total waste of time, money and effort. It is, in fact more of a distraction. So get rid of almost all of it and save the dough.
Let’s remember that sales and marketing takes up from 40% to 70% of the budget for almost any early stage technology company. So if there is a way to reduce costs by 40% to 70% it is clearly material—and it is disruptive if you can do it.
Massive sales and marketing, and the real loser, business development (Bus Dev = No Rev!), is totally unnecessary for the early startup. The reason it is such a large part of every budget is because most startups just mimic what the last successful one did. If they had lots of sales and marketing, well, that must have been the ticket so let’s do it.
Startups, particularly those with disruptive technology are NOT selling to the general market.
They are selling to a very defined slice of that market, called the innovator or early adopter. Those people have very different buying criteria and they are more repelled by marketing and sales than they are attracted to them.
Many venture backed startups, and early entrants in a market first ramp up the marketing and sales. They buy lists from SPAM foundational resources like DiscoverOrg and they are off. Endless email campaigns. If you respond, even downloading a white paper, you are toast—-they chirpy kid following you will almost be at your door when you try to get to your car in the morning.
Prospects consider this “inbound/outbound marketing” so toxic that over 50% will not give out their corporate email—-it is all Gmail and Hotmail. So what do the clever marketers do? Yes, you got it! If you want that crappy “white paper” about their product you have to have a “corporate” email address.
So anyone who is an executive avoids this stuff.
Most VC backed marketing companies would need a private detective to find a decision maker. While stats show that 70% of the actions toward finding a new solution occur BEFORE the sales person is ever contacted, the buyers slyly find ways to avoid the SPAM marketing campaigns and never download anything.
They protect their Social Security Numbers with the same passion they protect their corporate email addresses. Many have no email address on their business cards. Anyone important has their email screened by an assistant—-part of the eternal struggle to avoid that corporate marketing department the CEO finds so efficient.
So toss that crap marketing and the staff who delivers it. They give you, the early startup two results: they repel decision makers and they toss tons of money doing it.
Your new VC “partner” then tells you to hire that “business development” type. You know the guy. Usually it is a guy, in mid to late 40s and he ALWAYS has great hair. It is part of the job. He almost always is hugely political as his job generally never generates anything but make-work for the sales force so he kind of has to.
He has the press releases about the new partnership with the BIG COMPANY which for them is number 70,001. Their reps never even return your call.
And generate revenue? Probably not going to happen. Most of these guys are really adept at going through Salesforce reports and inserting “partner-led” into enough deals so they make it a few more quarters. Waste of money? It is—big time but since most are tight buds with the CEO for their survival, not much you can do about that. Great hair though.
Then dear reader, there is that sales force. Remember where we are here in the narrative.
This is a startup–maybe a few years old but startup nonetheless. And we know that these companies should be selling to the early adopters/innovators in the market.
The early adopter generally hates sales people. I mean, they really hate them. If they could booby trap their cubicles, they would do so. If they could see a well dressed, technically illiterate rep light up in flames, they would take pix with their iPhones rather than intervene with the fire extinguisher.
So what does the VC funded startup do? They hire an army of these types. Some are men and others are women, but they share the sexless characteristic of being only able to show interest if there is a deal there in this quarter. Not this quarter? Let’s move on–after all, we are only here to collect a commission check.
That sales force almost never sees a decision maker. Those executives do not talk to salespeople, they have grunts in the bureaucracy to do that. But, once every so often, the rep catches an appointment with the unwary executive. And what happens?
You guessed it! It is the 10 legged sales call.
The rep comes with his regional manager, a useless middle manager who has no authority and sits in endless forecasting meetings giving his opinions on accounts he has never visited. And then there is the tech rep. Must have one on this call. And the VP hears that an exec is there, so he or she comes along–maybe flying in–because the exec probably wants to see someone in “leadership.”
When exactly did sales middle management become “leadership?”
If it is a big company like Microsoft or VMware or Dell, the tech manager also came or the services manager. It never ends.
When I was at VMware I had many CIO meetings. The useless “core reps” would hear about them and come along with all their pals. So nothing ever got done. It was incredible but I witnessed, often, that someone who sold millions of dollars a year in VMware plumbing had never met the CIO. After a couple of these meetings, I saw why.
In my early CEO days, I would have these types show up. Often it was at the last minute. And all they wanted to do was talk about our “strategy” when I just wanted to buy some functional software and go about my business. During the creepy visit, the poor rep who knew my business best had little to say. Afterward, nothing ever happened from the meeting.
It was an organized, well scripted, perfectly informed waste of an hour or two.
All I remembered, and all execs remember now, is a bunch of people intervened on our day and we had an hour or perhaps two of completely uninterrupted waste.
Why do these startups–some years old but still unprofitable–hire these types? Why do they spend their money—approaching 50% of revenues for something that so patently doesn’t work?
Well, for those who took Latin, there is an age old answer. One of the first questions in Latin class, from the not-so-bright kid in the back is “Why did the Romans speak Latin?”
Pretty interesting question, although a bit late. And the teacher responds “…..because their mothers did.”
That is the problem!
These tech companies hire from the same pools, know the same people, live in the same environment and thus they do what the company before them did—they do stupid stuff like hiring a sales, marketing and business dev team that could not find an early adopter with Google Maps if he or she had a radioactive ankle bracelet on.
There is a more sinister answer as well, and I like it more. They need employment and they need a large salary with not much to show for it. So they form a cabal to convince an unsuspecting CEO (or he or she may be part of it) to hire them, raise tons of VC dough, dilute the heck out of the stock, and let’s live large for a few years before the bottom falls out.
There is a better way.
The early adopter does not buy from these creepy, almost non-human machines.
Early adopters are looking for the disruptive technology as hard as it is looking for them.
So maybe the best answer is for the early tech company to stop with all the overpaid reps, marketing types, T shirts and coffee mugs and put that money toward serving the customer and rewarding the early employees who struggled to get the company there.
But, if you are VC backed, well, you are screwed because this is not their model.