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School my name is Gustav and I'm a group
partner here at y combinator today I'm
going to talk about how to go from
talking to users
getting your first customers here's what
I plan to cover today one what does it
mean to do things that don't scale and
why is this mindset so so important at
this stage of your company two how to do
sales I'll make the argument the founder
should be the ones doing sales in the
beginning then we'll cover some sales
funnel information and then why is it so
important to charge for your product and
finally we'll learn how you work your
way backwards from your goals and why
that's important I hope you've read this
article or this essay the most important
essay ever written about the very early
stage of startups is do things that
don't scale by Paul Graham Paul is the
co-founder of Y commner he published
this essay about the early days of
Airbnb Airbnb is perhaps the best
example of a successful YC company who
got their feet off the ground this way
many Founders who never worked for a
startup or an early stage company
incorrectly believe that all you need to
succeed is a good product and growth
will take care of itself this is not the
case the truth is that good product is
very rarely built in isolation but
together with your customers and as a
result it's not actually that good when
you show it to your first customers set
this another way
startups don't take off by themselves
startup takes off because Founders make
them take off and you have to manually
recruit your customers it's not enough
to push a button on an advertising
Network this is uncomfortable and
Founders continuously find many ways to
avoid doing this the most common way is
believing that you can recruit people by
just writing more code or doing more
work on your machine or your robot or
whatever you're building I know this
from my experience of YC that this
actually don't work so why am I talking
about this right now learning the
tactics of sales is just one side of
this uh of of this learning the most
important side is just really realizing
that it comes down to you it's not just
knowing exactly how to do sales in
theory but actually doing it and
actually wanting to succeed another
great visualization is what's called a
startup curve this was initially drawn
by YC found program and then labeled by
Trevor Blackwell and you've probably
seen this curve before most companies go
through something like this it's kind of
like a timeline for startups here's how
it goes first you launch these days most
companies don't launch on TechCrunch but
probably on product hunt or Hacker News
or some other internet board the launch
energy that you get from this launch
eventually starts wearing off as early
adopters are looking out for something
new if you don't have instant High
retention nobody does for what you are
building then you'll enter the through
of Sorrow this can take a long time and
many companies die during this stage
they just give up and don't move fast
enough with testing new things some
startups do move fast enough and release
new improvements of their product
they'll listen to users and they improve
many still don't get anywhere further
and becomes victims of the crash of
ineptitude it's the founders to stay the
course and don't give up that reaches
the Wiggles of false hope and eventually
the promised land of crack Market fit
the learnings we draw from the start
curve is that every moment in the early
days of startups the founders are the
ones that make the difference between
success and failures if you are in the
wrong Market
it's the founders that switch to a new
one and if you don't know how to do
sales it's the founders who learn so you
have to really want it otherwise this
won't work all right let's talk about
sales and how to do sales first Founders
should learn how to do sales you should
learn how to do sales because you'll
need to learn to know your customer
talking to customers and sales are
effectively different sides of the same
coin and the same reasons Founders can't
understand what to build they don't
understand what the problem is you don't
know how to sell unless you know your
customers two learning how to do sales
actually gives you full control of your
destiny as a startup just like you can't
Outsource engineering sales has to be
part of the DNA of the founders
sometimes you just have to learn it as a
result you should not hire a sales team
until you know how to do sales yourself
only then will you know what good looks
like you also can't do sales if you
practice bad and you won't know if the
product is bad unless you've had some
effort in trying to sell it first if you
don't know how to sell don't worry you
you can learn it's probably the easiest
job to learn in startup if you know the
problem you're solving if you know
you're product intimately if you know
the market you are an expert in the eyes
of the customer they will want to hear
what you have to say finally a love for
solving customer problems is really
infectious if you're really passionate
about solving this problem they will be
able to tell if you don't believe me
here are some examples of Founders who
took on the sales job and learned to get
really good at it so Tony from doordash
matild from front Tracy from plangrid
and Steve Jobs let's get straight into
an example so these are the brex
founders Pedro and henrique when brex
was in wycomner in Winter of 2017 they
recruit the first 10 customers directly
from the YC batch June YC you have the
benefit of being around other startups
I.E potential customers the brex
founders asked themselves what would the
minimum product look like that they can
build to be useful to other startups and
then they went with strain straight into
signing up those customers the first
version was very very simple customers
just had a virtual credit card and
Enrique from brex actively onboarded
everyone of the customers himself of
course they could have waited until they
had a full-blown product a website a
Mobile app all of those things but they
decided to get going when they have
something that was really useful this is
how their first physical card looked
like this before they had this card they
just had a virtual card Rex reached out
to the their YC batch and otherwise the
companies and this is the email that
they sent I'm just going to read a brief
portion of it hey guys we're opening up
our beta for winter 17 batch friends
with the 10 spots for beta users 10 spot
this sounds like there's a limited spot
so I should take actions brex is a
corporate credit card focused on
technology companies that's me perfect
you're actually writing the email
directly towards your customers we don't
require a personal guarantee it can
underwrite startups who just got started
this was the value prop most other
alternatives to brex did not have
something like this so how much does it
cost it's free the merchants are paying
us so there's zero Annual fees this
seems like a no-brainer I would argue
that this email is probably a little bit
too long but it did work so let's talk
about how to write a great sales email
so first it should be short Max 6 to 8
sentences the brexit sample on the
previous slide is probably too long it
still worked but probably too long
people don't have time to read long
emails if you're coming out of Academia
your culture is going to be very
different you write very long emails but
in the world of sales you want to get to
the point and be brief as much as you
can two you want to make sure you have
clear language no jargon no buzzwords
just say exactly what you do and how it
works and then three address the problem
that the potential customer is having
four do not use any HTML formatting
write your email in plain text only like
you would written it to a friend say you
are the founder of the company who makes
this product many people forget to do
this describe why you and your team are
impressive include social proof and
remember to show not tell don't say
you're an expert don't say how many
years that you have been an expert if
you're in the YC match if you worked at
impressive companies in the past those
are other piece of social proof that you
can include you won't include a couple
of these ones so that the reader knows
the source and even if they don't know
you gives assign you some authority six
you want to include a link to your
website the website needs to be simple
you have to have information about the
product the website should not have a
lot of drawings or sort of like paid for
graphics you should just have
screenshots from your product and
bullets about what your product does
sometimes it works to send a short video
a YouTube video that you can embed in
the email that's very easy for the
receiver to click on and View and I've
even seen people using gifs now those
videos and those gifs needs to get to
the point right away because the the
receiver is kind of intimately familiar
with the problem but not really have
time to watch two or three or four
minutes of a potential solution and then
finally you want to include and ask for
a call or a meeting or a self-serve
whether whatever is appropriate for your
company but there needs to be a call to
action in the email that you're sending
all right let's talk about the sales
funnel the concept of sales funnels is
really quite easy I think people get
confused by the language the sales
people are using so I try to simplify it
here on the left hand side I call it the
founder speak on the right hand side I
call it the sales speak these are not
going to be perfectly mapping but you
get the idea so first you want to make a
list of customers you plan to reach out
to in sales it's called prospecting or
lead generation we'll just call it make
it the list and you can use Google
spreadsheets or something like that to
make this list then we want to send them
an email or a LinkedIn message or add
them on LinkedIn or whatever is the
appropriate way to contact these people
after that you want to schedule and run
a demo or a meeting from that response
to the email and then you want to talk
pricing and then finally close them as a
customer the last thing which you should
not forget is after you've closed them
you still need to onboard them to make
sure that they start using your product
if this is successful and you have good
retention that could lead to long-term
Revenue if you forget the last step then
you will have lots of churn because
people don't actually know how to use
your product and this is common with
early products because they are not easy
to onboard in the beginning this is not
something you spend a lot of time
optimizing so make sure that you do the
onboarding as part of this process if
you go back to the Google spreadsheets
that I'm that I'm making that I'm
putting in all the information you
should start simple but you should have
some Columns of things that you're
tracking so industry uh the company the
title the name the email maybe the
LinkedIn this could be enough to start
with a lot of CRM software comes with
these categories so these columns it's
pretty good idea to kind of use a simple
CRM software
um to kind of accomplish the same goal
but the key thing here is doing this
work up front and I've seen a lot of YC
Founders that when they are getting to a
thousand of these they're like oh this
is a very simple task I can actually
Outsource this and I think that can work
if you know exactly what it is you're
Outsourcing storing all this information
is going to be helpful for you in the
future now I made my list I understand
this the sales funnel so who should I be
going after and how should I be
prioritizing as I'm doing the Outreach
here's my most important advice when it
comes to sales your first customers
should be your easiest this is not the
time to bite off the hardest one
focus on the easiest ones what I mean by
that is you should try to do sales
make the sales processes easy for you as
you possibly can startups don't really
have time to chase every lead there's a
lot of leads out there you you don't
have to pick all of them you really
don't you're so early you can pick only
the ones that are the most likely to
close the best way to do this I have a
big pipeline where that means a lot of
people that you're emailing are
potential customers and then as you're
getting responses and you're getting to
meetings start prioritizing those who
are the most likely to close you can
probably tell from their answers to your
qualifying questions during the sales
call
avoid those who are moving slow and
don't be afraid of letting customers go
what I mean by that is that if someone
is dragging you along two or three calls
you can always be like it's been great
getting to know you
um and I've learned a lot but
um we should talk again in six months
that's totally fine to say two
selling to people you know is going to
be easy to selling to strangers so you
should take advantage of your network
three selling to startups is the easiest
category and I've I've learned this On
and On Again with YC company
specifically the ones that sell software
it just turns out that bigger companies
have more bureaucracy more processes
they even have a specific Department
that is in charge of negotiating with
you and that takes a long time and
startups don't have any of these things
because they don't have time to create
these things but it's not a priority for
them
so startups have short decision-making
lines you can often find that the
decision maker right away as you do in
the Outreach and you don't have to go
through a difficult process that's why
startups are easier and that's why we
recommend most companies to sell to
startups at least leads me to the fourth
Point most people are not early adopters
and I keep saying this to the white
companies I work with all the time the
reason you have to sell send hundreds of
emails is not that most of those people
get really upset and be like I can't
believe you emailed me like I really
love this alternative product by hate
your product that's not what's going on
most people they email are just be like
archive they just don't care they're not
going to try a new product that comes in
through your LinkedIn or your email and
they might not be the people that try a
new product at all in their career
that's most people some other people I
remember being one of those people when
I worked at Airbnb I would love when
founders emailed me with new new
products and I would be the one signing
up for them so
when I worked Airbnb and you were a
startup email me was great I am an early
adopter I love trying new things I don't
mind the risk of trying new things so
for every outbound uh to an average
company that you send you will mostly
like most likely on the average outbound
average email average LinkedIn reach
someone who is not an early adopter to
reach early adopters you just have to
send more out by messages because then
you don't have time to convince anybody
to become an early adopter you have to
find Aero adopters and just go for them
early on don't worry about everybody
else you just don't have time to
convince them let's talk about charging
it's attractive for you as a founder and
for your company to offer your product
for free offer free trials or unpaid
pilots and these things come in many
shapes and forms however if you don't
charge your customers they are not a
customer and you don't have a company
customers paying you money is a great
sign that you're providing them real
value
so you should resist the fear of getting
a no because of price
instead of figuring out what the price
should be if they don't want to pay and
you learn this during the qualification
process in the first call or the first
meeting
if they don't want to pay that's a great
sign that you should move on to the next
customer
again fire the ones who seem like
they're not good fit move on to the next
customers
free trials are common for consumers but
if you thought about it most consumer
free trials ask for the credit card up
front and then we forget and then we pay
anyway
that's because that actually works the
best the bdb version of this
is a better one than a free trial is a
money back guarantee so we charge you if
you're not happy you can get the money
back in 30 days so 60 days
um or even better you have the ability
to opt out from the annual contract you
just pay for one month instead of the
annual fee but you should not offer free
trials in B2B sales go for a money back
guarantee and go for the ability to opt
out instead increasing your price until
your customers are complaining but still
paying is the right way to go all right
let's talk about the thing that most
Founders get wrong I've seen as many
times but there are a few things that
most wanted to get wrong and this is one
of them working backwards from your goal
with your sales funnel in order to work
your way backwards from a goal of say
two signed customers you have to
understand that each step in the sales
funnel is going to have a drop-off when
you haven't started sales yet you don't
know what these draft off percentages
are maybe you haven't done a lot of
sales before you don't know what you're
not good at maybe you're really good at
sending emails but really bad at closing
or vice versa you don't know that so as
you're sending these outbound emails you
need to take notes and start tracking
all of these conversions in this example
I'm sending 500 Outreach emails or
LinkedIn messages I have a 50 open rate
that means 250 people will open the
email five percent will respond that's
about 20 potential customers 50 of those
will convert to demo from the response
which means I'm doing 10 demos that's
pretty good but I'm not that good at
doing demos only two end up becoming
customers from the demos that's 20 I bet
you most of you don't even track this
data but you should if you track this
data you will have some idea of how long
it will take to get to 10 paying
customers if you don't track this it's
very hard for someone to give you
feedback of what's working and not
working right it's just like when you're
launching a new product you want to have
some metrics and some user data to be
able to tell if it's working when you're
doing sales you want to have this data
if you have this data people will be
able to give you feedback on what what
you're good at and what you need to get
get better at my advice is to use a
simple sales CRM software that tracks
these conversion rates automatically
let's look at the same second example
this is how it looks like for most
startups even the ones that I work with
in the batch in the second example I'm
sending 100 Outreach email it feels like
a lot to me if I keep the conversion
rates constant from the previous example
I actually end up with zero customers
and the conclusion the founders draw
after this is that sales is not working
for me and I should just do marketing or
SEO or something else or referrals or
something that sounds attractive this is
simply wrong you don't have the data to
make that call you did not do enough
Outreach to actually get to correct
conversion rate percentages in your
sales funnel so the answer here is you
sent a few minutes too few emails you
don't have the data you can't draw the
conclusion that sales is not working
even though you have serial customers
and this is the mistake that funders do
on and on and on again so to summarize
what I just went through here you don't
know your sales conversion rate that's
why you need a CRM to keep track of it
two because you don't know who is an
early adopter you have a lot of drop off
in the outbound sales that makes up on
sales ultimately a numbers game and
successful startups we like this and
internalize this three you cannot close
five customers from 10 leads it's not
possible you need a lot more app on than
that a lot more and unfortunately most
finders don't work their way backwards
from this sales funnel and they don't do
this exercise and the result they don't
succeed as sales and they don't really
know why so a friend of mine from Airbnb
Atlanta rashitzki he writes an excellent
blog and he wrote a great blog post
about how YC and a bunch of non-yc B2B
startups
um got their sales go to market strategy
going I recommend reading this and other
posts uh newsletter it's it's one of the
best ones I've come across it has a lot
of real data that he collected from real
companies uh many of them being YC
companies so in this example here in the
second column Lenny is describing the
initial sales motion of some of these
companies as you can see some of the
early ones like amplitude stripe front
they were doing app on sales emails just
like the one we described to get started
those Founders were doing those sales
emails as they get started some of the
other ones was called Product LED
product LED could mean something else
than just doing up on sales but it
doesn't mean having a big sales team and
it usually does not mean doing marketing
or SEO or something else practically it
means something that the product itself
is is sort of like driving the growth as
you're running the demo
um your goal is to close your first
customers
you want to ask a lot of questions up
front in the demos and there's the
founders who should do the demos because
you are the one knowing the product and
you know the customer pain points here
are three examples of YC emails that led
to customers so I'll let you guys look
at the details of these afterwards but
this is an app on email that led to uh
72 000 a year contract this one LED is a
very specific email that led to out
Landing a goalie as a customer and this
third example here is the one email the
same email they got them 22 different
customers all right I'm going to
summarize this again the biggest
mistakes that most finders do is they
don't do enough Outreach because they
don't work package from the goal
believing that something else then sales
is going to solve your sales problem
Outsourcing sales is wrong you should do
it yourself and you need to qualify your
customers during your first call here
are some of the tools I recommend so
there are many many many tools this is
perhaps one of the biggest categories of
potential things you could use as you're
doing sales but I recommend apollo.io
close.com formerly called closed.io
pipedrive or hunter.io these are great
tools that you can use either as a
simple sales CRM or Hunter you can use
to get contacts or potential people to
email from LinkedIn here are two
additional resources if some people ask
me for books usually there aren't good
books but there is actually one that I
come across I find really good it's
called founding sales and then I also
recommend lineage newsletter.com there
are of course other ways that you can
grow as a startup but the truth that
I've learned is that even if you end up
with say like Airbnb where the sources
of growth is Word of Mouth Google search
referrals Facebook advertising if those
are the kind of end states of your
growth strategy that's not how ambica
started they didn't start by running
Google sem or Google SEO
the referral program did not bring in
the first 2000 customers they did things
that didn't scale and they looked
different than the one they do at scale
so a lot of companies are shorting
straight into What's called the scalable
growth channels the channels that
they've heard work which is true at
scale but that's not the same thing as
when you're getting started so in this
slide I'm outlining kind of like just a
rough idea of like even if it turns out
the Google sem and Google SEO is what's
going to work at scale you need to find
another place online where these people
that you're going to reach through sem
and SEO is identifying themselves online
right and that might not be the same as
Google if you're trying to go after sem
which means search engine marketing it's
going to be expensive probably because
there's competition if you're going
after SEO it's going to take a long time
if your growth is say proc LED or
virality referrals then personal
networks selling through your personal
Network to your co-workers is the way to
get started of course if you're doing
sales you should be doing sales it
doesn't change very much like early
stage sales to to large sales basically
means all the things that I just
described here
done by 100 people in a sales team with
more automation more tools more metrics
but it's the same thing and if you
practice setup to do online marketing
it's not usually how most people start
why because you can't really easily talk
to people you can't learn from users if
the first thousand or first-handed
customers are brought in through Google
and Facebook those people are not the
kind of people that you can easily get
on a 30 minute phone call with all right
that's all I had today thank you
everyone
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