Before Jyrki Saarinen became a professor, he was a very successful high-tech entrepreneur in Europe and in Silicon Valley. After becoming an academic, again, he has continued to invest and mentor photonics startups. During the 2021-2022 Draft photonics coaching process in Joensuu he gave a lecture about doing sales in a startup company. This article highlights some of the key lessons.
Heikki Immonen, Karelia University of Applied Sciences
Most important skill for a sales person in a startup
According to Saarinen, listening is the most important skills of a sales person in a startup. This comes from a simple realization that in a startup you don’t yet know what customer wants – no product-market fit identified yet.
In reference to his own ability to listen and pay attention to a potential customer, Saarinen says: “I never had official sales position. Still, I was the best sales guy”. He then goes on as say a story from the company he co-founded: “The hired sales director didn’t understand that (startup) sales meeting provided a lot of information!”. Saarinen encourages you to get customer say what they would really prefer instead of what you are offering initially.
Do not fall in love with your PowerPoint presentations and other sales materials
For a startup’s sales guy there is the trap of investing too much time (and money) in creating a perfect pitch deck. Saarinen shares how he spent one month perfecting his presentation slides in preparation to a very important sales meeting. In the meeting he started to go through his deck, but was interrupted by the potential customer: “stop presenting your slides, we’ll tell you what we want”.
What happened was that immediately he realized that instead of saying what he had planned to say, it was time to start listening what the customer really wanted.
When to meet the first potential customer?
We humans have a natural tendency to delay and postpone important decisions in order to avoid failure. For startups this is often reflected in the behavior of doing a lot of internal development and only talking with potential customers when a lot of costly product development choices has been made based on false assumptions.
In reference to this problem Jyrki Saarinen encourage startups to meet potential customers as soon as possible. Preferably yesterday! Then use this information to build your flexible and easily adjustable MVP (minimum viable product).
How to choose the first customer?
According to Saarinen, one of the main things to consider when choosing the first customer(s) is the reference value. Reference value refers to the credibility this first customer brings thus making future sales easier.
Saarinen recommends to carefully consider between the market leader and the next best leading companies. He explains the market leaders often want use their unique position to really squeeze everything out of you by for example by asking exclusivity. Exclusivity is good if it actually results in sales, but very bad if not, as exclusivity prevents you from selling to any other company. The market leader may also deliberately obstruct your business because your new solution may cannibalize their existing well-doing business.
Instead of market leaders, the other option is to focus on followers as they “are hungry, aggressive”, but who may not bring reasonable revenue and profit compared to the market leader.
Product adoption and sales
Product adoption curve or technology adoption life cycle illustrates how new products are initially adapted by only few customers, but then are accepted by many, and finally the most change-resistant laggards adopt the tech. Saarinen notes that the largest segments, i.e. early majority and late majority, are where the most money and profits are to be made.
In a startup you start, of course, with the innovators and early adopters. Saarinen explains how these segments want radical beta versions. As they are in the exploration stage themselves, your startup needs to help them end that stage. If you then manage to cross the valley of death, you need to shift your sales strategy as the early majority don’t want to explore, but instead want error-free improvement of their existing processes.
Pricing and startup sales
Pricing is always a challenging issue for a startup company. Saarinen lists several factors that can influence your pricing decisions: manufacturing cost, market place, competition, market condition, brand, quality of product. The important thing to note is that once pricing is defined, customer will always remember! And you can always go down, but hardly up with your price, even estimate one.
Saarinen recommends that price discussions with a potential customer should always be held face-to-face because it is all about building trust and finding out from gestures etc. the real value of your product. What you need to know for yourself is the minimum price before-hand.