Strategic elements to reduce rejections from investors for start-ups-Interview with Matthew Todd




Today I have the pleasure of having as a guest Matthew Todd, owner of fluentforward.com a Startup & ScaleUp Growth Agency.


Luca:

Good morning, Matthew. Thanks for accepting the invitation for this interview.


Matthew:

Good morning Luca. Thank you for inviting me here.


Luca:

Here is the first question: what is the weight of the financial projections or business plans compared to other qualitative elements?


Matthew:

For the first question, the investors care about your ability to put together a business plan and put foresight into it, but they realize it's largely a work of fiction, assuming early-stage investments rather than Series A, B, or C.


Luca

Thank you, if we had launched the business and then grown and scaled up, that would be another movie, because the strategy has to match the numbers.

The second question is related to vision and mission and the definition of the company’s discovery of value proposition.


Matthew:

To create a value proposition, there needs to be a vision and a mission, but these are expressed in terms of problems to be solved rather than solutions.


Luca

Thank you Do you use the same theory and practice those other consultants use for incumbents? If yes, please mention those that are related to the market strategies


Matthew:

It involves talking to customers, to people who haven't bought, to competitors' customers. You look for answers in the same places. It's the customers you already have, the ones you can't get. It's your competitors' customers.


Luca

The next question is about market types: define the type of market. I found acceptable existing markets and new markets, why do you think that these definitions are/are not valid?


Matthew:

I think that those are valid definitions. My thinking tends to be in terms of existing or new categories. But I see a lot of people pretending they are creating new categories with facts, which is just positioning.


Luca

Can you make an example?


Matthew:

Salesforce, for example, invented the category of cloud CRM. In the past, it was not a term used by anybody, nor did it represent an operating model for CRM software that everyone was familiar with or expected. They define the category of cloud CRM since everything was on-premises before that, and they weren't differentiated from their competitors because they were not subscription-based. This is because, within that category, they had no competitors because nobody else was even attempting what they were doing.


Luca

Now which one of these "standard" strategies can be applied to the scale-up stages:

Market penetration, Market development, Alternative channels, Expansion, Market segmentation and partnerships.?


Matthew:

They are all potentially applicable. I think it depends on what they have done so far. Too many companies at that stage try to diversify too soon before they really maximize the segments or channels that they have. My question is whether or not they've maximized what they've done


Luca

Brilliant answer Matthew, thank you. The next question can be seen as a little bit provoking: "Market disruption occurs when a product fits a new or emerging market segment that is not being served by existing incumbents in the industry". Do you agree?


Matthew:

I think it's a reasonable definition. I think it relates to what I talked about before with category design, in that a disrupter, is creating a new category within an existing market segment or in some cases, creating market segments.


Luca

Thank you. Is a competitor analysis required compared to the other analysis for market, product and so on? And why?


Matthew:

In my opinion, most companies think about it from a feature and comparison perspective. They are not thinking about how their competitors compare to them from a buyer's and a buyer's journey perspective. Moreover, they don't investigate what their customers expect from a solution


Luca

What criteria do you think can be helpful in showing a realistic projection?


Matthew:

There is a clear audience, and then there is product-market fit. It's quite simple to articulate, but not too well done.

Furthermore, It is how you take something that has been proven to solve a particular problem for a specific group of people. The ability to take this to a channel, probably just one channel, repeatedly and reliably is what's called product-market fit. In order to forecast effectively, you need to generate new customers as part of the go-to-market process. Most people aren't there.


Luca

To satisfy stakeholders/investors, what do companies need to do to present their products?


Matthew:

Doing the audience definition is the first thing. So, it's a very, very clear articulation of who needs your product.


Luca

How much does the business model need to be detailed, and at which stage?


Matthew:

In the early stages, there is a difference between business models and articulations of business models. The business model is purely an academic exercise for many founders. They type in what their go-to-market strategy is, etc., etc. They could have found 10 prospects and had three product-market fit conversations in the time it takes to rework three paragraphs. This is the wrong way around. It's a critical part of due diligence too. I think it's often a delaying tactic for executing.


Luca

Thank you, Matthew. Now, speaking about Market Development traction: what the KPIs could be to show that the company is growing effectively?


Matthew:

Good question. If you look at the cost per lead, or the number of leads, or those kinds of things, companies will look at a lot of numbers, especially with marketing that gives false information. That tells you nothing about the quality since it does not tell you anything. I think there are some simple metrics, such as customer lifetime value, churn rates, cost of acquisition, etc. These are all important metrics.


In order to show how effective, they are, it really depends on where they are, what their goals are, and how profitable they want to be at any given point, but I think the basics have to be focusing on lifetime value or churn?

The most important thing is to know if your customers continue to receive value from your products once you have them. And the answer is yes or no. Additionally, the ability to acquire new customers can be measured simply by the number of new customers per month, or by recurring revenues.


Luca

In summary, you should pay attention to the quality and type of customers just to realise that there are different sub-segments.


Matthew:

Exactly. When you look at churn, you should not bring on certain segments of customers if they churn early. You should solve this internally if the customer is good but didn't get what they wanted.


Luca

A brilliant answer, Matthew. Thank you. How much is relevant for a start-up the skills of internal resources to implement strategies?


Matthew:

You need the ability to understand the customer, the ability to implement a solution, and whatever technical skills are needed. There are some core skills you need to have, such as financial basics and marketing, as well as attracting more customers like the ones you have. There is no founder who is an expert at all these things, but they can build a team of experts to fill the other gaps rather than try to do them all.

In the beginning, they're going to need a little of all. But as they gain traction, they'll certainly want to add people who complement their set of skills.

The values of that core team are aligned because as a founder, you should be passionate about more than just the product. A common mistake I see is that founders are more passionate about the solution than the problem they're trying to solve, which leads to failure. Since they don't listen to their audience, they don't best serve them. That's why your core team should be people with different skills who are as passionate about solving that problem as you are.


Luca

Do you think there are any intangibles that can be relevant to the evaluation of the company? If yes, can you tell me at least two of them?


Matthew:

In my opinion, it's about the way investors perceive the founding team's attitudes, and whether they believe they're driven and committed. They are in it for the right reasons, and their motivations align. You know, some investors approach it more like accountants. You know, some are from an entrepreneurial background themselves and identify those who are eager to make a difference. But it's those kinds of character traits, I think,


Luca

Could you please tell me what you think about the brand?


Matthew:

It is relevant and it relates to marketing strategy as well. It is hard to measure and put numbers against how you are perceived by your market. And all audiences, but you can try.


Luca

I appreciate this answer. Do you think incubators and accelerators are useful?


Matthew:

As far as incubators and accelerators are concerned, they don't really offer anything new. They often don't provide much value in the process. You might be able to find someone in a few days through a better process than one of those 12-week things. In reality, they put a group of people in front of investors and give investors a chance to get to know the cohorts, the ones who stand out. In other words, it's useful to build a network and to get investors on your side, but not necessarily for their advice.


Luca

This has been a genuine answer, thank you!

We are at the last question: What are the elements that can prevent intrapreneurs to acquire methodologies, methods, and critical thinking?


Matthew:

There is a mindset of starting something. But being scared to see if it works is scared to expose it to the markets in case it gets copied or scared to expose it in case it fails.

However, if you try to take it into the real world and market it, it can fail. And a lot of these entrepreneurs don't like that. In fact, they should celebrate it.

One of the people I interviewed consciously sought out people in prospect companies who did not like what he was doing. They were very critical. As he kept working away, he could say, okay, I'll listen to you with an open mind and understand their concerns, say, okay, so how about we solve it? Because, yes, then they said, okay, we've got it now. You're seeking out negative criticism, repeatedly, as a way to succeed. There is a difference in mindsets. They want new customers, they build a platform, they have one or two customers, but they don't make sales calls.

Basically, they're not doing the marketing activities. . They just enjoy starting and don't like finishing. Perhaps they are scared of doing the work, and maybe they are scared of rejection.


Luca

Wow, this is something new as an experience to bring into this research.


Matthew:

I was talking to one start-up who I won't name, but they fear almost trying to think “we must understand our customer”. As I look at a funded company with a team of 20, I understand how they could do that. Please let me know one of their names and phone numbers, so I can call them. We will have the answers to all these questions in one hour. We will do that and find out their core problems. In the end, they would not do it just because they are afraid to find out that the platform you've got isn't appropriate for what they're trying to do.


Luca

Matthew, I have really enjoyed this interview with some genuine thoughts about critical points, and your view about finding the common element that drives many of the strategic activities. Thank you


Matthew:

Thank you. No worries. Take care

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