This particular learning has been front of mind for me during the past week. And things right v the right thing turns out to be a good way of shining a light on some of the more frustrating moments.
Are we making it easy for startups to do business?
I like to focus on helping entrepreneurs and companies. There are plenty of other smart people and organisation trying to help in the same way. You would think that making life easy for founders would be important. And on the face of it, Scotland and the UK should be a good place to achieve that.
There are a handful of key measures Economists like to turn to when explaining the relative economic performance of different countries. A favourite is the Ease of Doing Business index compiled by the World Bank. The UK ranks 7th in this list and 16th for the specific category “Starting a Business.”
Yet it doesn’t seem to work out that way. So often a promising startup pitch becomes entangled in a web of process and bureaucracy
Or tangling SaaS in a web of complexity?
One recent experience sticks in my mind. The entrepreneur had a strong, simple idea in a high value life sciences niche. Life sciences is not my speciality but this lady was the best entrepreneur in the sector that I have seen in the last 4 years. It was all clear and compelling. Questions were answered with confidence and little bit of brio.
Then we got to IP.
And found what felt like dozens of unanswered and unanswerable queries. Many of which lay in then hands of an organisation that I know is committed to helping companies like this get started. Yet the founder was left unable to get to any clear answer. Never mind a simple one.
And there are plenty of other areas where the ecosystem designed to help has enmeshed startups in complexity they don’t need.
On the very same evening I heard about challenges related to complex shareholder arrangements for a company that has not product yet and has not started trading. Questions surrounding the best way of ensuring that a startup qualifies for EIS or SEIS, the two excellent tax incentives that exist in the UK. And another entrepreneur worn down by the time and effort required to go through the process for a pitching competition designed to give startups free money.
This happens all the time.
Sometimes its the founding team that initiates the problem. In other cases, the system designed to help is just too process heavy. But every time there is more people like me and other senior mentors could be doing to help.
Matters of shareholder law and contracts, tax incentives, distribution of public money and IP are all important to get right. Risk and complexity do exist in these arrangements. The way this reality is approached is wrong.
Complex solutions are offered and pursued. Or worse, the situation is allowed to go unresolved. Professionals and others weigh the options while the startup tries to move forward. In time, the weight of this uncertainty becomes crushing. A huge obstacle to investment. And a real drain on the time and energy the founding team needs to get things moving.
The Chairman's View
Too often (and I include myself in this) experienced professionals hear the problem and switch straight into doing things right mode.
We all need a big dose of doing the right thing mentality.
In the shareholder example above, there was a lawyer in the room. The entrepreneur explained what he wanted to achieve with his co-founder. Rather than taking him at his word, she challenged the underlying thinking. Take an alternative approach and get a simpler, faster, cleaner solution.
Great work Julie.
Advisors need to look for the simple way through. Resolve obstacles and move forward. Or to be clearer, get shit done. There is nothing worse than confusion and uncertainty. Not knowing your IP rights or shareholder structure kills any investment and the business with it.
So the job of an advisor is to make it easy for entrepreneurs to focus on innovation getting in front of customers. That is doing the right thing.
The start not the end of a customer lifetime
All that aside, a different thought struck me as I was driving home. In my mind, these guys are already a customer. They are busy people with high pressure jobs that are literally life and death. And they gave up 3 hours of time between them to help me out.
Since I have gained value, I must owe them more value in return. Its an obligation plain and simple.
Retention first not acquisition first
That took me back to thinking about this article from Price Intelligently which argues for a retention first mindset rather than an acquisition first approach. The authors have approached this from a metrics standpoint. And they demonstrate clearly that reducing churn can be a straight path to rapid growth.
But metrics are outcomes not strategy. Churn and its relative LTV are good examples. They capture an important concept. Yet they result from measuring customer lifetime at the end not from the beginning. That can’t be right!
Nonetheless, I liked the principle when I first read the post. I was also a little bit doubtful to be honest. Retention first sounds very attractive to someone who prefers building relationships to cold sales. So was I just playing to my own preferences?
My customer meeting has put that niggling doubt to bed. Good business works on human relationships. Not just transactional benefits.
That’s why numbers and benchmarks are useful tools but no way to run a business.
B2B SaaS - relationships not pipeline
So for me, retention first is a simple principle. One that applies to any B2B SaaS from day one. And it works like this:
Competitive pitching drives a whole lot of bullshit.
Its become one of the centrepieces of every startup ecosystem. If you want to build a reputation, grab some PR, grow your network, win cash prizes and generally just fit in, you need to pitch to win.
Founders are groomed by a whole coterie of experts and supporters. How to hone your message? How to pitch your startup? Get yourself investment ready? Business is framed as a race and only the fastest and strongest are winners.