A Fortune Cookie in a Japanese Restaurant…very
strange!”
Inspector Closeau, the Return of the Pink Panther
A critical component of success for companies Venture
Capital Firms fund is the need for the management of these companies be able to
execute the sales and business development strategies of the market sector
(ongoing) and to further develop new potential sources of revenue. Preferably based NOT on fantasy or worse, on
an Outlier account that will never be duplicated but thus has launched a
thousand ships of wasted scarce capital of revenue projections that will never
materialize!
Actual revenue for post start-ups and even up to series A
funded companies may still be an allowable work in progress. Having market intelligence provided by a
business development person who can actually discern if a strategy is working
and new market verticals are viable is crucial.
Case in point.
What happens when the Venture Backed VC company fails to
execute or worse (in my opinion) over promises to deliver revenue based on projections
that aren’t realizable or credible? That
was the situation I found myself in recently on a post series A funded company
in the health care services vertical.
First I want to digress to a recent lunch, a good book and
China… (It’s relevant but not in the way you might think!).
I have been reading Jeffrey Bussgang’s excellent book,
Mastering the VC Game and I was having lunch with a very smart colleague who
besides being a great purveyor of wisdom in many things VC and beyond, also
happens to be Chinese American. Our conversation
started with a quote from said book, from Chinese Venture Capitalist, Quan
Zhou, from IDG-Accel China where he notes that” People are always sending
him business plans but fail to contact him directly. He wonders how well they will do at finding
customers and creating partnerships if they don’t have the chops to contact him
directly.” Many VC’s like Quan Zhou function like sales managers or
business development executives in the way the exploit their rolodex’s to reach
CEO’s directly, (this is what I do for my clients as well) on behalf of their
portfolio companies to help generate revenue and validate potential markets.
I began to share my recent experience of contacting key
decision makers in a new market vertical.
Their response for this company’s services was tepid at best. My wise friend began to immediately nod her
head all too knowingly having seen this movie opening one too many times. She
likened the experience to going down the mine shaft full-bore instead of
probing…you were brought on after they had gone down the hole..and Cut the
Rope! She was laughing, while I was
still wincing as I continued the rattle off my failed attempts to connect with management
and to communicate my lack of traction.
I was called in while the expedition canaries we had were
about to go on life support. I thought I
was given a more vetted market and actually relished a bit of lighter lifting
than my usual task of starting to the drill and enlarge the mine shaft. I was actually looking forward to some (I
have to admit) easier fare. I assumed
that they had done their due diligence (I asked during my initial meeting) and
after my queries were all satisfied proceeded to start.
The time spent was frustrating (outside of learning this new
Health Care market place which is interesting and quite complex) for actively
developing a market sector that was previously un-touched by the company save
for one “Outlier.” The initial market and customer base (what got
them the VC funding in the first place).
Some VC’s will only fund revenue generators was an entirely different
market than what I was tasked to generate revenue in. At the risk of inducing a coma on folks
outside the healthcare sector, the original market was a TPA (Third Party Administrator
vs. a Commercial Health Plan) which while seemingly inconsequential or
seemingly dis-similar to laypeople is kind of like saying that most of my ads
appearing in the Yellow Pages (hard copy) are of a similar platform to that of
a Commercial advertisement broadcast on CBS during Primetime.
I repeatedly told the Sales Manager (who reports the Board
where the VC has a seat…several) that this is going to be extremely
challenging for we were up against (huge in-house resources, staff expertise and
general inertia given the relative importance of this service to impact the bottom
line etc.). A male decision maker at one
of the health plans told me that having his company go out and get us the data
we needed for a trial demo was about as palatable as his going out and getting
another colonoscopy…at least he knew how long that would take and what the
results would be! Based on many such
conversations it was becoming clear that there were huge challenges ahead. I
asked the manager if he was concerned or if he concurred with my diagnosis.
Cut To: Blank stares..to outright hostility. OK. Have you called on these guys yet? A
shrug and some veiled allusion to the outlier account.
I suggest to him that he go back to the board and VC and get
some high level leads. His look told me
that he would rather visit the proctologist.
“You have uncovered more high level contacts than
anyone else thus far”!! Yikes I
thought to myself. More front line
troops were added since my deployment to buttress sales to go after this
“outlier” market.
I knew how this was going to play out in next board meeting
or two! It can get really ugly when
mis-aligned projections come to light.
There will be layoffs. I have
been in this position before..back in 2001 right at the U.S Tech bubble
bursting while working for a NJ based Medical Startup (I was so young…talk
about pain!!!) as THE Sales Manager. I
was so flattered to have the position yet soooo naive when the lack of a
credible market (hence my sensitivity) came down on my head. Why I am so focused on credible markets for
my clients.
However… This same sales manager when I told him that I
had frequented a local Chinese restaurant for lunch one day early in my tenure
asked…”How’s the sushi there…I heard it was good.”..I thought at
the time he must be joking or at least gave him the benefit of the doubt.
…I should have known!!!!!
I like this..!