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[14] Startup Growth Done Right

Ralph is a proven senior executive with 20 years of diverse blue-chip leadership experience across strategic finance, corporate strategy, and operations at companies ranging from early-stage startups to Fortune 100 companies globally. Over the past 7 years, he has also advised extensively high growth technology companies, helping them navigate through early-stage strategic and operational growth.

Currently as the Chief Financial Officer at Jyve?”

Throughout his career, he has strategically built companies, teams, and partnerships that sustain strong growth. He has also successfully helped companies scale, transform, and exit; completing 80+ strategic transactions and exits for $90+ billion of M&A value and raised $60+ billion of equity/debt capital.

Ep 14 SVS transcribe

 Shawn Flynn  0:00 

Welcome to Silicon Valley successes. On today's episode, we have Ralph Liang, who is a former investment banker at Morgan Stanley, who has since gone on to create his own company at age ships. It's a company that helps startups grow. So let's learn a little bit about him.

 Show Announcer  0:23 

Welcome to Silicon Valley successes, we interview experts and entrepreneurs to give the world access to the knowledge and experience that is here in Silicon Valley. Our mission is to create opportunities for those who seek them and tell you to become the next Silicon Valley success

 Shawn Flynn  0:44 

Rao. Thank you for coming on Silicon Valley success. And thanks for having me. Can you give a brief introduction of yourself who you are what you're up to?

 Ralph Leung  0:52 

Sure. So as you mentioned earlier, I found that Ada ships but a year and a half ago at chips is a growth and innovation platform focused on helping corporations find innovation and startups helping them grow and scale. Prior to that it's been almost 20 years honing my career in a variety of strategic roles. Everything from being an investment banker in New York, and in Hong Kong, helping tech companies and FinTech companies from being a principal investor, Principal m&a person, as well as being a strategy consultant.

 Shawn Flynn  1:20 

Wow. So tell me about how that 20 years of experience kind of leads into Ada chips. How did that help you with what you're doing now? Right.

 Ralph Leung  1:28 

Well, that's, that's a good question that's at that was the real foundation of how I founded the company, as ships know, when I took a step back and look back into my career and thought, what have I learned over this, this 20 year path, right? I've worked with amazing leaders from enormous companies like Alibaba to work with earlier stage startups, all throughout Asia Pacific, and even in the US. And I learned a significant amount of seeing companies make mistakes, seeing companies grow. And then scale seeing companies go from being an early stage startups to a growth equity company to become a public company.

 Shawn Flynn  2:01 

Okay, some of that lingo that you're saying right there, some of the audience at home may not know it was growth equity, short, and all that.

 Ralph Leung  2:07 

So early stage startups which which I understand a lot of your people on the show talk about is

 slightly later than two guys talking an idea or you actually have a product, you have an early stage business, but you're finding that early traction, early business growth equity is primarily in the phase right after that you've raised a few rounds of capital are raising money. So we can focus on scaling the business, right, not to prove a concept to prove whether it works or not. And then right after that, you know, some people some companies tend to go public, right, if they choose to go public listed on NYSE or NASDAQ, for example, they become publicly traded corporations

 Shawn Flynn  2:44 

interested. So when do you step in and start working with those companies?

 Ralph Leung  2:48 

On the leadership side? Yes. So at chips will typically step in the earlier stage of the business. What will work with people with technically, oftentimes, technical founders, okay, have a product, they have some early revenue, they have proven that there was a market fit for this, or they don't have a business built around it. So

 Shawn Flynn  3:09 

an accelerator is that still too early for you? Or is that the right time?

 Ralph Leung  3:12 

That's typically the right time, right? So they've gone through either an incubator program and accelerator program, they have something built, but they don't really have a team to focus on the business, they don't have the capital to hire a bunch of C level executives around them to build a business. So he would come in and we help build that real business for them. Okay, tell me more about how you help help them build that business. Sure. Okay. So when you when you take a step back, right, peel the onion on what makes a business successful. Okay, you have to start with a product, you have the core product, and that's what they ideally should spend time focusing on building and making sure there's product market fit, whether it's by themselves through an incubator and accelerator program, okay, but around the round the product you have to think of how do you go to market? So how do you sell this? How do you sell the product? How do you take it to market what really is your market,

 Shawn Flynn  4:01 

this isn't necessarily just a physical product, right?

 Ralph Leung  4:04 

software, it could be software could be, you know, something you see on Shark Tank, it could be, you know, it could be anything, but something that somebody would pay money for cable service doesn't matter, then you think about how you go to market, how do you sell it? How do you build your core competencies around the functional areas around it. So any good business beyond the product and selling you have to think finance, you have to think accounting marketing, you think branding, you think advertising, you think legal, right? You think HR and recruiting talent, and infrastructure and operations, all of these elements that that really formed around the product, that's what he focuses on. Now, every company is a little bit different. Some companies may, depending on the founder of the founding team, they may have certain expertise on certain areas. So we usually spend time studying the company working with the founding team, understanding where the biggest gaps are, when come in to help them out in the areas

 Shawn Flynn  4:55 

now, now, everything you just mentioned there, you can't do that alone. Obviously. Tell me about your team.

 Ralph Leung  5:01 

Sure. So we, we what, let's take a step back. Right. There are plenty of great players in the market, especially in Silicon Valley that help startups right, yeah, look at the list of incubators, accelerators, just one every four blocks. So there are definitely a lot of players in the market, the way that we want to differentiate ourselves is taken, taken execution approach to helping startups grow. So not an education approach, which is typically the approaches that accelerators incubators to that they follow. Because they weren't big batches, Oh, we don't run big batches. And we go bespoke one on one a companies a year maximum on the startup side, we take a very hands on execution based approach to helping them scale.

 Shawn Flynn  5:42 

Okay, so tell me about when you meet one of the stars for the first time, what does that look like, you just sit down with the founder and go, Hey, I saw your product and you're not doing anything with it. I think we can make you guys something or is it they come to you, like, hey, we've tried all these things, we don't know what we're doing.

 Ralph Leung  6:00 

It's a combination of both right. And, and there's three elements. So we we haven't done any advertising and marketing, everything's through referral. Okay, so usually comes through some of that we, as a friend of yours, a friend of a friend, someone that we worked with, in the past, they come through a referral channels, you know, they say, hey, so and so has a has company, you know, he or she started a company, they have a great product just came out of whatever accelerator program,

 they're thinking about doing a series A or Series B fundraising, or they're really struggling trying to get in front of a large corporation to try to sell that big enterprise deal, right? Then, when we sit down first meetings like this, this just one on one get to know each other? Well, first, we have to see we get along, okay. Because if, if you don't like me, and I don't like you. So yeah, this is not working out at

 Shawn Flynn  6:43 

three take that

 Ralph Leung  6:45 

you know, but it's do is the understand each other, okay, just to see, we get a law giving you a chance to understand what it is that you're struggling with what you are trying to accomplish, right. And then after this first meeting, then we have a second meeting, what typically they do is they start up with send us information, right?

 Shawn Flynn  7:01 

So this is typical, what type of information is your market information?

 Ralph Leung  7:04 

Or no, we just be your typical diligence pack, right. So, again, what will diligence pack for companies that we have that haven't gone through a certain stage yet, I don't expect them to have a lot, but I do expect them to have at least some semblance of a business plan. Okay, not necessarily the traditional 50 page Word document business plan that people very familiar with, it could be a set of slides that they've used to capture note.

 Shawn Flynn  7:26 

So like a 15 Deck slide, that would be enough for you to

 Ralph Leung  7:31 

give me something, something to show that you've thought about your business, I thought about your product, thought about your roadmap, right? Doesn't have to be fully baked, does not be fully developed, that's what we would help you with, okay, but give me something where I can go home, study your business with my team, my understanding where your challenges are, give us a chance to assess where what we think about your business, right, because we approached it just like we're investors, really, because we only, we only spend time with a company's maximum, you know, same way that a VC would have X amount of capital them to invest in premium content. So you have to be very picky about who you want to work with. And this is a long term partnership. It's not, we're not consultants, right? We don't come in, do a three month McKinsey style project, and then we take off, but you never see us again, that's not how we operate. So we operate as it were partners together, which means we're in it for the long term, which also means we have to get along well, we have to really believe in the business believe in the founding team

 Shawn Flynn  8:23 

interested. So let's go back Say, say you've met that startup, you get along with them, you want to help with them, the first thing they say to you is we don't have money or we're trying to raise money right now, what information does a startup founder need to know about raising capital?

 Ralph Leung  8:41 

That's That's a really good question. And I think there's, there's a lot of confusion in the market, depending on the stage, right, just based on the stages that we talked about before, I think with with technology these days, a lot of people can look up Cora, they can go to Google and just just look up, what do you need in the fundraise deck? Right? What do you need in a picture tech and they follow certain guidelines. Now, my advice to founders that are going through this process is take a step back first, understand, fundraising is not a one shot deal. It's an ongoing effort. As you continue to grow the company and your your goal is not to raise money, right? Your goal is not to raised to send me get my a round, let me get my seed round, your goal is to build a business? And also what do you have to do to build a business successfully over time? I think that's the first step that any founder needs to think through before they think, Okay, how do we raise money, I get that there's pressure, if founder doesn't, you know, they have three months of runway left, six months runway left, does that mean amount of money to keep your lights on for the next

 Shawn Flynn  9:42 

X number of mine? Okay, so they only have three months of runway, right? They even have time to respond in there.

 Ralph Leung  9:47 

Well, that's the first mistake, I would have pointed them out, right? If you only have three months of runway, that means you started planning a little bit too late, but you always have to start thinking about it from day one, as you're thinking about building a product, you'll think about how do you have your sources of capital for how long and it's an ongoing process, right, always think about is an ongoing, long term process.

 Shawn Flynn  10:06 

So how much of your work with the the startups is actually just sitting there and saying, this is your next one year roadmap? Let's break it down step by step, right?

 Ralph Leung  10:14 

It's it's a large portion of what we do, we help them think very strategically about how to build a company, right? We try to get them away from short term, you know, let us sell X number of products get 10,000 users raise $5 million, right? These are very short term goals, we help them think about what is a three year roadmap and then you back into right if for us to be this when we grow up in three years? Okay, in two years, here's what we want to do in one year, this would be what we want to do. And how do you back into what do we have to do today to set us up to we can get you the three year mark? Not the six month

 Shawn Flynn  10:50 

mark. Okay. So a lot of it is goal setting.

 Ralph Leung  10:53 

Oh, yeah. It's think thinking about what the goals are. But also, what is the execution roadmap, like, how do we actually accomplish what our goals are, rather than just saying, you know, what, in three years, I want to be number top three in the market? Yeah, you know, that's, that's not a goal.

 Shawn Flynn  11:07 

If someone came to you with this dream, hey, I have a three year plan. And, and as you're talking to a person, their three year plan is just that goal at the end,

 and working step by step backwards. There's just, you know, so much information there is not there. What happens in a situation like that.

 Ralph Leung  11:25 

So I mentioned earlier, our typical vetting process, right, we don't take applications, but we have a 2.5 meeting process. tomorrow's meeting is what we talked about is the let's just get along, right? It's just understand each other, what our priorities are, what our values are, what drives us, okay, second meeting is we have a follow up with deep dive into the business based on what you send me Okay, we look at your pitch deck we look at whatever materials that you have, we look at your XL models, right? So we understand your finances and we understand your roadmap. Okay, if that's the worst and then the last point five a meeting you know, we discuss what are working arrangement under scope of work is gonna look like to answer your question though, what happens if someone or founding team says we have a very ambitious goal in three years, we have no idea how to get there.

 Typically, we would, we would get a good sense of that during the first meeting. Okay. And if it's that far away, then we think that's company like that may be a little too early for us. Okay? Because we typically work with companies that have done enough, enough of the legwork enough of the struggles to really understand building companies not easy You can't just you know, outsource a hired gun to come and do it for you, you have to go through the struggles yourself. But at the same time, we also understand that you don't have to do it all by yourself. So once you've done enough to get the product into the market, get some early revenue early users are the pilots you know and you're free to accomplish that chances are you would have thought through what your roadmap is going to look like even at a high level then we come in and actually stress test that model for you. So how important is it for the founder to be coachable in in this situation, it's extremely, extremely important, right? Because if you're not coachable, then why have us with you anyway, right, then we just become a hired gun to simply you want to work with the team. But this is it's the same thing as the way that a VC would think about it, right? When I invest money into a company where the founder of the founding team would not listen to any of the advice or they just looking for a check. And you know, and and some VCs may may may be okay with that, but I'd say most of them would prefer to have work with founders who are coachable because building businesses are hard, right? No one really knows all the answers. So you have to work with the team,

 Shawn Flynn  13:26 

how important is it for the CEO to have kind of a financial background? I your backgrounds from investment bank? Yes, go a little bit more detail about that aspect of it, just the financial model and how important it is for founder where they could maybe develop this area, just basically to have a conversation with investors? Because I guess, and if they don't know, the cap table, or kind of the structure? Yeah, that meeting might be lost?

 Ralph Leung  13:52 

Oh, it's it? That's a good question. That's so I'd say most of the founders that we work with, don't come from finance, or don't come from finance, or not former accountants or investment bankers, or anyone in that world. They're typically product folks, right? They Okay, you the engineer, so the product managers, they know the product, right? Because they have an idea, they have an idea, they want to come with something. So they have the product to answer a question, I would say it's, it's not critical, it's helpful. It's helpful, because, like you said, right, when you're it's typically the CEO, the founders who pitch because the investors want to hear from the CEO, they want to hear from the founders, they want to, they want to feel confident that the CEO, the founding team, has an appreciation for finance, for cash flow for working capital, because the number one reason why talk about working capital, what is it working capital is how much money you got coming in, and how much money you got going out on a net basis, are you working capital positive, which means you're collecting more than you are spending, which gives you more runway or vice versa, you're spending a lot more than you're collecting, which means your time is going to run out soon, right? So any founder has to have a basic appreciation of managing cash. Interesting, right? So you don't have to be finance PhD to, to be a good founder, but you have to have an appreciation for the importance of managing your money.

 Shawn Flynn  15:10 

How important is it that the CEO has that, that respect, I guess for for money, and versus a CFO say there's a team of four CEO, CFO, CTO, sales guy? I don't know. Yeah, CFO, CEO, that that kind of relationship right there, right. Okay, so

 Ralph Leung  15:31 

let's unpack that question. Oh, yeah. Right. For typical startup, at an early stage, you're not going to have for sea level titles.

 Shawn Flynn  15:38 

Oh, four guys have named themselves right level titles, right. So

 Ralph Leung  15:42 

if it's nice team, though, if it's a nice team, nice been the team where, you know, the CEO, the CFO and you name the other c Suite's they have complementary skill sets, that would be very helpful, but in my opinion, it's still very helpful, the CEO, right, and the person who is who is building the business to have some basic understanding of it. And again, we're not talking accounting principles are not talking revenue recognition, and, and those deep detail finance and accounting topics, you know, but in depreciation on how to manage money, because ultimately, that's who investors are going to trust.

 Shawn Flynn  16:14 

It's interesting that you brought up the word trust, we had a guest on last week's episode, Bill, who talked about how important trust was in the wholesale cycle, right. So it's kind of interesting how that gets repeated. He brought up in business though trust factor

 Ralph Leung  16:29 

absolute, especially for early stage companies, right. So going back to the phases that I talked about early stage companies, growth equity, when you're older, and then public, or just large corporations, when you're in the early stage, it's all about trust. And you have to believe that the founding team has the ability to execute, that they're coachable that you can trust the founding team to deliver, right, because you're early, you don't really have much more than the founding team to be able to teach, to get investors to be comfortable. When you're a more developed company, then you can actually look get business results. You look at KPIs, you could look at what the company has accomplished, and what's in the growth and pipeline, but when you're early stage

 Shawn Flynn  17:08 

trust is critical. Interesting. And let's go back to you to your life's roadmap. Okay, I'm kind of curious about it. So you form 88 ships. Yes. What was the desire to form it? And why not stay in the investment banking world? I mean, it's Yeah, cushy area. For my understanding you I died depends on your heart attack. Yeah, exactly. Oh, my Ico Can you

 Ralph Leung  17:30 

know copy of it? That's a good question. But why wants to take a step back and start and start eth ships? Yeah, it's the I reflected on my own career path. You know, after 20 years of thinking about where do I want to spend the next 20 years working, I actually add the most value be the most impactful to people I work with the companies I work with is it continued to do more deals which I very much enjoyed right, working with very large corporations around the world, I learned a ton from add significant value or is it to take that knowledge take that skill set and work with earlier stage companies that typically don't have access to the same caliber of help typically don't have access to the same type of advice right, someone or team who has worked with fortune 100 companies and say, hey Sean, this is this is not how you do it or have you thought about this or to put in that level of sophistication much earlier than you typically would be able to afford but to set you up for success right its name for your show

 Shawn Flynn  18:27 

with that yeah, if you want more information on Silicon Valley successes please visit our website Silicon Valley successes. com also on Facebook, Twitter, LinkedIn but with that let's go back to Ralph and learn a little bit more so so Ralph, tell me a little bit about you know what startup some of the mistakes they make early that might cost them later well

 Ralph Leung  18:51 

soon. So let's talk about fundraising for a quick sec. Perfect. I think oftentimes, startups think about valuation, right. And for whatever, whatever that's worth, maybe just people focused a lot on on the internet, or

 Shawn Flynn  19:04 

even come up with their valuations

 Ralph Leung  19:07 

depending on the stage of the company, right? You can you can, you can add, you can have a variety of metrics where you can peg it to, you know, how many users you have, how much revenue you have, what your monthly recurring revenue, you know, startups typically aren't profitable, right? So you're not able to use this your traditional valuation metrics that later stage companies would use right here, p multiples, and all these other multiples typically doesn't really work for jargon. People can look up on Google. Yeah, so you know, so, but for early stage companies, you know, it's a little bit looser, but all kind of comes down to economics, one on one, supply and demand, right, depending on how much investors Believe in your company in the future potential of your company,

 you know, how many investors are flocking to it, you know, it's supply and demand, they could potentially drive up valuation that your company itself may not be able to defend. So to answer your question, typically I see as as a common mistake because early fans are so focused on I want to maximize my valuation right away right away. So even before they can really defend it, because going back to what I said at the beginning of the show, is fundraising is not a one shot deal. You got to think of it long term, but you have to think about fundraising in parallel to building a business long term if you overstretch on your valuation too early, what does that set you up for in your next round, potentially a down now potentially flat round or your pressure to deliver because you you a call it you got such a high value talking

 Shawn Flynn  20:32 

about down around flat round real quick shortly. So

 Ralph Leung  20:35 

let's say, you know, Sean, yet you have an amazing company, you did your very first round at a $10 million valuation. So investors said, You know, I want to buy 25% of your company. Yeah, at a $10 million valuation. But that's more than what you really deserve today, because you have for users, people are just investing in you, because it's Sean, right? 97 users, right? 97 users, you know, so that's, that's quite a lot of money per user, your that's, that's a very high valuation. Now, fast forward six months, you say, you go back to these investors and say, You know what, we need more money because we need to grow, they'll say shot, where have you gone with your 97 users? Well, I've gone from 97 to 100, I think, Well, okay, that's fantastic. But from evaluation perspective, you haven't really accomplished that much more. So I'm going to invest either at the same valuation and Australia flat round, while I would say, you know what shot I gave you all this money, you just kind of blew it, and you didn't really grow your user base, even generate much more out only invest, instead of a 10 million valuation, I'm going to value at 5 million. Wow. So that's it down.

 Shawn Flynn  21:38 

So you have to give up a ton of your company then to get the same amount of

 Ralph Leung  21:41 

money if you can even raise around because these these just red flags all over the place, which goes back to should you have taken that validation? That 10 million? Maybe, maybe not

 Shawn Flynn  21:51 

right? What's your opinion, then of startups taken

 raising money? Maybe too early? I mean, should they try to raise as soon as possible to early when they're about to run it? Should they wait to they're about to run out of money before accepting a tech or should they from day one beyond the road trying to raise things?

 Ralph Leung  22:12 

I would, I would recommend the latter, right. I'm a huge fan of planning. And I and I understand when you're building a business, especially for startup things don't work out as planned, more often than not, right. But having a plan. being thoughtful, having a roadmap is super important, in my opinion.

 And then you still piecing putting the pieces together as you go along. Right? Okay, but having some plan to go for, right, just like you're jumping off a cliff and trying to build the plane at same time. But having a plan before you jump off the cliff would be helpful, right. So as you in terms of raising money, same thing, don't wait until the last minute because people can smell you're desperate. Right?

 Shawn Flynn  22:48 

So before we had, I think it was episode nine, we had a Groupon that talked about pivoted and the importance of pivot as a startup. Okay? How important is that? See, you have that three year plan, you've worked it out, these are the steps to get there after your water. You go, Okay, guys, we're not where we should be the markets telling us this. Yes? In your opinion, how important is it to pivot? And what happens in that situation? Do you then alter that whole three year period? I know it depends on the situation, right, case by case, right. But in that situation pivoted and your team coming in reevaluate everything. How does that go

 Ralph Leung  23:24 

to get it depends on why you're pivoting. Okay. Right. Is it because your original strategy failed, right or something has changed? Or is it because the market dynamic has changed is because you found other opportunities that may be a better product market fit for you It depends right are you being proactive or reactive to something good or just something bad so that's that's my investment bank every answer to your question devil it really depends but the my my what I would say though, it is very important that the founding team is open minded like you mentioned earlier, they coachable right open minded coach both to consider pivot and maybe it doesn't have to be a full pivot. Maybe you can just be you know, slight turn.

 Shawn Flynn  24:05 

Okay, so a little bit of recap on what we've talked about today. So far, we've had Ralph Leo vest and bacon background. He's not a founder of 88 ships. They have a full team that comes in and helps these companies actually plan out their goals. three year plans, step by step work with coachable founders, founders have just possibly gone out of accelerators or have some type of product market fit. We've talked about raising funds, and what kind of a mindset what they need to know a little bit of information, what they need to have prepared. overvaluation flat rounds. Down rounds. We've talked about run runway, a lot of a lot of terms that were thrown out there today. So go back in this episode, and go on our website for more information on those terms, and to review things. But with that being said, Rob, what have we missed on this conversation? What one important question Do you often get asked?

 Ralph Leung  25:00 

So I would recommend for founders when given the opportunity to to have help, right? think really hard about receiving that help. As in Yes, it may cost you a little bit today, right? Or Yes, it may be it may come early. And you may feel like you're busy with so many things like getting the right type of help is super important to supercharge in that growth. Well, then, question

 Shawn Flynn  25:23 

on that one. I don't even know if it's if it is the right type of help. Well,

 Ralph Leung  25:29 

number one, as you're building company, you want to try to surround yourself with really good people. Right, that includes your advisors that is at ships, right. So that could be a plug. But as you're thinking about building a team around you, a could be immediate team. It could be your advisors could be a board members, definitely your investors, this becomes your sounding board as you're thinking about, okay, am I bringing in the right, help, this could be full time, senior hires Junior highers consultants, you know platforms like ours that would come in because these, this type of help can really supercharge the growth of the business, right. And I've seen many, many times where founders are saying, you know, we're very much interested. But we're so busy with something super myopic, super narrow, super myopic, and they're forgetting about the force.

 Shawn Flynn  26:15 

So Ralph with that we have about a minute left. Can you talk about one how people can contact you who your ideal client is, and anything else you want people to know?

 Ralph Leung  26:27 

Sure. My contact information is Ralph at 88 ships. So that's eight, eight sh, IPS. com companies. I typically work with all technology based, there are three sectors that I typically focus on. One is consumer tech, the others internet, which includes marketplaces, and that works. And the third is FinTech. And in terms of the stage of the business, we typically work with fairly early stage companies that have raised a little bit of money themselves. So their initial seed round a couple million dollars that have a product in the market ready, they're generating early revenue or pilot with a client that feel like they have figured out the product market fit and they say, you know what, we're ready for that next stage that's really focused on growth rather than fit. That's where we come in. And supercharge. We're out.

 Shawn Flynn  27:11 

This was an amazing episode. There's so much information so everyone at home, please visit us at Silicon Valley successes, and we look forward to the next week's episode. We have some amazing guests and we're here to help you. We want to make sure that you become the next success.

 Show Announcer  27:26 

Thank you. From all of us at Silicon Valley successes. We hope you found the information presented today useful and your path to success. For further information on accessing the resources in Silicon Valley. You may visit us on the web at Silicon Valley successes. com on Facebook and YouTube. Thank you. And remember, we want to help you in your journey to become the next success.

 Transcribed by https://otter.ai

[siliconvalleysuccesses]

💰Sales Done Right, Best Advice for Startups

Phil Solk is a managing partner at Opero Partners. Providing strategic advice and hands-on implementation services to companies seeking to significantly enhance their growth trajectories.

He is a seasoned executive (former C-level, VP and directors) with functional expertise in marketing, sales management, operations, product & technology development, finance strategy, funding & M&A.

We interview him on Sales techniques, best practices, and advice for startups.

[siliconvalleysuccesses]

💰Sales Done Right, Best Advice for Startups

Phil Solk is a managing partner at Opero Partners. Providing strategic advice and hands-on implementation services to companies seeking to significantly enhance their growth trajectories.

He is a seasoned executive (former C-level, VP and directors) with functional expertise in marketing, sales management, operations, product & technology development, finance strategy, funding & M&A.

Shawn Flynn 0:00

This week on Silicon Valley successes we have Phil sock who is a business to business sales consultant here in Silicon Valley many years experience and he's got a lot of great information that's going to help startups around the world. So stay tuned.

Show Announcer 0:21

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Shawn Flynn 0:42

Welcome back to Silicon Valley successes so filled Could you please introduce yourself?

phil 0:47

Yes, thank you, Sean. So I've been working in high tech in Silicon Valley, and a couple other parts of the country for large companies and a lot of startups. And over time I saw the pattern and what makes top line revenue grow. And so a couple folks and got together and more recently started a consulting firm to help companies grow their top line revenue

Shawn Flynn 1:11

interested. So Phil, I just want to go right into the questions. So I've heard of b2b sales. I've heard a b2c but what's the difference?

phil 1:20

I think the easiest way to get at that is, is talked about the longer version B to B to C. Okay, tell me about that

Shawn Flynn 1:28

business to business to consumer. Sorry, I should have been a little clear at the beginning. Yeah, all works.

phil 1:33

So let's say you sell software to a restaurant to help them run their business better. Okay, that part is b2b, but your software might also affect consumers, like making reservations, or giving feedback. So even though you're selling to a business part of your functions, go to the consumer. So that's B to B to C, when you get involved with their

Shawn Flynn 1:55

customers interested. So is there any difference though, between b2b sales Peter, see, sales are b2b to see sales,

phil 2:03

there are more alike than different, because in b2b, b2c, or b2b to see your primary customer and concern is still the business you're selling to. Okay, regardless of whether you get involved downstream with their customers

Shawn Flynn 2:15

interested. Now, if I was a salesperson, though, if you're saying it's pretty similar, the sales I mean, how, how do I actually go about it? Can you walk me through the steps of meeting that client?

Yeah, just walk me through it.

phil 2:32

Yes, what tends to work is not come across as pushy, that's rule number one, okay. Because you're having trying to have a dialogue and develop a customer might be a better term than selling. And so if you want to develop a relationship with someone,

it's really helpful to understand what problems are trying to solve, okay, because it's something that's easy to talk to. And obviously, if you don't have a really firm understanding of the problems, it's going to hurt to continue to build credibility with that prospective client.

After you've got a thorough understanding what problems are trying to solve. You don't want to jump into what's in it for yourself, keep the conversation going, and stay on their side of the table. So you can ask them questions like, what have you tried, I didn't want to recommend something that they're already convinced doesn't work, even though it may work. Okay. So it's a good transition to continue the conversation going. And then the next step is still the stay away from your company and my customers, and how wonderful we are, okay, talk to them about what capabilities they see

that would help them solve their problems. Okay, the longer you can stay on the same side of the table, the better the trust will develop, and the more likely you'll be able to connect with that particular customer. So when you go into this meeting with this customer, and you'd mentioned the very beginning you're trying to, to find learn about them, how much research Have you done about them prior? Have you looked at their website? Have you asked some of their customers? How much research Have you done before that meeting as much as you possibly can, but it does gauge on how many customers you have to work with per day. Okay, so if you're like setting up for someone, and you meet a customer, a prospective customer, once every two weeks, just do a lot of research. Okay. But sometimes you have to try to reach out to 10 prospective customers in a day. Oh, wow. So you got it's all over the board, depending on the nature of your business. So matter is proportionally to sound competent, and to start with the impression that you're knowledgeable, and you've done your homework so that they do trust you. Because contrary to the illusion that people buy from people they like in the b2b world is people really buy from people they trust.

Shawn Flynn 4:50

Interesting. So then, let's go to the second part you'd mentioned. So the first was to find out information about the company. And then the second part you'd mentioned was to ask them questions? Is there like a list of questions you normally go through? Like, these are the five questions? Is that a 10? Or how do you go about talking to the person without semen, I guess intrusive or making him uneasy, that you're just kind of trying to steal secrets or something,

phil 5:20

also, you have the concern that even if they tolerate questions, if you keep asking them, eventually, they'll get disengaged.

And it varies a lot by the product. But the idea is, or the service because you need to be pretty knowledgeable about those and know the typical problems that people are going to mention. So you might ask some swift called situational questions about the size of their company, or some things you couldn't find out that are really critical, okay, in your research, but then you need to jump in and and talk about, hey, what types of problems are you working on? And what Where did your interest in talking to us come from, so I can kind of help out and provide useful information. So it is different if you're the one reaching out to them versus them reaching out to you, there's all kinds of nuances. And the key is to be proficient enough in the area to be able to have a flexible conversation where you can get their point of view out. And the reason that the CEO is so critical to top line revenue growth is it starts at the top, okay. And they need that feedback, not only to know how to connect with prospective clients better, but if they're going to guide the how the offering or the product or the service goes, they have to have a first hand feedback. And so they're the most important people to get this process started as they bring on sales, people will feel people will have that domain knowledge provided to you.

Shawn Flynn 6:39

Okay, so let's go back to second. So the CEOs, most important, so if this is an early stage company, early stage startup, say there's four people on their team. Mm hmm. So the CEO how much the sales process say they have a b2b product. Mm hmm. And how important is sales skills for him, and when he talking noise trying to grow the company. Talk a little bit about that, please?

phil 7:03

Well, it's very rare that a CEO and lesser than multiple companies would have that skill,

Unknown 7:10

okay.

phil 7:11

And it's totally fine for them to hire someone with that expertise and employee or consultant because they can't create the process while they're trying to create the company.

The key is not for them to become the most effective sales people, okay, but to understand what their customers really want, and that sales professional or consultant can help them with their knowledge of how these things work, and how to give them feedback in these meetings. But fundamentally, they need to learn to a certain level in order to really understand and refine what market problem they're trying to solve.

Shawn Flynn 7:46

So if later or in these means that they're getting a lot of feedback, and the feedback might be negative, how important is it that the CEO is able to listen to that feedback and possibly pivot the company for the company's success? Or should he just kind of brush it off and go to the next potential client?

phil 8:08

It's kind of funny, because

there's someone who's been in 13 startups, and now we teach you Stanford, Berkeley, Columbia. Oh, and Stanford MBAs are pretty talented people,

but

there are certain of it, and I'm going to go with their judgment, okay. And he went to the administration resigned in the middle of the sense semester, why the students were supposed to talk to 10, people didn't even have to be prospective clients with their business idea. And he found they were just frightened to do it, even these really talented people. And the only solution he had is he went to the next class and announced anyone who doesn't see 10 people, I will flunk them in the class. So that solved the problem. But it was more a competing fair thing, as opposed to getting the CEO comfortable with getting that feedback which you need, even in a big company on the way in order to lead the company.

Shawn Flynn 9:06

So how important is confidence then, as a CEO,

phil 9:11

well, conference, it's kind of an elusive thing, okay. But they're really persistent. People

aren't afraid to make fools of them cells frequently. So it's just more of a persistence thing, then I'm feeling comfortable. Because again, for most CEOs that are doing startups, they have no experience space to feel comfortable from.

Shawn Flynn 9:30

Okay, for people at home that don't really have too much for sales background, we pulled some questions from from some startups. And one of the questions that came up was, you know, any misconceptions in the industry, for example, the importance of being able to close a sale, how important is that?

phil 9:50

Well, it's still a wide misconception in the industry today, that somehow closing

Shawn Flynn 9:57

someone for people that don't know Queen, little bit closer means Okay,

phil 10:02

that's a good thing. So

in the b2c environment, it's easy to talk about is like, you kind of want to buy some shoes now. And if you get pressured a little bit, you'll make an impulse buy. Okay, so it's like, would you like those in brown or black, right, and you're creating pressure on the prospective client. And impulsively they might say, brown and they buy it and you're in great shape their most people don't bet their jobs in the b2b environment on being pressured. And the number one complaint is that the vast majority of sales people or pushy Oh, and so it breaks the relationship very early on. And so studies including one of 38,000 sales call showed trying to pressure and using closing statements to get that by is really correlated to losing the sale. Oh, but it's still a popular misconception.

Shawn Flynn 10:54

Yeah, do you have any stories of aggressive sales people?

phil 10:58

Um, I think the one that confuses people the most is there are certain companies that are well known in the valley. We won't name names that hired super, ultra aggressive sales people, okay. And even after they stopped growing, it's so ingrained in their culture, that they're alienating people left and right, okay. And what's happening is in the beginning, there's so much pull for their product, and you're trying to capture market share. And you can hire pretty much anybody and just aggressively fire anybody who doesn't meet their number because it's less important that you about alienating prospective clients than capturing market share. Because your product speaks for itself. Oh, and so that's a little of how this closer mentality gets continues on

Shawn Flynn 11:45

to try and say the the product was in such high demand, anyone could have sold it. And they basically hired aggressive people thought they were doing a great job because of how much they were expanding. But in reality, it was the product and that's situation.

phil 12:00

Yeah, and there's a lot of, particularly in Silicon Valley, more than any place in the world. There's a lot of disruptive technologies, which are a fraction of the price all new function much more accessible. So that situation happens much more frequently here.

Shawn Flynn 12:17

interested. So back to a startup founder, so startup founder, he was the one doing the sales b2b or b2c. But now they've grown a little bit they, they've gotten some funding, and they're ready to hire their first salesperson. What should that see, you'll be looking for in that salesperson. And let's go back to that CEO really doesn't have sales experience. I mean, he tried it, they've tried it,

phil 12:42

but they still haven't, they haven't got a long track record.

Shawn Flynn 12:44

But now they have the budget to hire that one guy, what kind of questions should they ask, what should they look for? How can they get the best person,

phil 12:55

the people that close the most business, whether they're starting in sales, or very advanced,

always are able to get them their prospective clients or customers side of the table,

they've learned through trial and error, that pushing people isn't something people like. So one of the big characteristics are folks who have really good communication skills to kind of figure out what's going on when things don't work and actually are empathetic and they're not just faking, being interested in the prospective customers problems, because customers, customers, and people in general, genuine in general are very, very, very savvy about when somebody's being genuine or not, okay, if you're not genuinely empathetic, you're not going to, it's not going to come across. Additionally, it's helpful that they've had how to college one real world job, because that's kind of an eye opener, okay. And even better still, if they've been under quarter pressure, some personality types in just very, very distracting to them. And if they have those qualities I mentioned earlier, and they've had those two experiences, you've got good odds of having success.

Shawn Flynn 14:08

Okay, how difficult would it be for a small startup, though, to recruit that person reverse? I'm guessing most of them would go to a corporation or someone that has, you know, bigger expense account?

phil 14:22

Yeah, well, the people who have really pro proven track records are typically not going to go into a startup unless the customer traction is overwhelming.

Unknown 14:32

Okay. Can you talk about customer traction? Yeah, that is,

phil 14:36

you'd be just the CEOs, ideas so powerful that even with their limited experience, and selling just like the example those Silicon Valley disruptive companies, yeah, people just want to buy it because they're already know what the problem is, they're already looking for capabilities. And, and they already can't find them. So in the attic stream, just going out and talking to people without sales skills, you'll make sales, okay. And then there's a big spectrum all the way to something that people don't even understand. And so the more traction the more people are wanting to buy the product without all the skills, but just because it's so needed in the market, that's what sales people are looking for. Because then they can apply their skills and boost the company's revenue and earnings dramatically.

Shawn Flynn 15:22

Okay, one of these sales people say, you hire one, you found him super talented, not sure how you got him. But you got him?

How much leeway how much autonomy should the CEO give him?

phil 15:37

Well, really good people like that are really many CEOs, or CEO and development type people. And so they're very creative. And they if you have a product that's got good customer traction, and they're not selling things that your company can't deliver what you discover,

you want to be able to, to give them leeway. But you need to make sure that their incentive incentive plan is very aligned with the company's so the typical problems that they're measured by revenue, and you're measured by profitability, yeah, their incentive 10 times more than you are to discount. And so they're going to do that to maximize learning, just like the CEOs trying to maximize their earnings. Okay, so aligning the compensation so then everybody's when, when we eliminate a lot of headaches,

Shawn Flynn 16:29

interested, and back to the questions that that we pulled, someone's brought up sales hostage, do you do you know what that is? Can you go into detail, I have never heard that that term before.

phil 16:42

If you talk to CEOs who've had on successful experiences, even startups, they know exactly what it means. And the most extreme example I know is a founder was very, very technical and passionate, he had a way that hospitals could quickly tell

there are people was going downhill, even though people were noticing. In fact, the poor fella lost his wife to the situation.

And he came up with a method that hospitals could use to do this. But he really was so uncomfortable with trying to sell that he hired somebody, and that person actually was executive and they hired a few people could sell. And the problem is, is that person kept selling. And every time he would sell more, he would ask for a greater piece of the pie. And then they the founder, got in an increasingly awkward situation where as a revenue grew, he was more dependent on this person, to the point where almost none of the Prophet was coming to the company. And he couldn't fire this fellow. And so basically, the company was bound to collapse after the Commission's and unpaid and so he basically was in a position to lose his company, because he didn't get involved. And this sales executive had complete power.

Shawn Flynn 17:58

Wow. So for more information on that, please visit Silicon Valley successes, visit us on Facebook, LinkedIn, or other social media channels. But let's get back to the interview. So Phil, that was an amazing example there. So how much

control could a CEO take back in a situation? Or how does he put boundaries there, so something like that that hostage sale situation doesn't happen?

phil 18:26

Well, the only one I know about is what we talked about earlier, which is you can't be afraid to go out there not to deliver the bunch of the revenue, but to stay enough in contact with your prospective buyers to know when the head of sales is really doing it properly. And to be in a position to take it over. If need be, as long as the person working for you knows they don't have a monopoly on growing the company, you're in a much stronger position. And of course, aligning the plans to make sure that it's a win win when we talked about is also really important.

Shawn Flynn 19:04

So for a salesperson, what type of compensation should a startup give that person should be equity? Should it be base plus commission? Should it be 100%? commission? What What can the CEO gift specially of an early stage company that doesn't have much money?

phil 19:24

Yeah, well, the more customer traction you've got, when you're hiring the person, the more the equity will be attractive without customer traction, you know, a good sales representative is going to be looking more for commissions and dollars.

Unknown 19:40

Okay.

phil 19:41

The other thing too, is, the more convinced the candidate is that they want to be part of your company, the more they'll display an interest for commissions over base, and they'll take more commissions more leverage, because that's their way of telling you, I think I can get a lot of customers and I'm willing to bet my compensation on it interested.

Shawn Flynn 20:04

So with that, what advice would you give for for an early stage founder about sales in general, or anyone at home that really doesn't know anything about sales were kind of just start

phil 20:18

again, I would just learn by get comfortable going out and talking to your target market and understanding thoroughly about what their problems are very thoroughly looking at objectively of, of what you can deliver, and what you might be able to deliver. And then make sure there's a very clear definition for success with those early customers and get that feedback and keep improving the value provide interesting. So,

Shawn Flynn 20:44

so far today, we've talked about b2b to see sales. We've talked about the CEO and some of their sales skills. We've also talked about hostage situation with sales. We've talked about compensation for your sales rep, and recruiting sales rep, we've talked about about many areas, what questions do you normally get that we've missed today?

phil 21:09

I think all of those, we've covered the vast majority of them, but the one is how to put it, I put together enough materials and content

to get the sales people I do hire up to where they're profitable, because once a salesman is breakeven, you can hire another one. So you want to get that learning curve to be as small as possible,

Shawn Flynn 21:34

what are ways to shorten that learning curve?

phil 21:37

Like we've I don't want to harp on it. But I like being out there to understand what works

spending the time to figure out how someone who doesn't have your background can be not as proficient as you but more proficient and what works and doesn't work as you watch them come up to speed?

Shawn Flynn 21:56

And then what sales advice would you give someone that has five or 10 years experience in sales,

phil 22:05

there's this effect where after you've been successful for a while, and you're making a living in sales versus a lot of people who can't and that you've learned all there is to know

so you can ask your prospective clients and the people who didn't buy from you, you know, did you feel I was genuine? Did you feel I understood your problems? Did you understand? Did I make it clear where we might provide value? And overall, did you build trust with me? And they'll tell you, if you really want to know

Shawn Flynn 22:40

how important is it, I'm just going to go back to that question of hiring the salesperson to have that person already have an established network in that area that you're selling.

phil 22:53

Yeah, the challenges and let's see, there's all kinds of different markets. But let's talk about someone with a start in a lot of the tone. The challenge for someone started with a startup, assuming there's not huge traction, in which case you can attract anybody there is someone who really does have that network can everybody will claim to has too many options. And they will go to the place where the customer traction is most established. And they don't have to create the sales process and do all the things we've talked about. So that's the key is don't rely too heavily on the network. Because you really won't know how strong it is. And a lot of people who have a network, what that means is they've sold to them in the past. But that doesn't mean that they've built a lot enough trust coming with something new, it might mean that the company was really desperate and needed the product. And they actually alienated the customer interest. So it's very hard to assess networks ahead of time. People who really have them have lots of options. So just be careful with that becomes too dominant, you're hiring.

Shawn Flynn 24:02

And another question about the CEO and the first sales hire, what type of KPIs key performance indicators should they set for that salesperson, how to go about thinking those up making that those dates in that that quota.

phil 24:19

So the first person you hire is the one who's going to be kind of like your guide in the wilderness they've been to selling so they know what our fees are, and they know how to read signals better than someone just a request for request for prize for press for quote, this is where they mail out all these big documents, and let everybody beat themselves up to win the business, right. So they know all the link of as just demonstrated. So that's that first person, that first person is working with you, and you'll be involved with them very intimately. When you get to the next person who's going to try to learn the map, that the KPI is really how many sales they close and building them a ramp that's realistic. So month by month and month, the level of business they need to develop is accelerating, okay, because you're trying to get them within whatever you know, your training time to be, or what you can afford that if they can't get up to being profitable, and whether that's 6090, you know, four months that they know that it's not going to work out.

Shawn Flynn 25:26

And then for a CEO or a startup founder, what's the one piece of advice, most most powerful advice you could give them?

phil 25:36

Don't be afraid to go out and talk to your prospective clients. It's the only way

Shawn Flynn 25:40

right and Phil, we got a minute left. Could you tell the audience once again, how they can reach you

what type of consulting you do your ideal client, all that all that jazz?

phil 25:51

Yes, certainly,

my clients are. Typically b2b clients are almost exclusively actually. And they took basically, occasionally it'll be an individual CEO who's got something working really well. And they're ready to hire two or three people because they not only know what they're doing, but they're ready to externalize it so they can bring people on but typically it's three or four sales people up to about 40 above that it's very complicated to change fundamentally how they're approaching things

if they want to reach me my email address because I love to have coffees with people you can tell I'm kind of enthusiastic about the topic and they can just email me at Phil at Oprah partners. com. Could you spell that out, please? Certainly. That's o p. r EU partners, all one word.com.

Shawn Flynn 26:42

That's great. And Phil, I want to thank you for for coming on Silicon Valley successes. This is an amazing episode and there's a ton of great information so everyone at home. Our next guest is Ralph Lauren, who is former investment banker who founded 88 ships. So we look forward to for Next Episode. Thank you guys.

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