At the Seed Stage, the ability of an enterprise startup to find product-market fit, attract beta users, and then quickly turn them into paying customers is critical. Unfortunately, the majority of founders have no previous experience selling and vastly underestimate the precision, volume, and tenacity required. That’s why we created a systematic approach to selling at the seed stage by taking tactical learnings from past exits and current portfolio engagements, enabling founders to not only hit their customer/revenue milestones, but to become great sellers along the way. While some investors offer sales help in the form of introductions, we will provide tactics and playbooks that are formed directly from our experience helping founders find PMF and close deals in real time.
If you’re a founder at the Seed Stage of the company-building journey, there’s a good chance you’re intimately familiar with the expression above. It represents the first of many sales milestones for a typical (enterprise) startup and is a critical metric to hit in order to raise subsequent financing in the form of a Series A. Reaching this goal from a customer acquisition standpoint also typically indicates that you’ve achieved, or are very close to achieving, Product-Market Fit.
In a time where startups are raising record-setting levels of capital and making/losing eye-watering amounts of money, one would think that getting to that first $1M in revenue, while not easy, would still be very attainable.
Most startups never reach it and when others finally do, many are left sputtering between extension rounds or crossing the Series A mark with lasting damage.
If you drill down to analyze the overall conversion rates here, which take into account all milestones (sales, product, team, etc.), it’s made clear that the jump from seed to Series A is by far the hardest to make with 79.4% of companies failing to do so.
This “death gap” between Seed and Series A is also exacerbated by the fact that 82 percent of companies that raised Series A rounds from top investors last year are already making money off their customers. That’s a big shift from 2010 when just 15 percent of seed-stage companies that raised Series A rounds were already making some money, and as recently as 2016, when just 56 percent of the startups nabbing Series A funding were generating revenue.
You may be familiar with the idea of Sales Enablement, but for those new to the topic, Sales Enablement can be defined as breaking down the complexity of sales into practical ideas through scalable and repeatable practices that will lead to increased revenue. In the simplest terms, it’s the systematic process of teaching others how to sell effectively.
The same way there are defined steps and processes for the software development lifecycle, a good sales process has the same level of rigor for delivering the highest quality revenue (CLV) at the lowest cost (CAC) in the shortest time (ASC). Sales Enablement programs provide this process to sales reps, regardless of whether they’re in their first year or their tenth, in order to learn a company’s sales methodologies through training, templates, frameworks, playbooks, email sequences, etc.
For companies that have Sales Enablement programs, the results are impressive. According to Sales Hacker:
If you’re still not convinced, according to a Pitchbook report, Lyft, Zoom, Slack, Uber, PagerDuty, Fastly, Crowdstrike, and over 84% of tech IPOs over the last two years have Sales Enablement programs.
Here’s my take on why that’s the case:
That’s why we created the sales arm of the Get Ahead Platform (GAP) at Unusual. It’s designed to take all of the insights, strategies, playbooks, and tactics from world-class sales and sales enablement programs — coupled with my experience as a seller and sales leader — to distill them down for what’s most applicable and most impactful for seed-stage founders and their goals.
By better-enabling founders around sales go to market strategies at the beginning of their journey, when they need it the most, I believe we will allow more companies to survive the seed-to-series-a death gap and become more well-rounded and effective executives in the process.
If you tasked the majority of first-time sellers with the goal of bringing in $1M of revenue with no training, no leads, no sales management, no product recognition…oh, and you have to do it in 18–24 months or you’ll likely lose their job, few would sign up for that.
Yet, this is exactly what’s being asked of first-time founders.
By creating what I consider a Founder Sales Enablement program, I’m excited to take what’s made other software companies and sellers wildly successful and give it to founders who are just getting started.
In 'Fixing Seed-Stage Sales', I spoke about how founders and first-time sellers often mistake activity for progress by not properly qualifying opportunities.
For this post, I’d like to start right at the moment after you’ve had your first meeting with your investors and all parties have agreed on a revenue goal for the fiscal year. (For most seed-stage startups, that number is $1M ARR or total bookings.)
The majority of Enterprise B2B founders can take that revenue goal and divide it by four quarters or twelve months to figure out roughly how much new business they need to close to hit or surpass that target. Where the wheels tend to fall off is when you ask founders how those quarterly/monthly goals translate into the number of prospects they need to reach out to, or in other words, how many net new meetings they need each week to be on pace.
If you input your revenue goal and ASP, the calculator shows you roughly how many prospects you’ll need to reach out to in a given quarter to stay on track when it comes to the required number of net new meetings, demos, proposal reviews, deals closed/won, etc.
Here are the sales funnel assumptions I’m making for cold outbound outreach in the enterprise B2B space:
"For example, let’s say you cold outreach to 1000 individual prospects following the math above:
Total Outreach: 1000
Positive Reply Rate: 20
Discovery Meetings/Demos: 14
Technical Deep Dive Meetings: 7
Proposals Reviewed: 3 (round down, better to be pessimistic 😎)
New Business Closed/Won: 1
This would give you a 15% overall close rate for all qualified opportunities (New Business Closed / Technical Deep Dives), which is a rough industry standard for many enterprise B2B companies, with 20%-30% close rates being world class."
Breaking down your required sales outreach is no different than breaking down a study schedule for a test (GMAT, LSAT, SAT, etc.). You want a target score and you have a limited amount of time until test day (in this case, the end of the fiscal year) to achieve it. So, you might break down your study schedule into manageable chunks:
Of course, there are several other factors to consider and the example might seem simplistic, but the underlying logic is the same.
"If you can’t run a fairly simple process for how many net new meetings you need every week to hit your overall revenue target, then how do you know if you’re on track?"
Finally, before you dive-in to the calculator here are a few important notes:
One of the top reasons I’ve seen startups struggle is by not being systematic enough about their sales outreach process and vastly underestimating how many people they’ll need to talk to every week, month, quarter.
My aim in creating this tool is that by providing a range of total outreach required, working backward from your revenue goal and ASP, founders will quickly understand how much outreach is needed that quarter and be able to adjust their pace, volume or accuracy to stay on track.
Founders often make the mistake of confusing activity (meetings) with progress (qualified opportunities). Implementing a standard qualification process is key to discovering real opportunities and better prioritizing your time.
In my previous post about better enabling early-stage founders when it comes to sales, I included a poll asking what aspect of sales is currently your biggest challenge. Based on the responses, qualifying sales opportunities seems to be a large pain point and, as a result, will be the topic of this post.
I learned the value of qualifying my time (and sales opportunities) the hard way when I started selling at the open-source database company, MongoDB.
As a Sales Account Executive, I covered a territory that spanned a few states on the East Coast and, at the time, the open-source version of the product had around 40 million downloads. So, with a little hard work, there were endless opportunities to get meetings with users/companies that loved the product. With that said, since it is an open-source product, there were only a few use cases where users/companies would actually pay for it.
After weeks of cold calling, emailing, and meeting with a lot of prospects in my territory, I was feeling good watching my number of meetings and pipeline continue to rise. Then, in the last two weeks of the quarter, when everything was on the line, a lot of those prospects informed me that they decided to continue using the product for free — essentially invalidating my forecast. Here I was with the most net new meetings and pipeline on the team, but with the lowest amount of closed business (also known as annual contract value or ACV) that quarter to show for it.
"I realized I was making two costly mistakes that can easily get a seller fired or a founder in trouble: 1) I was confusing lots of activity (meetings) with progress (qualified opportunities) and 2) I wasn’t using a defined and repeatable qualification process."
If I had been using a qualification process from the start, I would have uncovered that a majority of those opportunities in my pipeline never had a compelling reason to convert to paying customers.
Fixing these two areas (qualified opportunities > more meetings and using a repeatable, scalable qualification process) were critical adjustments that allowed me to go from the bottom half of sales reps to the #1 rep in North America that year.
The below is an outline of how early-stage founders can have a similar transformation, going from lots of meetings, but little closed business to show for it to clear definitions of what a qualified opportunity is and a process to meet/exceed sales targets.
As an entrepreneur, when you receive your first round of funding, you become a first-time salesperson at the same moment you become a first-time CEO/CPO/CTO. Therefore, like any salesperson, you now have a revenue target to hit and need to set up your sales go-to-market process, which includes organizing your meetings by stage.
With that in mind, most founders start by running searches about how to structure a sales funnel, or they might recall examples from their previous companies, and the results usually look something like this:
Below is a more simplified version:
Then, the team along with their board typically set a goal for a number of meetings (aka the “top of the funnel”) for the next quarter with the idea that, if they can get a certain number of meetings, it will naturally lead to a number of opportunities, then POCs, and then paying customers.
So, founders do what most people would do — they reach out to any and all contacts in their network, ask for introductions to 2nd/3rd level connections, do some cold outreach, and/or potentially use an internal SDR or outsourced lead-gen firm.
When the next board meeting happens at the end of the quarter, the founders pull up their sales forecast, talk about the positive traction they’ve had, represented by a ton of meetings, which could look like this:
Stop: Can you identify what’s wrong with the forecast shown above?
"Including “Meetings” in your Sales Forecast Funnel is one of the most common examples of confusing activity with progress"
In the funnel above, the difference between a meeting and a qualified opportunity is that the latter has made it through your qualification process while the former has not yet answered the necessary qualifying questions to be considered an opportunity, it was merely a conversation with a new prospect.
It’s very common for founders and board members to stare at versions of this funnel where the number of meetings is 5x or 10x the amount of qualified opportunities. Detailing what good conversion metrics look like and how to review a forecast deserves its own separate post, but the biggest takeaway here is meetings should never be represented in a sales forecast funnel.
By including meetings here, you potentially give yourself, your team and your board a false sense of progress by focusing on the high number of meetings (activity), and not the low number of qualified opportunities/POCs (progress).
Instead, your sales forecast funnel should only have qualified opportunities and POCs and closed/won customers, with the number of meetings being represented in a sales outreach funnel.
So, next time you prepare a sales forecast slide for a board meeting or team review, it could look like this:
(Takes off rose-colored glasses and squints) Feel the difference in the sense of urgency around creating more qualified opportunities, aka “top of the funnel”, when you take the number of overall meetings out?
All of this is not to say that meetings are not important — they are crucial, but should be seen as a sales outreach metric and not a forecast component. By separating them out, it also forces you and your team to track all other associated outreach metrics to see where there might be areas for improvement:
Then, if you show both side-by-side in a deck, you can also analyze the conversion rate of meetings to qualified opportunities (8 out of 56 in this case, or 14%) which is an important conversion metric:
Now, being able to separate meetings and qualified opportunities into two separate funnels is predicated on having a process to do so.
There are numerous qualification methods you can research and apply, and some may be better for your product/industry/buyer persona than others (I personally like MEDDPICC).
"The key isn’t so much which method you choose, the key is having a method you adhere to and stick with for every opportunity, company-wide"
It can evolve along the way, and it will, but there needs to be agreement across everyone involved in customer acquisition on what a qualified opportunity means at your company so you can speak a common language when reviewing/discussing deals.
What I’ve outlined below (and in the accompanying tool) is my take on qualification criteria that early-stage founders can use for every opportunity, which are also generally applicable across industries, products, buyers, etc.
For every qualified opportunity, you need to be able to fully answer the first four questions:
I’ve “mandated” the first four questions in order for an opportunity to be considered qualified since they are the building blocks of any sales opportunity. The qualifying components after those (5–9) can be discovered as you progress through the sales stages, but the first four are the hurdle you need to clear for a meeting to become qualified.
I’ve included detailed definitions for each qualification criteria in this accompanying tool (below), which I encourage you to look through and apply to your current opportunities/pipeline.
Once you’ve checked off the qualifying aspects you know for each opportunity, I would sort them by the “Score” from highest to lowest, prioritizing ones where you know the most information (closest to new revenue) and working your way down to those where you know the least (furthest from new revenue).
How you spend your time and where you spend your time in any given quarter will determine its results, so utilizing a systematic way to qualify your time (i.e. should I keep engaging with this prospect?), and therefore your opportunities (based on what I know, what is the chance they turn into a paying customer this quarter or next?) is great first step to directing your time where to go instead of wondering where it went.