When I was 22, I launched my first tech startup. I was working in civil engineering by day, and coding on nights and weekends. I was both sales and development. At 25, I went full-time. I owned sales while my partner owned development. All of my initial sales — a bunch of $500-$5,000 websites — were through friends and family connections.
While networking one day, I met an executive from a large hospitality company. I told her what I did, and she invited me to come meet with her about a project she was about to put out for proposals. Next thing you know, my partner and I are writing a 7-figure proposal. During the interview, the hospitality executive asked me why she should give us the business when Microsoft and IBM had given her very similar proposals. I was 25… I said “I don’t see their CEOs here! Must not be that important to them.”
I closed the deal a week later. It was not easy. For the next month, I almost lost the project every day. Procurement kicked my butt. I learned about payment terms, default-cure language, insurance, and more. It was a whole new world. I also learned how to negotiate beyond price, scope, and schedule.
Entrepreneurs: in order for your startup to be a success, your first $1m in sales MUST be executed by a founder of the company. It can’t be delegated. The first $1m is critical — not just from a cash perspective, but as a learning experience.
With this in mind, here’s my simple method for how to scale the sales process:
Sell your friends and family (first $250k).
Sell a stranger (next $750k).
Hire a stranger to sell strangers.
These are warm intros; people who will take a risk on YOU, and not necessarily the business. It’s your opportunity to build references and shape your product. If you don’t have friends and family that will help you sell, then you shouldn’t launch your startup in the first place. Again, this stage can’t be delegated. The marketing messages and case studies you create during this stage are as important as the cash you secure. This process will also help you create focus on your first market. Identifying your first market is critical.
Understanding lead generation, sales methodology, and delivery is crucial. This is your chance to document and iterate your process. This process iteration also helps you develop your metrics (cash in, cash out, and how long). Run your business like it’s a cash business. There is so much learning in this phase that it can’t be outsourced. Oh, you aren’t a salesperson? Too bad. That’s the job. If you’re unwilling to sell, you should go back to your day job.
Now that you understand the process, timing, and delivery lifecycle, you can teach a stranger. Your first sales hire! That’s the next blog post.
In our venture capital firm, we like to see founders that have followed a similar process. A red flag is if they believe that they need to hire a salesperson without having sold anything themselves.
Written by KP Reddy, Founder and CEO of Shadow Ventures
