Originally published on DanaWright.vc
Last week I was meeting with a team that had certainly done its research on MATH. They had already met with Mark twice. I was the third meeting and fresh eyes on the deal. Early in the meeting, they referenced a blog I had posted and several videos from Troy.
It’s always interesting to see how entrepreneurs react to our content and our different styles and perspectives. This particular team is the classic case of consultants that have solved a problem for years with bespoke, customized services but believe they have found a way to build a scalable technology product. They have immense industry knowledge and experience but they recognize selling a SaaS product is different than selling a custom service offering, and they are eager to learn.
As they walked me through their pitch, they kept pointing out where they were struggling with certain concepts from the MATH 101 videos posted on our site. In essence, they were applying approaches from Troy’s videos about digital marketing and not yet at the point where they could measure the outcomes. Of course they couldn’t, they were applying a concept meant for a company selling to consumers or SMBs (small-medium business) and they are selling to enterprise. When I explained how and why I didn’t think the concept they were worried about applied to their business the team seemed relieved.
Troy and I often banter about the differences in selling to SMBs versus large, enterprise companies. In many cases, the entire approach has to be different – especially in complex, direct sales with long sales cycles. Finding product-market fit in these cases are often times more complicated. They require more time and more investment. The result is often not incremental proof points but step functions.
What I like about what the founders are doing in this specific deal is they chose one component – a very precise place to “land” the initial solution, one with pain, urgency and some regulatory compliance thrown in for good measure. They have landed a few times and are beginning to get positive feedback from customers. They focused initially on an elegant, simple solution.
What makes this company interesting is the structure of the market is such that the product can be sold into one division of one geography, then easily expanded to other divisions and geographies. In addition, because of the team’s deep expertise, they have a comprehensive roadmap that was developed and battle tested in their consulting practice for many years. This roadmap provides them with additional modules and up-sell opportunities over time. This company will have step functions, not incremental sales to cover their customer acquisition costs. In this particular case, they may land a customer with an average contract value of $100,000, but be able to 20x that sale over the next two years through the horizontal (division and geography) and vertical (up-sell) expansion opportunities. The challenge here, is that step functions are harder to test, predict and measure – but they are a thing of beauty when you find a repeatable, scalable process.
Entrepreneurs often want a specific formula from us on what we mean when we talk about an unfair advantage in customer acquisition. They want a revenue number, a specific number of customers or some other concrete measure. The experience with this team reminded me again of how difficult it is to nail it down to something that is universal across businesses. It is too early to tell if this company will become a MATH portfolio company or if the team will be able to execute the strategy, but the potential is there for both.