Monday, July 6, 2015

싸이처럼 미국 시장에 진출하라!


많은 한국 분들이 저에게 미국 시장 진출을 원하는 벤처 기업에 어떤 조언을   물어보십니다.

이런 경우 저는 싸이가 강남 스타일을 얼마나 효과적으로 인터넷 (유투브)  통해 사용자를 획득했는지를 설명합니다. 싸이는 미국 진출을 위해 현지에 오피스를 열거나 미국내 비싼 마케팅 활동으로 시작하지 않았습니다. 조금 구체적으로 설명드리면,

첫째, 최소한의 마케팅과 영업 활동만으로 인터넷을 통해 먼저 트랜드에 민감한 미국 고객 (또는 해외에 있는 어얼리어답터) 사용자를 획득하였습니다. 직접적인 만남은 없이 인터넷 (유투브)만을 통해 고객과 사용자를 획득한 이상적인 경우와 비슷합니다.

둘째, 트랜디에 민감한 미국인 고객들 (또는 해외에 있는 어얼리어답터) 열정적이고 적극적인 팬으로 전환하였습니다.

이러한 초기 단계의 성공을 기반으로 저희 같은 벤처투자회사들은 한국 벤처들이 어떻게 하면 미국에서 빠르게 성공할 있도록 지원해 드릴 있습니다. 하지만 저는 초기 성공없이 미국에 오피스를 여는 것에 대해서는 재고가 필요하다고 말씀드립니다.


저희는 유럽의 벤처회사들과도 이와 같은 전략으로 미국 진출을 지원한 경험이 있습니다.

I want to thank Jason Lee for helping me with this post.

Saturday, July 4, 2015

Are you a high growth company?

The answer seems obvious – just look at the growth rate.  For early stage companies, 10x per year is obviously very high growth.  2x per year is moderate. 

If you ask a company growing 2x – why are you not growing like the 10x companies?  Companies usually say that their growth rate is severely limited by their sales and marketing spend.  Basically, the primary difference between the 10x and 2x growth rates is merely the amount invested in sales and marketing.  The implication is simple – Investors just have to write larger and larger checks.

A more subtle, but more important, reason is the cost of growth.  The most common metric for measuring the cost of growth is the magic number, which measures the amount of new annual contract value created for every $1 spent on sales and marketing.  Tomasz Tunguz, in his blog post, analyzed the Sales Efficiency Benchmarks for SaaS startups.

We can model the magic number's impact on the annual growth rate of a typical early stage startup (which just crossed $1m ARR and is spending $500k/quarter on sales and marketing).  The startup would grow between 2.2x to 5.0x depending on the magic number.
The growth rate would accelerate if the same company (i) reinvested 50% of the new ACV in sales and marketing and (ii) maintained the same magic number.  The same startup would grow between 2.8x to 16x depending on the magic number.  Unfortunately, the magic number declines as the company invests more in sales and marketing.
To understand the intuitive reason behind the magic number, I look at successful B2C startups.  How did they acquire a huge number of users?  Few successful B2C startups acquired a huge user group with only a large marketing budget.  Most had a product/service with high virality and low churn – which results in very low cost of user acquisition.

Friday, July 3, 2015

What if the Ideal Customer Use Case seems nichy?

Understanding the Ideal Customer Use Case makes it very easy to calculate the potential market size (product of the number of Ideal Customers and the average deal price).  Usually, that calculated number seems small.  In other words, the Ideal Customer Use Case seems nichy.

Is that a problem?  Should the company panic?

No, if the company can quickly become The Leader in the Ideal Customer Use Case.  The key is the word – quickly.

By quickly becoming the Leader in the Ideal Customer Use Case, the company develops the culture of winning. The team now knows how to win together, especially since the team may not have worked together before.  So, the company can now execute well.  A winning culture is extremely valuable. 

By executing well, companies can then expand the niche by finding (i) other types of Ideal Customers for the same or similar use cases or (ii) other types of ideal use cases within the Ideal Customer, as shown in the chart below. 

Sometimes, companies with winning cultures find completely new and bigger Ideal Customer Use Cases as well.

Basically, winners keep winning – somehow -- and not rationalizing.

Sunday, June 28, 2015

Thanks Ed!

I would like to thank Ed Zitron for dramatically elevating our firm's profile!
Jason Lemkin introduced Ed to Storm.  Ed is an unusual PR person.  He is the anti-PR PR person, as illustrated in his Newsweek interview, A Conversation with the World's Most Self-Loathing PR person.

Despite Jason's endorsement, I was a natural skeptic after working with and seeing numerous PR firms and people.  Notwithstanding my initial skepticism, Ed has significantly helped Storm's PR by helping both the media savvy (like Jason Lemkin and his SaaStr efforts) and the media un-savvy (like myself).  What is his secret sauce?  He finds and extracts the authentic value from everyone and designs the right PR strategy to showcase that authentic value for that person.  For example, he suggested and arranged for my interview with Adam Bryant from the New York Times, who published today an interview with me in his Corner Office, called "Tae Hea Nahm of Storm Ventures:  A Believer and a Skeptic in One."  
I have been avid reader of Adam Bryant's Corner Office column, but never thought about getting interviewed by Adam -- until meeting Ed. 

Ed, thanks for all your help!!

Achieving Product Market Fit with Tracking Spreadsheet

In achieving Product Market Fit, I find it helpful to create a comprehensive, tracking spreadsheet, as shown below where each row is a potential customer.
The first section in the spreadsheet summarizes the Ideal Target Customer -- who is the customer? who is the buyer? the person's title and department? what industry is the customer from?  The title is extremely important, since you can later target LinkedIn and search for that title.  The industry/department can also help focus the company's demand generation efforts.

The second section summarizes the Use Case -- Name of use case, # of active users, usage metrics and key results (benefits) resulting from using the product.  Early product management is about reducing friction -- reducing the time to value through better onboarding, reporting, ease of use, ...

The third section summarizes the Value Proposition -- What is it? How to value it? What price is the customer is willing to pay? What are the alternatives (who, pricing and what are their issues) -- some may be internal solutions?

The fourth section summarizes the timeline -- source to the customer, and then dates of the 1st Mtg, 1st Trial and PO.  This provides the early data for the sales and marketing model.

The fifth section is for customer anecdotes and other comments.

This spreadsheet is an organic document.  I normally see this spreadsheet expanding significantly (ie, adding more columns), as the company is looking for Product Market Fit. But, after PMF, only few columns and rows become important.

We have done well investing in companies prior to Product Market Fit (Airespace and MobileIron), But we are also very interested in B2B software companies that have found very early Product Market Fit, especially since we have experience accelerating early growth and helping through the entire startup journey.

Sunday, June 21, 2015

Finding Early Acceleration from Product Market Fit

After achieving Product Market Fit (ie finding the Ideal Customer Use Case), the company should be able to accelerate early growth by getting more customers just like the Ideal Target Customer and by just closing them.  In other words, the Company has found a replicable sales and marketing model, as shown in the table below:

PRODUCT MARKET FIT

REPLICABLE SALES/MARKETING MODEL
Who is the Ideal Target Customer?

Get more customers just like the ITC
-- focus website, messaging, branding, references
-- focus demand generation/leverage (virality)
-- focus business development
-- focus product management
-- focus new hiring (relevant experience)
-- focus the whole company
How sell to them?

Just simplify the closing
-- which sales rep closes better à sales rep profile, sales playbook
-- reduce sales friction/overcome obstacles à sales playbook, product management, pricing
-- build a culture of winning (ie successful closing) à better commissions, recruit even better sales people
How much will they pay?

Calculate potential market size
Calculate early business model 

What is Product Market Fit?


In earlier blog posts regarding Product Market Fit, I focused on Happy Customers -- active, paying, referenceable customers.  Unfortunately, I saw companies with extremely happy customers, but not able to accelerate growth.  Slow growth is expensive and demoralizing.

Once these companies found the Ideal Customer Use Case, though, they could find and close more similar customers in a fast, predictable manner.  They started to accelerate growth.

This is why I revised the Startup Journey.

Now, I define Product Market Fit as 10+ active, paying, referenceable customers that fit an Ideal Customer Use Case.  This corresponds to around $500k ARR (10 customers paying $50k/year, or 20 customers paying $25k/year).

The Ideal Customer Use Case means understanding:

- Simple use case (value proposition for the product; how/why the customers use the product?)
- Ideal Target Customer profile (buyer title/decision criteria/authority; and customer profile/industry/ department)
- Crisp message

Achieving Product Market Fit (understanding the Ideal Customer Use Case) helps answer three key questions:
1) Who is the ideal target customer?
2) How to sell to them?  Why should they buy?
3) How much will they pay?