In an overly simplistic summary, I am offering to work with companies under a performance-based contract that requires payment only when something is sold. It is backed by an agreement that is cancelable, with a 30-day written notice, if I don’t produce the agreed upon performance metrics. The macro trends that make me think this is an interesting approach in today’s environment are as follows:
1. Higher interest rates and less availability to capital is making seed funding harder to secure 2. Investors are aligning with more efficient and cost-conscious startups 3. Runway and cashflow are more important than ever because funding rounds are taking longer
So, do you think this is an interesting approach or am I missing something? As an aside, I have been a long time reader of HN and I am so grateful for the interesting, intelligent, and thought provoking comments. Thank you in advance for any you may offer to my post!
Most startups don't have product market fit. Further, most startups make things no one wants. The product might sound good to you and you will think "oh I can sell this", but you will work your ass off for no results.
They you may go back to the client and say "Hey the market doesn't want your product, they want this instead". Now you are doing free market research for them, and most likely, they won't listen to you anyways.
You may think "okay I need to be good at identifying startups struggling to sell who have products people want" and then you may realize there's a whole industry of VCs trying to do this, that mostly suck at it.
I think you'll find that young companies with products people want who are struggling to sell is extremely rare.
There's a reason the business model your suggesting isn't more prevalent with startups, and it's because sales skills matter far less than market fit.
Most good founders (regardless of market fit) should be figuring out sales engines themselves. Especially the first version.
I would not invest in a company where the founder is trying to offload sales. Precisely because, as mentioned, sales, market fit and product are so deeply interlinked.
Sort of, but not in the way you are thinking about it.
People want help with this yes, but they shouldn't be outsourcing it.
The founder needs to ask literally thousands of questions to the market (can vary depending on how simple or complex the market is). If they haven't asked these questions, then they shouldn't be outsourcing it.
If they have asked all the questions, they know who to approach, what to say, how to say it. Then they can hire consultants to help them build the sale engine, which is actually all about adopting the best tools, distributing work, hiring, performance management, incentive structure, etc.
The parts that are specific to the startup (who to connect with, what to ask, what to say) need to be figured out by the startup and done by the founders. The parts that are more generic to all companies (hiring, training, performance management, team structure, tool stacking). Can be outsourced, and probably should be if the founders don't know how to do these things or really don't want to.
Edit 2:
The reason the founders shouldn't be outsourcing this, is that the founders are the ones to decide which part of the market to focus on and what to prioritize in the product. If they try and outsource it to someone else, there is an extra layer of noise in the communication between the two.
There is also this thing called the innovators bias (lots of cognitive biases really) that will exacerbate the situation because the founders with the power will over-weight their own incorrect instincts against what they hear from one person (consultant), but they will more appropriate weight their instincts against what they hear from dozens to hundreds of actual possible customers.
So the regret comes from wasting a lot of money. Always do your own sales first.
If you have an excellent sense for products then the model might work, but I've seen some of the smartest people I've ever met walk right into a wall, even when doing everything they can to reach/verify the fit. It's an incredibly hard problem
> Most startups don't have product market fit. Further, most startups make things no one wants. The product might sound good to you and you will think "oh I can sell this", but you will work your ass off for no results.
For these exact reasons, this same business model would probably work really well if you were instead connecting pre-seed / seed round startups with VCs who commit to a round instead of customers lol
If you're really drawn to this model, just beware the MLM ones where you have to pay first to sell the product.
maybe they should focus on. growth stage startups? frankly, even incumbant who are perpetually trying to play catchup and are more startup like in their core teams via transformation maturity and have what startups don't have, market fit and deep pockets.
target the enterprise b2b orgs in private equity portfolios.
edit: https://www.reddit.com/r/sales/comments/146gjwu/what_the_hel...
Turns out that I hate sales. Not coincdentally, I'm also not much good at it. We talked to some marketing agencies, but all of them wanted flat fees, and none of them would consider "performance based" payment.
So, yeah. I wish someone like you had existed at the time.
There is no magic wand to this. You just learn sales by doing. I am a nerd myself but when I started my company, I automatically started selling which is mostly just trying to talk to potential customers and understanding if your product can solve their problems. Only you know that best in early days.
The reason why many sell themselves is because it's cheaper. The founder knowing the product the best is true but trying to be a world class seller is best left to those who can be a world class seller which many founders fail at.
The investor side of me thinks the founders should be doing early sales. I don't agree that capital is any harder to raise. IMHO market turmoil is good for angel/seed as those with means are looking for alternatives.
However, for a company with PMF, if you have industry connections, and can help them get a short term boost of deal flow, I could see that being very attractive.
Helping first time founders setup any sales process at all can also be viable. You help them refine their closing process, hire on their team, and then move on.
If you have the taste to find that sweet spot you’ll do great. That said, this level of taste is most often deployed alongside venture capital where you’ll work less and make way more.
If your taste isn’t good then you should build a highly effective cheap rapid assessment tool out of your business so that the tool can tell you what’s good fast. Which is a thing many venture firms do or have tried to do, for obvious reasons.
Upshot: sure, give it a try. I suggest you negotiate for some options along with your cash comp for being ‘free’, because even a great venture portfolio hits like 1 in 20.
They didn't understand our product and had no desire to understand our product. I advocated to end the contract with them, but management refused.
So I think I would want some verbiage in the contract that says I can just walk away if I don't think it is working out. I understand you need to protect your interest too, but I wouldn't want to get strung along by someone who is just not willing to put in the work.
OP will have multiple clients. OP’s sales employees will get to choose which things to sell.
OP’s customer still has to do a lot of work to bring OP’s salespeople up to speed at all, and even more if they want to be successful/“compete” with OP’s other customers for OP’s salespeoples’ attention/effort.
It can be a good business model for OP if he can get it, but as has been mentioned elsewhere seasoned potential customers will not, and should not generally, bite.
The downside for OP is once the sales process starts working, his customer grows, probably hires in-house sales staff, trains them off OP’s work, and cuts his contract, so he is always having to work to bring in new.
I might have tried a service like you're proposing when our company was very small.
Now that it's bigger, we have revenue goals that we need to hit, and I wouldn't want to hire someone for free to help hit important KPIs. If a larger company does engage with this model, it would probably be to supplement an existing revenue stream I would imagine.
I think the biggest risk with the model you're proposing is that it's more appealing to small companies who are more likely to not have reached PMF yet, and therefore have products that are more difficult for you to sell compared to more established companies.
I've played with the idea of this model myself, in the sense that it would be an interesting value-creating service. I'm open and also skeptical.
1) My product is software, you were in hardware. 2) Do you have a large existing rolodex? 3) How many startups do you plan on representing? 4) Where are you from & where are you located?
I'm not shy of talking to people. The biggest help for me would be prospecting and qualifying.
I'm in a rush, please reach out! Email in profile.
It might work for a product that’s already found a segment and is looking for new markets.
There's an adverse selection problem where the businesses that aren't market ready are the ones most likely to be intrigued by the idea of someone who isn't an employee and doesn't cost anything doing their sales for them.
Outsourcing sales to a person with competing incentives is even worse...by competing incentives, if you have ten clients for your service one of them is easiest to sell. Nine of them are not the easiest.
Good luck.