A VC in Vacationland

Managing Start-Ups: Yesware helps sales people keep track of email responses

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According to Xconomy, Boston-based Yesware, which makes e-mail software for salespeople, has raised $13.5 million in a bid to accelerate its growth.

Battery Ventures led the investment, which also featured Yesware’s existing backers: Google Ventures, Foundry Group, Golden Venture Partners, and IDG Ventures. With the new cash, Yesware has raised a total of $18.5 million in venture investments.

In a blog post today, CEO Matthew Bellows says he was looking for investors who could help the startup eventually become a public company. As for immediate plans, Bellows says the details of Yesware’s growth will be revealed “in the coming months and years.”

Yesware’s product is an e-mail plugin that helps salespeople keep on top of who is reading and responding to their messages. Users also can collaborate with their co-workers and share e-mail templates.

The company now has more than 30 employees and some 300,000 users.

In a press release, Battery’s Neeraj Agrawal says the firm thinks sales software could follow the example of “marketing automation” software, which has spawned a new class of high-growth startups over the past few years.

“At Battery, we saw similar innovation in the field of marketing automation and invested in successful companies like Marketo and ExactTarget as a result—we believe sales-effectiveness will experience the same disruptive adoption curve,” he says.

Viral Loop and Other Hot Start Up Marketing Strategies

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I admit to being a bit skeptical, even after a second reading, of the Viral Loop marketing strategy as some universal rule for start up marketing.  Adam Penenberg's best seller on the subject certainly has a lot of compelling stories about the "to use it, you have to spread it" philosophy that has built some great American businesses, most notably Facebook and YouTube. After all, everyone needs an audience for their postings of the most intimate details of their lives, including real-time photos and videos.

But let's think about some variations of the viral loop theme and see how related marketing strategies might just work a lot better for your start up:

1. "Let others do the heavy lifting" strategy--here, you set up a platform to serve a relevant subgroup, like people wanting to stay fit, with all sorts of tools related to fitness.  Then you offer personal trainers the right to upload a unique exercise video, which is basically an ad for their services as well as a a good way to build up those pecs, for example. Thousands of personal trainers take up the offer, then tell their existing students about the site and voila, you have over 500K users before you know it. DailyBurn and HealthGuru are excellent examples of how to execute such a marketing strategy.
2. "I want to emulate your lifestyle" strategy--Mommy Blogs, for example, have morphed into lifestyle websites where all the aspects of raising a baby in Manhattan or some other city are presented, including products bought, services utilized and kid-friendly locations, among numerous other bits of vital information. Developing a platform where people can explore different types of lifestyles is an obvious next play.  The web sites are well developed, have a strong following (what does that say about individuality in the world...) and content updated daily. Just bring a bunch of them togther and provide the tools to search for stuff/lifestyles you like. A new start up in NYC, fav&co, is doing just that. Full disclosure: the entrepeneurs work at Control Group, of which I am Board Chairman.
3. "I write the reviews and you charge me to look at them" strategy--One of my all-time favorites. You review a restaurant on Zagat and then you have to pay to see reviews you or others have written. Oh, but you give me badges, such as jetsetter, if I complete certain tasks, like reviewing European restaurants.  Big deal. The motivation is that you want to be known as a foodie, or for doing cute reviews (there is a monetary reward every so often for review creativity)
4. "Stealth" strategies--my portfolio companies are working on some interesting variations on the viral loop, including some tried and true "pay someone for bringing on new customers".  More on those later as they prove themselves out.

The Coin Drops on Shareholder Value

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My only question is why it took so long to debunk the ideas that companies should focus on maximizing shareholder value? In a recent Financial Times interview, Paul Polman, CEO of Unilever, made sure that the markets and his employees know that Unilever's first priority was the satisfaction of their customers, not shareholders.

He joins other former shareholder focused advocates, including Jack Welsh--often cited as the father of shareholder value--in distancing themselves from a short term, quarterly view of maximizing share price and tying compensation to achieving the highest possible share prices.

Mr Polman understands that if you make your customers your primary focus and happy over the long term, then your shareholders will be amply rewarded.  Nuf said.....

Does this fly in the face of Milton's Friedman's famous dictum that it is the social responsibility of companies to increase their profits?  Absolutely not, just do not do it all in the short term. 

Keys to Sales Success

One of the major challenges entrepreneurs face is selling their solutions.  Mo Bunnell has summarized the key steps quite nicely in the March 2010 edition of Consulting Magazine.  You can find his thoughts, No More Death by PowerPoint: Keys to Sales Success here.

Twitter for Business?

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No, I don't  really Twitter. A few tweets a month. Perhaps more someday when I figure out what I want to say.  I tend to be a late adopter of social networking unless it involves my family.

But Twitter for business got me thinking about whether this phenomena will translate, like IM, cell phones and related technologies.

Here's why I think it will happen in supply chain:

1. Speed--people need answers fast in today's business world and Twitter is one of the fastest ways to do it.
2. Conciseness--140 characters forces concise, clear answer...a real benefit for fast communication of critical issues.
3.  Networks--you can set up a network of suppliers and let them instantly know about changes in orders, deliveries, etc.

Having said all this, they still do not have a concept or business model for business communications solutions. We'll see if business becomes a late adopter, or some other solution emerges that trumps the Twitter world.

Marketing & Sales Strategy: Business Intelligence & Networking Solutions

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One of the big problems companies have, especially start ups, is distinguishing themselves in the marketplace.  For example, how can you best communicate the impact your technology can have in creating higher ROI and revenues for buyers?  If you do not succeed here, you can have the best technology in the world and few buyers will understand how it can make them successful.

The "old school" model was to, once you had a lead or a prospect, have the sales guys, perhaps assisted by marketing, develop some basic information on a company, its successes and its problems. The sales guy would then grab a pre sales or product management guru and head off to visit the company, hoping to make a sale based on a "few good facts". Not exactly the Marines hitting the beach...

There is an opportunity to create competitive advantage in your market by improving the access sales guys have to in-depth information on a company, its performance, the performance of the industry, the performance of its competitors, its executives(and who in your network might know them), etc, etc. The problem is that few collective sources exist that pull together information from the many necessary on-line data bases that contain all this information.  Until now...

Two new services are providing sales executives with new ways to gain much more relevant information on target companies, leading to significant advantages over less prepared competitors. Dow Jones Companies and Executives is a new offering aimed at sales professionals which combines numerous information sources to improve knowledge in the selling process. The Dow Jones solutions combines development of prospecting lists, territory management, alerts, business analysis, competitive data and executive profiles. It's not cheap, perhaps the same dollars as a marketing automation solution ($25K per year or so), but it can be invaluable if it helps close sales by having sales people be able to "customize" selling to solve specific customer problems. 

Decisionlink is another interesting start up in the business intelligence and networking space. They call their solution "Comparative Intelligence" and their web site describes the process as follows:

"Comparative Intelligence is the basis of your IQ. Comparative Intelligence tells you where companies have issues based on a comparative analysis of each company in context to their True Peer Group. By determining the issues at each of the 120,000 North American companies in our database you now have a entry point of value. This is appropriate for evaluating a solution you are bringing to market, researching the companies you want to sell, or determining your strategy and go-to-market plans. Capabilities include:

•  Analyzing your target markets, geographical territories, and individual companies across a spectrum of millions of data points with conclusions drawn for you.
• Contribution by not just you and your colleagues but by all users, for non-sensitive data, shortens your research time and provides immediate benefit even if you infrequently use the system.
• A library of sales assets and internal communication documents are at your disposal and prepopulated with content to maximize your effectiveness and minimize your effort.
• One click integration with your CRM (Customer Relationship Management) system means no more double duty as a data entry clerk for your sales and marketing field teams."

Marketing & Sales Innovators: Yext

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OK, I know a lot people think that Howard Lerman, founder of Yext is a jerk, did not invent anything, will fail, or, if you prefer add your criticism in Comments below. But hey, the guy just raised $25 million from some pretty smart VCs, including IVP (a Twitter investor--but please save the rants on that one as well for the moment). According to TechCrunch50 attendees, his demo left a judge "speechless" and resulted in a traffic jam at the podium of VCs trying to give him their business card.

So why does Dave think he is not a jerk?  Yext is already making $20 Million a year going after the Yellow Pages (YP).  There is not a more miserable example of old media trying to hang onto their water-soaked remnants of the past (has anyone out there ever received a dry YP on their doorstep?) than the YP.  Ever try using their website and get sent to the Australia YP instead of New York?  Real easy to happen, that one is. Yext is going after the YP's business with on-line ads for local businesses which generate real phone calls from people looking to use their services. Not such a great idea you say?  lots of competitors, right?

But do the competitors have the right business model? Perhaps not. At TechCrunch50, Yext previewed a pay-per-action, not a pay-per-click, business model, were the action is a relevant call that actually drives new business. I will spare you the technical details, but the platform sits behind the old-media sites like a mailbox and collects details on inbound calls for the business When a business signs up, Yext places ads in local YP websites--YellowPages.com, SuperPages.com, Local.com, etc. Responses to these ads flow through the Yext platform and are instantly available to the business for action. Wrong numbers, junk calls and (oops!) marketing calls are placed in a junk folder for the business to later sort through, just like Outlook.

Lerman is so confident that the pay-per-action model is the future for his business that he has switched all of his 20,000 customers over to the model.  That takes big you-know what's.

What's the downside?  First, Yext is only active in 12 local categories--like auto repair, chiropractors(that's a weird one), gyms, vets, and yoga, or .005 percent of YP categories. He plans to use the new venture money to expand categories, hiring sales people to go after key verticals. He also plans to be big in the mobile space and allow all sorts of apps developers to tag on new goodies.  The big challenge will come from the well funded, legacy players in this space, who will probably buy the guy out for $250 or more million and then sit on/not use/screw up the technology (think MySpace).  We'll see real soon on this one. Rupert, where are you?  This is a perfect space for you.

Redefining Fashion Sales & Supply Chains: Gilt Groupe, Quiet Logistics & Kiva Systems

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Designer clothing and accessories move through some of the most complex and expensive (read: not so green, either) sales and supply chain channels in the world.  Made in Asia or other third-world countries, shipped to European, Asian or North American distribution facilities and then sold through in-store or stand-alone boutiques, fashion products consume inordinate amounts of supply chain, sales and retail resources and costs.

With the global slump in high end fashion sales, major designers are increasing shedding "excess" merchandise to emerging online retail start ups, which specialize in "private sales" of discount designer clothing and accessories.  The Wall Street Journal recently had an interesting article on the space, entitled, Designer Bargains, for the Invited. These new companies strip away at least part of the super expensive distribution channels, generally taking excess goods from designer warehouses into their own facilities and selling the products in day-long sales at discount prices until the product runs out. The WSJ article cites discounts of as much as 50% on handbags, shoes and clothing.

The idea is that discreet sales online on members-only web sites is preferable to the designer than to have the stuff ending up at Marshall's.  For the start ups, margins are higher that retail, inventory risk is minimal and you can outsource your logistics operations to outside providers. The good news is that the online channels can reduce outbound supply chain and retail resource use, and lower operating costs, making fashion a lot more green, but a lot less profitable for designers.

That's what Gilt Groupe, one of the major players in the online retail fashion start ups, has done.  They struck a deal with Quiet Logistics, another start up that uses robotic technology from one of my portfolio companies, Kiva Systems.  Genius move.  Gilt can experience even higher margins because Quiet Logistics operating costs are much lower than traditional 3PL providers, due to the efficiencies inherent in the robotic technology.

As we look to green up our supply chains, companies like Gilt Groupe, Quiet Logistics and Kiva Systems are excellent examples of how significant reductions in supply chain resource consumption are not only possible but happening today.

Marketing & Sales Strategy: Brainshark & BrightTALK

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One of the big problems many start ups face is developing quality marketing collateral. At best, they may have a pretty good website, perhaps a brochure or two and, oh yea, numerous PowerPoint presentations.  The problem is that the founders are not always able to do a live presentation or webinar for a prospective client or funding source. Here's where Brainshark and BrightTALK comes in.

According to their website, "Brainshark is the leader in on-demand business communication solutions, with patented software that empowers businesspersons to easily transform Microsoft PowerPoint slides and other business materials into powerful, voice-enriched, interactive presentations. More than 1,000 companies, including a third of the Fortune 100, rely on Brainshark software and services to accelerate training, increase marketing response rates, shorten the sales cycle or enhance corporate communication." 

Brainshark developed the application to feed the need for leads. Lead generation was fast becoming an all-consuming job for Brainshark's marketing team. Its efforts to create awareness of the company's offerings and spark a dialogue between qualified prospects and sales were successful, but the process to manage leads and nurture them through the pipeline was clunky and cumbersome. The biggest obstacle Brainshark encountered was its use of several SaaS offerings that didn't fully integrate with each other. For example, critical prospect data housed in Salesforce.com  wasn't able to sync with other applications, thwarting marketing's efforts to utilize that information in targeted campaigns.

BrightTALK allows easy creation of webinars. As stated on their web site, "presenters can create powerful webcasts using one, two, or all of our three main business components:

1. brighttalk.com is our simple-to-use live webcast platform—built using the latest Web 2.0 principles—where business professionals create and view webcasts through BrightTALK™ Channels.

2. BrightTALK™ Conferences deliver thought leadership events focused on market areas where access to the latest information is essential to driving that industry forward. Enterprises use these conferences to generate qualified leads and associations use them to keep their members up-to-date and accredited.

3. BrightTALK™ Webcasts provide individual and customized webcasts delivered through our webcast content management system—BrightTALK™ Media Zone. You’ll work with our experienced video and audio production teams to create high-quality videos and to reduce the stress of delivering online events."

I have not personally used either software, but have positive feedback from friends that have developed enhanced marketing materials using their services.  Check them out.

Marketing & Sales Strategy: Smartsourcing for Start-ups

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One of the biggest problems start-ups have is finding enough resources to do a lot of mundane tasks, especially around marketing and sales development.  A new service may provide some inexpensive options to help build marketing collateral, sales opportunities and mailing lists in a time and cash strapped environment. 

Bellevue, WA-based Smartsheet, a project-management software firm, announced it has formed a partnership with Amazon to deliver outsourcing services to the masses. The new release, called Smartsourcing, is powered by the 100,000 virtual workers in Amazon Mechanical Turk. Each outsourced task, such as finding a list of articles, e-mail addresses, or experts on a topic, costs between $0.01 and $5.