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How to Get Your First Customers | Startup School — Transcript

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0:01foreign
0:03[Music]
0:10School my name is Gustav and I'm a group
0:13partner here at y combinator today I'm
0:15going to talk about how to go from
0:16talking to users
0:18getting your first customers here's what
0:20I plan to cover today one what does it
0:22mean to do things that don't scale and
0:24why is this mindset so so important at
0:27this stage of your company two how to do
0:30sales I'll make the argument the founder
0:32should be the ones doing sales in the
0:34beginning then we'll cover some sales
0:35funnel information and then why is it so
0:37important to charge for your product and
0:39finally we'll learn how you work your
0:41way backwards from your goals and why
0:43that's important I hope you've read this
0:45article or this essay the most important
0:47essay ever written about the very early
0:49stage of startups is do things that
0:52don't scale by Paul Graham Paul is the
0:54co-founder of Y commner he published
0:56this essay about the early days of
0:58Airbnb Airbnb is perhaps the best
1:00example of a successful YC company who
1:03got their feet off the ground this way
1:05many Founders who never worked for a
1:07startup or an early stage company
1:09incorrectly believe that all you need to
1:12succeed is a good product and growth
1:14will take care of itself this is not the
1:16case the truth is that good product is
1:19very rarely built in isolation but
1:22together with your customers and as a
1:23result it's not actually that good when
1:26you show it to your first customers set
1:28this another way
1:29startups don't take off by themselves
1:31startup takes off because Founders make
1:33them take off and you have to manually
1:35recruit your customers it's not enough
1:37to push a button on an advertising
1:39Network this is uncomfortable and
1:41Founders continuously find many ways to
1:43avoid doing this the most common way is
1:46believing that you can recruit people by
1:48just writing more code or doing more
1:50work on your machine or your robot or
1:52whatever you're building I know this
1:54from my experience of YC that this
1:56actually don't work so why am I talking
1:58about this right now learning the
2:00tactics of sales is just one side of
2:03this uh of of this learning the most
2:06important side is just really realizing
2:09that it comes down to you it's not just
2:11knowing exactly how to do sales in
2:13theory but actually doing it and
2:15actually wanting to succeed another
2:17great visualization is what's called a
2:19startup curve this was initially drawn
2:21by YC found program and then labeled by
2:23Trevor Blackwell and you've probably
2:25seen this curve before most companies go
2:27through something like this it's kind of
2:30like a timeline for startups here's how
2:32it goes first you launch these days most
2:35companies don't launch on TechCrunch but
2:37probably on product hunt or Hacker News
2:39or some other internet board the launch
2:41energy that you get from this launch
2:42eventually starts wearing off as early
2:45adopters are looking out for something
2:46new if you don't have instant High
2:48retention nobody does for what you are
2:51building then you'll enter the through
2:53of Sorrow this can take a long time and
2:56many companies die during this stage
2:57they just give up and don't move fast
3:00enough with testing new things some
3:02startups do move fast enough and release
3:05new improvements of their product
3:06they'll listen to users and they improve
3:08many still don't get anywhere further
3:10and becomes victims of the crash of
3:12ineptitude it's the founders to stay the
3:14course and don't give up that reaches
3:17the Wiggles of false hope and eventually
3:18the promised land of crack Market fit
3:20the learnings we draw from the start
3:21curve is that every moment in the early
3:24days of startups the founders are the
3:26ones that make the difference between
3:28success and failures if you are in the
3:30wrong Market
3:31it's the founders that switch to a new
3:33one and if you don't know how to do
3:35sales it's the founders who learn so you
3:37have to really want it otherwise this
3:39won't work all right let's talk about
3:41sales and how to do sales first Founders
3:44should learn how to do sales you should
3:47learn how to do sales because you'll
3:49need to learn to know your customer
3:50talking to customers and sales are
3:52effectively different sides of the same
3:54coin and the same reasons Founders can't
3:56understand what to build they don't
3:58understand what the problem is you don't
3:59know how to sell unless you know your
4:02customers two learning how to do sales
4:04actually gives you full control of your
4:07destiny as a startup just like you can't
4:09Outsource engineering sales has to be
4:11part of the DNA of the founders
4:13sometimes you just have to learn it as a
4:15result you should not hire a sales team
4:17until you know how to do sales yourself
4:19only then will you know what good looks
4:22like you also can't do sales if you
4:24practice bad and you won't know if the
4:26product is bad unless you've had some
4:28effort in trying to sell it first if you
4:30don't know how to sell don't worry you
4:31you can learn it's probably the easiest
4:33job to learn in startup if you know the
4:35problem you're solving if you know
4:37you're product intimately if you know
4:40the market you are an expert in the eyes
4:42of the customer they will want to hear
4:45what you have to say finally a love for
4:47solving customer problems is really
4:49infectious if you're really passionate
4:52about solving this problem they will be
4:54able to tell if you don't believe me
4:55here are some examples of Founders who
4:57took on the sales job and learned to get
5:00really good at it so Tony from doordash
5:02matild from front Tracy from plangrid
5:05and Steve Jobs let's get straight into
5:07an example so these are the brex
5:09founders Pedro and henrique when brex
5:11was in wycomner in Winter of 2017 they
5:14recruit the first 10 customers directly
5:16from the YC batch June YC you have the
5:19benefit of being around other startups
5:21I.E potential customers the brex
5:22founders asked themselves what would the
5:24minimum product look like that they can
5:26build to be useful to other startups and
5:28then they went with strain straight into
5:30signing up those customers the first
5:32version was very very simple customers
5:34just had a virtual credit card and
5:36Enrique from brex actively onboarded
5:38everyone of the customers himself of
5:40course they could have waited until they
5:42had a full-blown product a website a
5:44Mobile app all of those things but they
5:46decided to get going when they have
5:48something that was really useful this is
5:50how their first physical card looked
5:51like this before they had this card they
5:53just had a virtual card Rex reached out
5:55to the their YC batch and otherwise the
5:58companies and this is the email that
5:59they sent I'm just going to read a brief
6:01portion of it hey guys we're opening up
6:03our beta for winter 17 batch friends
6:05with the 10 spots for beta users 10 spot
6:08this sounds like there's a limited spot
6:10so I should take actions brex is a
6:11corporate credit card focused on
6:13technology companies that's me perfect
6:15you're actually writing the email
6:17directly towards your customers we don't
6:19require a personal guarantee it can
6:21underwrite startups who just got started
6:23this was the value prop most other
6:25alternatives to brex did not have
6:27something like this so how much does it
6:29cost it's free the merchants are paying
6:31us so there's zero Annual fees this
6:33seems like a no-brainer I would argue
6:35that this email is probably a little bit
6:37too long but it did work so let's talk
6:39about how to write a great sales email
6:41so first it should be short Max 6 to 8
6:45sentences the brexit sample on the
6:47previous slide is probably too long it
6:48still worked but probably too long
6:50people don't have time to read long
6:52emails if you're coming out of Academia
6:55your culture is going to be very
6:56different you write very long emails but
6:58in the world of sales you want to get to
7:00the point and be brief as much as you
7:02can two you want to make sure you have
7:04clear language no jargon no buzzwords
7:07just say exactly what you do and how it
7:09works and then three address the problem
7:12that the potential customer is having
7:14four do not use any HTML formatting
7:16write your email in plain text only like
7:18you would written it to a friend say you
7:20are the founder of the company who makes
7:22this product many people forget to do
7:24this describe why you and your team are
7:27impressive include social proof and
7:29remember to show not tell don't say
7:31you're an expert don't say how many
7:33years that you have been an expert if
7:35you're in the YC match if you worked at
7:37impressive companies in the past those
7:38are other piece of social proof that you
7:40can include you won't include a couple
7:42of these ones so that the reader knows
7:45the source and even if they don't know
7:47you gives assign you some authority six
7:49you want to include a link to your
7:51website the website needs to be simple
7:53you have to have information about the
7:56product the website should not have a
7:58lot of drawings or sort of like paid for
8:01graphics you should just have
8:02screenshots from your product and
8:04bullets about what your product does
8:06sometimes it works to send a short video
8:08a YouTube video that you can embed in
8:10the email that's very easy for the
8:11receiver to click on and View and I've
8:14even seen people using gifs now those
8:16videos and those gifs needs to get to
8:18the point right away because the the
8:20receiver is kind of intimately familiar
8:22with the problem but not really have
8:23time to watch two or three or four
8:25minutes of a potential solution and then
8:27finally you want to include and ask for
8:29a call or a meeting or a self-serve
8:31whether whatever is appropriate for your
8:33company but there needs to be a call to
8:35action in the email that you're sending
8:37all right let's talk about the sales
8:38funnel the concept of sales funnels is
8:40really quite easy I think people get
8:42confused by the language the sales
8:44people are using so I try to simplify it
8:46here on the left hand side I call it the
8:48founder speak on the right hand side I
8:51call it the sales speak these are not
8:52going to be perfectly mapping but you
8:54get the idea so first you want to make a
8:57list of customers you plan to reach out
8:59to in sales it's called prospecting or
9:01lead generation we'll just call it make
9:03it the list and you can use Google
9:04spreadsheets or something like that to
9:06make this list then we want to send them
9:08an email or a LinkedIn message or add
9:10them on LinkedIn or whatever is the
9:12appropriate way to contact these people
9:13after that you want to schedule and run
9:15a demo or a meeting from that response
9:18to the email and then you want to talk
9:19pricing and then finally close them as a
9:21customer the last thing which you should
9:22not forget is after you've closed them
9:24you still need to onboard them to make
9:26sure that they start using your product
9:28if this is successful and you have good
9:30retention that could lead to long-term
9:31Revenue if you forget the last step then
9:34you will have lots of churn because
9:35people don't actually know how to use
9:36your product and this is common with
9:38early products because they are not easy
9:40to onboard in the beginning this is not
9:42something you spend a lot of time
9:43optimizing so make sure that you do the
9:45onboarding as part of this process if
9:47you go back to the Google spreadsheets
9:49that I'm that I'm making that I'm
9:51putting in all the information you
9:52should start simple but you should have
9:54some Columns of things that you're
9:56tracking so industry uh the company the
9:59title the name the email maybe the
10:01LinkedIn this could be enough to start
10:03with a lot of CRM software comes with
10:06these categories so these columns it's
10:09pretty good idea to kind of use a simple
10:10CRM software
10:12um to kind of accomplish the same goal
10:14but the key thing here is doing this
10:16work up front and I've seen a lot of YC
10:18Founders that when they are getting to a
10:20thousand of these they're like oh this
10:22is a very simple task I can actually
10:24Outsource this and I think that can work
10:26if you know exactly what it is you're
10:28Outsourcing storing all this information
10:30is going to be helpful for you in the
10:31future now I made my list I understand
10:34this the sales funnel so who should I be
10:37going after and how should I be
10:38prioritizing as I'm doing the Outreach
10:41here's my most important advice when it
10:42comes to sales your first customers
10:44should be your easiest this is not the
10:47time to bite off the hardest one
10:49focus on the easiest ones what I mean by
10:51that is you should try to do sales
10:53make the sales processes easy for you as
10:55you possibly can startups don't really
10:58have time to chase every lead there's a
11:00lot of leads out there you you don't
11:02have to pick all of them you really
11:03don't you're so early you can pick only
11:06the ones that are the most likely to
11:07close the best way to do this I have a
11:09big pipeline where that means a lot of
11:11people that you're emailing are
11:13potential customers and then as you're
11:15getting responses and you're getting to
11:16meetings start prioritizing those who
11:18are the most likely to close you can
11:21probably tell from their answers to your
11:23qualifying questions during the sales
11:24call
11:25avoid those who are moving slow and
11:28don't be afraid of letting customers go
11:31don't be afraid of letting customers go
11:32what I mean by that is that if someone
11:34is dragging you along two or three calls
11:36you can always be like it's been great
11:37getting to know you
11:39um and I've learned a lot but
11:41um we should talk again in six months
11:43that's totally fine to say two
11:45selling to people you know is going to
11:48be easy to selling to strangers so you
11:50should take advantage of your network
11:51three selling to startups is the easiest
11:55category and I've I've learned this On
11:57and On Again with YC company
11:59specifically the ones that sell software
12:01it just turns out that bigger companies
12:04have more bureaucracy more processes
12:07they even have a specific Department
12:09that is in charge of negotiating with
12:11you and that takes a long time and
12:13startups don't have any of these things
12:14because they don't have time to create
12:15these things but it's not a priority for
12:17them
12:18so startups have short decision-making
12:19lines you can often find that the
12:22decision maker right away as you do in
12:24the Outreach and you don't have to go
12:25through a difficult process that's why
12:28startups are easier and that's why we
12:30recommend most companies to sell to
12:32startups at least leads me to the fourth
12:34Point most people are not early adopters
12:39and I keep saying this to the white
12:40companies I work with all the time the
12:42reason you have to sell send hundreds of
12:44emails is not that most of those people
12:47get really upset and be like I can't
12:49believe you emailed me like I really
12:50love this alternative product by hate
12:52your product that's not what's going on
12:53most people they email are just be like
12:56archive they just don't care they're not
12:59going to try a new product that comes in
13:01through your LinkedIn or your email and
13:03they might not be the people that try a
13:04new product at all in their career
13:06that's most people some other people I
13:08remember being one of those people when
13:09I worked at Airbnb I would love when
13:11founders emailed me with new new
13:13products and I would be the one signing
13:15up for them so
13:17when I worked Airbnb and you were a
13:19startup email me was great I am an early
13:21adopter I love trying new things I don't
13:23mind the risk of trying new things so
13:26for every outbound uh to an average
13:28company that you send you will mostly
13:30like most likely on the average outbound
13:32average email average LinkedIn reach
13:35someone who is not an early adopter to
13:37reach early adopters you just have to
13:38send more out by messages because then
13:41you don't have time to convince anybody
13:43to become an early adopter you have to
13:45find Aero adopters and just go for them
13:47early on don't worry about everybody
13:49else you just don't have time to
13:50convince them let's talk about charging
13:51it's attractive for you as a founder and
13:54for your company to offer your product
13:56for free offer free trials or unpaid
13:59pilots and these things come in many
14:02shapes and forms however if you don't
14:05charge your customers they are not a
14:08customer and you don't have a company
14:10customers paying you money is a great
14:13sign that you're providing them real
14:15value
14:15so you should resist the fear of getting
14:18a no because of price
14:20instead of figuring out what the price
14:21should be if they don't want to pay and
14:24you learn this during the qualification
14:26process in the first call or the first
14:28meeting
14:29if they don't want to pay that's a great
14:31sign that you should move on to the next
14:34customer
14:35again fire the ones who seem like
14:37they're not good fit move on to the next
14:39customers
14:40free trials are common for consumers but
14:43if you thought about it most consumer
14:46free trials ask for the credit card up
14:48front and then we forget and then we pay
14:50anyway
14:51that's because that actually works the
14:53best the bdb version of this
14:55is a better one than a free trial is a
14:58money back guarantee so we charge you if
15:01you're not happy you can get the money
15:03back in 30 days so 60 days
15:05um or even better you have the ability
15:07to opt out from the annual contract you
15:09just pay for one month instead of the
15:10annual fee but you should not offer free
15:13trials in B2B sales go for a money back
15:15guarantee and go for the ability to opt
15:17out instead increasing your price until
15:20your customers are complaining but still
15:22paying is the right way to go all right
15:24let's talk about the thing that most
15:27Founders get wrong I've seen as many
15:28times but there are a few things that
15:29most wanted to get wrong and this is one
15:30of them working backwards from your goal
15:33with your sales funnel in order to work
15:35your way backwards from a goal of say
15:38two signed customers you have to
15:39understand that each step in the sales
15:42funnel is going to have a drop-off when
15:44you haven't started sales yet you don't
15:46know what these draft off percentages
15:49are maybe you haven't done a lot of
15:50sales before you don't know what you're
15:52not good at maybe you're really good at
15:54sending emails but really bad at closing
15:55or vice versa you don't know that so as
15:58you're sending these outbound emails you
16:01need to take notes and start tracking
16:03all of these conversions in this example
16:05I'm sending 500 Outreach emails or
16:08LinkedIn messages I have a 50 open rate
16:10that means 250 people will open the
16:13email five percent will respond that's
16:15about 20 potential customers 50 of those
16:18will convert to demo from the response
16:20which means I'm doing 10 demos that's
16:22pretty good but I'm not that good at
16:24doing demos only two end up becoming
16:26customers from the demos that's 20 I bet
16:29you most of you don't even track this
16:31data but you should if you track this
16:33data you will have some idea of how long
16:35it will take to get to 10 paying
16:37customers if you don't track this it's
16:39very hard for someone to give you
16:40feedback of what's working and not
16:41working right it's just like when you're
16:43launching a new product you want to have
16:45some metrics and some user data to be
16:47able to tell if it's working when you're
16:49doing sales you want to have this data
16:50if you have this data people will be
16:52able to give you feedback on what what
16:53you're good at and what you need to get
16:54get better at my advice is to use a
16:57simple sales CRM software that tracks
16:59these conversion rates automatically
17:00let's look at the same second example
17:02this is how it looks like for most
17:04startups even the ones that I work with
17:06in the batch in the second example I'm
17:07sending 100 Outreach email it feels like
17:09a lot to me if I keep the conversion
17:11rates constant from the previous example
17:13I actually end up with zero customers
17:15and the conclusion the founders draw
17:16after this is that sales is not working
17:19for me and I should just do marketing or
17:21SEO or something else or referrals or
17:23something that sounds attractive this is
17:24simply wrong you don't have the data to
17:26make that call you did not do enough
17:28Outreach to actually get to correct
17:30conversion rate percentages in your
17:32sales funnel so the answer here is you
17:34sent a few minutes too few emails you
17:36don't have the data you can't draw the
17:38conclusion that sales is not working
17:39even though you have serial customers
17:41and this is the mistake that funders do
17:43on and on and on again so to summarize
17:45what I just went through here you don't
17:47know your sales conversion rate that's
17:49why you need a CRM to keep track of it
17:51two because you don't know who is an
17:54early adopter you have a lot of drop off
17:55in the outbound sales that makes up on
17:58sales ultimately a numbers game and
18:00successful startups we like this and
18:01internalize this three you cannot close
18:03five customers from 10 leads it's not
18:05possible you need a lot more app on than
18:07that a lot more and unfortunately most
18:10finders don't work their way backwards
18:11from this sales funnel and they don't do
18:14this exercise and the result they don't
18:16succeed as sales and they don't really
18:18know why so a friend of mine from Airbnb
18:20Atlanta rashitzki he writes an excellent
18:22blog and he wrote a great blog post
18:24about how YC and a bunch of non-yc B2B
18:27startups
18:28um got their sales go to market strategy
18:31going I recommend reading this and other
18:32posts uh newsletter it's it's one of the
18:35best ones I've come across it has a lot
18:37of real data that he collected from real
18:39companies uh many of them being YC
18:41companies so in this example here in the
18:43second column Lenny is describing the
18:46initial sales motion of some of these
18:47companies as you can see some of the
18:49early ones like amplitude stripe front
18:52they were doing app on sales emails just
18:54like the one we described to get started
18:56those Founders were doing those sales
18:57emails as they get started some of the
18:59other ones was called Product LED
19:01product LED could mean something else
19:03than just doing up on sales but it
19:05doesn't mean having a big sales team and
19:07it usually does not mean doing marketing
19:09or SEO or something else practically it
19:12means something that the product itself
19:13is is sort of like driving the growth as
19:16you're running the demo
19:18um your goal is to close your first
19:19customers
19:20you want to ask a lot of questions up
19:22front in the demos and there's the
19:24founders who should do the demos because
19:25you are the one knowing the product and
19:28you know the customer pain points here
19:30are three examples of YC emails that led
19:33to customers so I'll let you guys look
19:35at the details of these afterwards but
19:37this is an app on email that led to uh
19:3972 000 a year contract this one LED is a
19:42very specific email that led to out
19:44Landing a goalie as a customer and this
19:47third example here is the one email the
19:49same email they got them 22 different
19:50customers all right I'm going to
19:52summarize this again the biggest
19:54mistakes that most finders do is they
19:55don't do enough Outreach because they
19:57don't work package from the goal
19:59believing that something else then sales
20:00is going to solve your sales problem
20:02Outsourcing sales is wrong you should do
20:04it yourself and you need to qualify your
20:07customers during your first call here
20:08are some of the tools I recommend so
20:10there are many many many tools this is
20:12perhaps one of the biggest categories of
20:14potential things you could use as you're
20:16doing sales but I recommend apollo.io
20:18close.com formerly called closed.io
20:21pipedrive or hunter.io these are great
20:24tools that you can use either as a
20:26simple sales CRM or Hunter you can use
20:28to get contacts or potential people to
20:31email from LinkedIn here are two
20:33additional resources if some people ask
20:34me for books usually there aren't good
20:36books but there is actually one that I
20:37come across I find really good it's
20:38called founding sales and then I also
20:40recommend lineage newsletter.com there
20:43are of course other ways that you can
20:44grow as a startup but the truth that
20:47I've learned is that even if you end up
20:49with say like Airbnb where the sources
20:53of growth is Word of Mouth Google search
20:56referrals Facebook advertising if those
21:00are the kind of end states of your
21:02growth strategy that's not how ambica
21:05started they didn't start by running
21:06Google sem or Google SEO
21:08the referral program did not bring in
21:10the first 2000 customers they did things
21:13that didn't scale and they looked
21:15different than the one they do at scale
21:17so a lot of companies are shorting
21:19straight into What's called the scalable
21:21growth channels the channels that
21:22they've heard work which is true at
21:25scale but that's not the same thing as
21:27when you're getting started so in this
21:30slide I'm outlining kind of like just a
21:32rough idea of like even if it turns out
21:35the Google sem and Google SEO is what's
21:37going to work at scale you need to find
21:38another place online where these people
21:40that you're going to reach through sem
21:42and SEO is identifying themselves online
21:44right and that might not be the same as
21:46Google if you're trying to go after sem
21:49which means search engine marketing it's
21:51going to be expensive probably because
21:52there's competition if you're going
21:54after SEO it's going to take a long time
21:56if your growth is say proc LED or
21:59virality referrals then personal
22:02networks selling through your personal
22:03Network to your co-workers is the way to
22:06get started of course if you're doing
22:07sales you should be doing sales it
22:08doesn't change very much like early
22:10stage sales to to large sales basically
22:13means all the things that I just
22:14described here
22:15done by 100 people in a sales team with
22:17more automation more tools more metrics
22:19but it's the same thing and if you
22:21practice setup to do online marketing
22:23it's not usually how most people start
22:25why because you can't really easily talk
22:28to people you can't learn from users if
22:32the first thousand or first-handed
22:33customers are brought in through Google
22:34and Facebook those people are not the
22:36kind of people that you can easily get
22:38on a 30 minute phone call with all right
22:40that's all I had today thank you
22:42everyone
22:45foreign
22:47[Music]

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