How to sell your business idea to your customers & investors

How to sell your business idea to your customers / investors

Aki InkeroinenSanteri Muhonen

Espeo Software

Contents of the Workshop

• Background

• Typical Startup

• Business Challenges

• Growth Enablement

• Selling to Your Customers

• Selling to Investors

• Software Development for Scalability

Background

Aki - background

• Business development, sales and sales management

• Experience of how to create exponential growth

• Several large international ICT enterprises

• EdTech gamification startup

• Software houses

My current role:

• Responsible for Espeo Software business in Finland

• Daily contacts to dozens of startups

Santeri - background

• Sales in B2B, B2C over the last decade

• Software, Tech, CRM, Security, Blockchain

My current role:

• Sales Development Representative

• Lead hunting & refinement

• Development of business processes

Espeo Software

• Polish company with Finnish roots. Founded 2008

• Combines the Finnish business and software consulting

with the Polish programming skills

• With a number of Finnish customers we have done

close cooperation over 8 years

• Sanoma Oikotie jobs, Janton, Ottoboni, Solita, YLE,

Startups, Advertizing agencies and Industrial customers

• We know startups well – during the last 2 years we have

started software development for 14 new Finnish

startups

• We have clients also in other Nordic countries, in

Central Europe, Asia and in the USA

Typical Startup

Typical Startup Company

• Innovative business idea

• Group of persons with different skills

• Not always enough experience

• Money and time constraint

• Need to show the business potential to the investors

• After investment rounds, needs more resources and

external experience to solve the bottlenecks

• When the success hits – often impossible to get

resources fast enough to enable the growth

Business Challenges

Our Targets for Success

• Every startup employee able to use his/her skills

• Successful selling to end customers

• Investors’ development expectations fulfilled

• Fast development cycles of the product / company

• Scalable resourcing when success peak hits

• Internalization and scalability of the products and

organization

• Exponential growth with correct actions done

Key Growth Issues with Startups

1. Bad business idea. No money

2. Wrong timing vs. competition

3. Not able to show validity for investments

• Not fast enough vs. competitors

• Missing product features

• Incomplete / inexperienced team

• Solution scalability problems

4. Missing monetizing of the solution

5. Design or user interface help needed

6. Suitable partnering for growth

7. Support and maintenance of the solution

Growth Enablement

Startup Team

Startup needs the following resources:

• Business idea owner, quite often the founder

• Technology owner, technical viability

• Monetizing owner, profitability of the product

• Solution sales owner, selling and partnering

• Potentially a set of own software developers

• Team of experienced advisors, for creating contacts

Time

Re

ve

nu

e

Target

Growth

Start and Scaling

Digitalization

Software development & digitalization

• Digitalization creates visibility & added value

• Good to think in early stages of you startup

• Even if you product is totally something else, digital

presence strengthens your company image

• Product and company image are the factors that define

if your product or solution sells at all

• Integration to payment systems generates easier cash

flow

• Almost every product or service can contain remote

management features or at least some connection to

social media

Selling to Your Customers

Lead generation

• Define your target customers

• Find the decision makers

• How and when you contact your leads depends on

who they are

• Industry events, online databases, networks

• Professional looking materials with prices

• Select the right people for the task

• Outsourcing is a common option

Selling Cycles

Solution selling

• Do NOT expect quick acceptance of your product or

your totally new company

• Selling means repeating your message to the same

potential customer 3 – 4 times before getting the order

• Selling cycles are long: 3 months to several years

• This is regardless of your target group of

customers, B2B or B2C

• Concentrate on having 1 – 3 references that can be

used to sell to others

• Check SPIN Selling or other solution selling method

• “Selling starts when the customer says no”

Don’t change your message

Keep your customer message

• Big mistake is to change your customer message or

company image too quickly

• Make a three year strategy and keep your customer

message steady

• Every time you make changes, the selling

cycle counter starts from zero

• Customers need to hear the same message

several times

• They want to see that your company and the

products still exist

• They may have selected your product, but are

in “wait and see mode” before the final

decision

Reven

ue g

row

th

Planning Activity and continuation

New business

Areas

Partners

Pricing model

Customer

references

Product MVP

Business

model

Exponential Growth - Do it once and replicate

Correct Timing

There is a correct time for every solution

• Typically there are moments where markets,

technologies or customer needs validate some specific

solution

• When this time hits the same solution is invented in

several places at the same time

• Just like singers, for example Bruce Springsteen:

• Was singing with his own style 20 years

• Suddenly, at the correct time, 1975 came well

known worldwide for 15 years

• Then disappeared back from the highlights

By Bill Ebbesen, https://en.Wikipedia.org

New Ideas

Hard work to sell

• First they ignore you, then they laugh at you, then they

fight you, then you win - Mahatma Gandhi

• Typical example. Elon Musk & Tesla and SpaceX

• Both start to be in the “win” phase

Competitors are needed

• Competitors create credibility

• Customers buy when they see also some

alternative products

• Investors believe that you startup has potential

for growth

• You can verify the validity of your solution

Courtesy Tesla & SpaceX

Be Fast. Copy from Others

Be fast

• … when you get money. Investors expect results in

months.

• You may not have time to recruit new resources

Fail fast

• Fail fast internally. Learn from failures.

• Do not show it to the customers

Copy from others

• Use your valuable own resources for business (idea)

development

• Copy the best practices from others

• Use external professional skills effectively

Organize when growing

Adapt to markets and grow

• Do actions for growth consistently

• When in “small startup mode” you need to be able to

adapt your resourcing very quickly according to

the needs

• In small startup everyone knows each other

• Larger company needs processes

• Standardized processes are needed and enable

your company growth after approx. 40 employees

• It might also be useful to hire a new CEO

Selling to Investors

Investment rounds

Pitching needed at every stage

• You need to show consistent results at every stage

• Critical thing is to keep the promises

• Try to be realistic of what you promise

• Failing is possible at every stage

• Investors follow carefully the personalities and skills

in your team

• Also your team need to show development during

the company growth

The Pitch

Prepare well

• Investors see many pitches yearly

• Make sure your core message and important information is available

The Pitch

A good blueprint for a pitch goes something along the lines of:

• There is a problem in the market

• We have a solution

• The solution has a large (enough) market

• We have a good team for the work ahead

• Where a profitable business can be built with the right model

• There are competitors, but we are better and we stand out

• We have already got this far

• We want to be more - which is why we seek an investment/expertise/contacts

Example of the pitch structure: etula.fi/pdfs/pitch_en.pptx

Funding

Investor Profile

• Early funding rounds are usually from

business angels

• On average a person between 35-65

• Has worked in management of a large

company or as an entrepreneur

• When planning a pitch, take this into account.

Soft values not a priority in the pitch, focus on

fact and info relevant to growth and scalability

• Angel investors usually seek between 10%

and 40% of shares

• Investments from venture capital companies

are more common at later stages of a start-

ups development

Valuation

Valuation refers to how much money your company and all its assets such as

IPR is worth. In Finland valuation generally refers to a pre money valuation or

how much the company is worth before an investment.

A post money valuation is a sum of the following factors:

Pre money valuation

+ Private equity investment

+ Sweat equity investment

+ Network equity investment

= Post money valuation

A post money valuation is different for almost every investor. The post money

valuation is based on how much added value an investor brings into your

company.

Valuation

Valuation is something entrepreneurs should not do themselves. Most times

they get it wrong, and this often leads to investors losing interest. A good

resource is a free tool called Angeltool.

Without a valuation tool you can use the following as a good rulebook:

1: Great idea - A powerpoint presentation: 100 000 €

2: Working MVP or prototype: 250 000 €

3: Working product in market with proven sales: 500 000 €

4: Stabilised business - established sales: 1 200 000 €

http://etula.fi/pdfs/guide_to_finding_an_angel_investment.pdf

http://angeltool.org/#/new

Valuation gap

• What is a valuation gap and how it is formed?

Companies seek to maximize valuation and hold on to as many shares as

possible. Investors want to minimize valuation to increase the amount of their

profits.

Things to look out for

• A bad valuation can lead to difficulty in next rounds of investment and drive

a company into a financial dead end. Don't overvalue your company even if

the investor would give you the money!

• A valuation gap is the main reason why negotiations between investors and

start-ups fail

Best places to look for an investment

• FiBAN - Companies of all sizes, usually turnover under 1M €, mostly

Finnish angel investors

• Arctic 15 -Startups and growth companies, business focused

• Kasvu Open -Focused on Start-again companies

• Slush -Start-ups, large investment need, over 0,5M €. International

investors

• Vigo-accelerators -Several different accelerators focused on the field or

investment phases

For later investment rounds new possibilities arise:

• Crowdfunding via “traditional” channels - Kickstarter

• Venture capital companies

• Crowdfunding via new channels: ICO’s

ICOs as an option for funding

• ICOs are similar in some ways to a crowdfunding campaign

• Unlike Crowdfunder or Kickstarter digital tokens are offered

• Tokens have varied uses - are often tradable

• Funding often received via other cryptocurrencies

• Most commonly in Bitcoin or Ether.

• ICOs have raised 3,2 billion $ of funds in 2017 alone

Software Development for Scalability

Spaghetti code and bottlenecks

Spaghetti code

• Inexperienced software developers

• Need to get more features into the product

• Need to show credibility to the investors

• All these result as a spaghetti code

Bottlenecks

• Need to fix the code

• Need to grow fast

• No time to recruit

• Scalable resourcing helps

Monetarization & Integrations

Monetarization

This is the point where you make your money!

• Web shops

• Payment systems integrations

• Payment security solutions

Integrations

This is the way how you increase the visibility and

popularity of your solution

• Integrations to partners' systems

• Integerations to social media

• General API available for connections

• Open documentation / interfaces for development

Scalability and testing

Downscaling

• After one investment round product has reached the

specified level of functions and features

• Development resources need to go down quickly

• Product goes into field testing mode

Testing the product

• Testing the product with real customers mean support

functions and feedback collection

• Selling starts for new level of investments

Upscaling

• New investment round means quick upscaling to the

same or higher level as earlier

Solution for scaling

• The cost level of the software development can

be halved by using nearshoring

• Spaghetti code cleanup and redesign is done

quickly by experienced software developers

• Business idea validity can be checked at

workshops and bootcamps with business and

software consultants

• When the growth need hits, external resources

can be delivered fast

• External developers can be scaled according to

the needs

• The whole solution development can be

outsourced and the own team can concentrate on

finalizing the business idea

Thank you

Aki & Santeri

www.espeo.eu