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Startup Competitors

A Business, Management and Marketing podcast featuring Michael Kelly
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How do early-stage software startup founders identify competitors in their space? How do they leverage the information they learn to develop a go-to-market strategy? In each episode of the Startup Competitors Podcast, we sit down with a startup founder to learn about how they think about competition, and how they leverage their knowledge of the market and competitors to make better tactical decisions.


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Smart Scale Consulting: Helping You Find What Makes Your Company Different, and Selling That to Buyers
Subscribe on iTunes, Google Podcasts, Spotify, Google Play, Stitcher, or Podchaser.In this episode, I talk with Jeanette Renshaw of Smart Scale Consulting. This firm specializes in working with early-stage, pre-series E, companies that are aware they could use sales help, and they want to make sure they know how to translate their funding appropriately. Jeanette works with each company in a unique way that is structured to fit the company and meet them where they are in the process.  “The more you can enable people to self-buy, self-teach, self-learn, self-use, the easier it is for them to buy, the less time they have to give, and the more likely they are to try and adopt your product. And you can even create what they’re looking for in the market because they might not have tried any of them. So while they’re waiting for demos from other companies, they’re clicking around in your stuff.” — Jeanette Renshaw I am excited to have Jeanette as a guest and talk with her about how she approaches the competition for the companies she works with. We have a detailed conversation about the process of figuring out where a company is, and how to identify and use their competitive advantages, and she uses Startup Competitors as an example of how to go through that process. Topics in this episodeDifferent categories of differentiation from competitorsWhy some differentiators need to be fixedApproaching the marketplace a company fits withinWhy did you get into this?Describing your company in one sentenceVarious personas buying the same offeringThe relative importance of pricing and pricing model Pricing is not rigid, but also should not be ever-changingContact Infojeanetterenshaw@gmail.comLinked In: Kelly:                          Welcome to the Startup Competitors Podcast. Today we have Jeanette Rensha with Smart Scale Consulting. Jeanette, welcome.Jeanette Rensha:             Thank you for having me.Mike Kelly:                          Tell me about Smart Scale.Jeanette Rensha:             So, Smart Scale is my consulting practice where loosely we focus on sales, but there's a lot that falls under that categorical level. Our capabilities are broad, but the niche that we specialize in working with are early stage companies that are aware they could use sales help. Early stage being defined very loosely. I'll say pre-series E, which is a lot of room. They know they need help, and they may be either approaching a round of funding or just achieved a round of funding and want to make sure they know how to translate it appropriately. My engagements are unique in that they're structured, customized to fit the company based on where they're at in their process, as far as approximate length of the engagement. But more so, they're not defined by the objectives from the beginning.Jeanette Rensha:             Like most consultant engagements, you know what to expect, what you're going to receive and the deliverables. These companies have so many different aspects of what contributes to sales, the goal is to be able to have enough awareness to do all of it. Help them keep everything together and constantly reevaluate what's the biggest priority to move us forward. Let's do that next.Mike Kelly:                          You said early stage company, is that any kind of company? Is that SaaS companies? Do you have any other filter that you apply to who a good client might be?Jeanette Rensha:             Yeah, certainly. There are some that are sort of known in scope, out of scope from the beginning and then, so for that, say in scope absolutely would be technology companies, SaaS based everything for the most part. I have background in life science as well but the work I do most prominently rarely translates there. I know enough to know when I can help and when I can't. I have background in B to C or non-technology based companies and the skills that I most deploy can be transferrable in a good amount of those instances but usually it becomes pretty clear about whether we're a fit or not in our initial conversation. I'm very happy to say if it's not. I usually scope things out of the norm in that initial talk.Mike Kelly:                          Got it. Thanks for coming on this podcast that you're kind of a nontraditional guest because you're not a tech founder with a company. The thing I was interested in talking with you about, because we talked a little bit before about having you on the show is how you approach thinking about competition for the companies that you're trying to help sell. One of the big ways to think about competition is product road map and how you differentiate the product, how you differentiate your brand and your messaging, how do you differentiate yourself during the sales cycle, how do you differentiate yourself when you go out for funding. All of those are different aspects of understanding the competitive landscape. I wonder maybe if you could talk a little bit about as you engage with a client or as you start to wrap your head around their marketplace and specifically how they position themselves, what do you look for and how do you start to approach that?Jeanette Rensha:             Yeah. I like how you took a couple of different segments. We'll start with the one I think this is most directly asking about which is when I'm working with a specific client with their product or service or combination offering, how do we determine the strength of their assumed competitive differentiators that exist, whether they're the right ones or how do we craft it from the beginning? I think a place to start is to really ask why did you get into this. Because those answers prove to be very telling. Some people have this kind of differentiation component on their mind from the beginning and unfortunately some people never have it until I'm on the scene which is usually not a great sign unless we're really, really early. But it's a surprisingly prevalent thing. There's a lot of in betweens there, a lot of gray but it's first like, do we have any awareness that we need this or what we think we have or the health of it.Jeanette Rensha:             Then it's how actual is it. When we're looking at what's the best case scenario, is this healthy or what should it be, first think about what's the industry that we're falling into. Is it established, is it new? Is it busy and what's the makeup of who exists in there? Each of those answers takes you into different tiers of consideration although I will say there are common threads across all of them, just like B to B, B to C have different entire kind of tiers of differentiation but commonalities also across those.Mike Kelly:                          Walk through an example of how you try to assess, I guess when you're first, maybe it's that first meeting or maybe it's one, probably more likely when you're doing discovery with a prospect or a client, walk through how you try to assess where they are.Jeanette Rensha:             Mm-hmm (affirmative). I think one thing that I typically start with, when appropriate to start into a little bit of weeds, even the first meeting is how would you describe your company in a sentence? Unfortunately most people struggle to do that.Mike Kelly:                          Can we do that for Startup Competitors?Jeanette Rensha:             Yeah, how would you describe your company in a sentence?Mike Kelly:                          We provide the data that founders need to help them better understand the market that they compete in.Jeanette Rensha:             If that sentence proves to be in the way yours was, human language that someone that might not have experience could understand, so it's relatable no matter the person. We know if you're speaking to just the right person they still have different backgrounds and languages. You want to make it as easy to understand and that was clear. Then do I know where you fit in my scope of any kind of vendor I might use or resource because if its an unknown even category, I've never considered needing or even exploring or knowing of a tool that would work like that. Much more difficult place to start from. In fact, some would argue very poisonous and not very effective because even if your functionality is easy to understand, if you are creating or you think you are creating your own market category, the buyers won't be able to start to understand what you do, what you solve, any of the things you're going to say after that until they first have a frame of where you fit.Jeanette Rensha:             Even if this is especially prevalent when you're commercializing an innovation. That could be an A-stage company but you're bringing something that you think is new, maybe creating a new market category. In sales, tech resources to enable sales teams, this is incredibly prevalent because there's a lot of overlapping functions and tools and things. Some of them work together, some don't but the category of sales enablement is far too broad and all encompassing but how do you differ up sales enablement? There are some subcategories and now you're seeing subcategories branch out for artificial intelligence field sales enablement tools regardless of their function. It's just really messy out there but when people try to sell those tools, if they don't have a category they knew of tools or any of that frame of reference, they can't evaluate it, they don't know how to process it and you're not going the be able to get into a really good conversation or even have them consider your offering because it's never been on their radar before. That doesn't mean you have to fall into something that exists. There's certainly new markets being created all the time.Jeanette Rensha:             Rather, it's give me a frame that's close by. If it's something completely unrelated to anything I've ever had truly all its own, well then let's start with the problem. Because if I'm familiar with the problem and I can frame that, then I can maybe entertain solutions where there has never been one before. If I'm a new kind of tangential segment for where my tool falls, start with the main segment category and get this familiarity of, "Oh are you familiar with the CRM" would be an easy entry point for an app that might come in an app store, build onto a CRM or enable that to go further or faster or something like that. That just has, okay I know CRM. Now keep talking to me. Check that, start to get my arms around it before I start to understand all the cool new stuff you do and get lost in where it will fit holistically.Mike Kelly:                          Not clearly defining or understanding kind of the, what did you call it? The space that you live, right? The area of spend that you live within a company. What are some of the other common problems that you identify at that, even that first stage of tell me, give me the one sentence of what your problem is.Jeanette Rensha:             Once we get that understood, whether we fix it or it's there, then we move to why would I pick you in a sentence.Mike Kelly:                          We're going to be the best fit for founders who aren't quite sure where to start or need an extra level of depth that they're not going to find if they just use a standard, automated service.Jeanette Rensha:             Okay. When you say that I hear we're going to help you start if you don't know what other automated service to buy. Like, we're for the first timers.Mike Kelly:                          Maybe. Let me try it again. I don't know, I've never done this before.Jeanette Rensha:             That's okay, that's good.Mike Kelly:                          I'd say if you're not sure where to start, yes first timers, I would also say if you don't have the time. I didn't say time in the first one. I would say time is a key value prop because we do all the work, you don't have to do anything. Just completely hand off. Then the third piece would be maybe a little bit extra depth because we aggregate so many different sources that, part of that goes to time right, but it's just even finding those sources, buying subscriptions to all of them, things like that. It's the white glove version that if you're not sure where to start, that's okay. We're happy to handle that for you and then even if you know what you're doing, probably go a little bit deeper and you don't have to do any of the work. We white glove that for you.Jeanette Rensha:             Mm-hmm (affirmative). Yeah.Mike Kelly:                          That's not crisp. That's not one sentence.Jeanette Rensha:             It's not, which is okay for the creation of it. It's about being able to have, just like any receiver or listener, you could be the most diligent, you could take all the notes or however you intake data knowledge and then go on your way. You could have understood everything in the conversation but translating it is much more difficult. People usually leave interactions with one to three things that they can recall stood out to them, whether they're action items or not, you know but if you want anyone you're working with or a prospect you're talking with about Startup Competitors, then to walk away remembering what you do and why they should do it with you, it has to be concise and it has to be something that sticks with them.Jeanette Rensha:             I always think about mission statements as a good analogy because I worked at a large public company where one of our monthly activities in one of the departments I was in in my time there was to go into a big conference room with our whole department and we would volunteer to raise our hand and read the mission statement for our department which was 12 font on a full slide of text. You stood up and you read it to a group of adults. I was just wondering how we were going to walk through our lives and our careers there and remember to live by that statement that we could barely read on the slide once a month. There was nothing that you could carry around with you, a mission statement that is truly your core that you could have in a sentence that fuels the decisions that you make, day in and day out. That is what will stick with you. That is what will drive behavior back into what is your mission. All the other details about what you do and how you do it can be part of your ultimate plan but they're not going to carry them around every day.Jeanette Rensha:             A differentiator is what is going to be the most compelling thing to your audience. That is where competitive differentiators, you could textbook it for days and there are lots of ways to chop it up. They're not all right or wrong. It is about your audience and who you're talking with and what you need to get across to them and how they likely receive those types of messages, as much as it is what you're saying and what you believe are attesting differentiates you.Mike Kelly:                          How do you handle that for products or companies that have multiple buyers?Jeanette Rensha:             I think especially in the segments I work with, that's more common than not. It comes down a lot of times to more specifics. I mean, it's part of why I love what I do because I get to get into the weeds and really make these textbook, high level recommendations but specific to a certain company because there are so many nuanced things that will change how you do that. When you think about how do you make a value statement for a new customer-Mike Kelly:                          Just different types of buyers.Jeanette Rensha:             Different types of buyers.Mike Kelly:                          YeahJeanette Rensha:             Complex sales. Yes, yes.Mike Kelly:                          At Startup Competitors, we sell to entrepreneurs who want to get market research for their SaaS idea. We also sell to venture groups that want to use us as part of their due diligence process. Then we also sell to professional services companies who can leverage our data to better provide their services. Think a marketing services company, a PR company, who wants to better understand the market that this client is in. They want access to our data because again, we can find it faster than they can. Those are three very different sales, when we make that sale. The value props are very, in my mind the value props are very different. I love what you're saying but now you've got this extra nuance of how do you say that to three different audiences at one time.Jeanette Rensha:             Yeah, that's actually two different things now that I'm wrapping my head around it. There's the instance of various personas buying the same offering.Mike Kelly:                          Yep.Jeanette Rensha:             Then there's the instance of various personas all at one prospect company considering that they need to align or reach consensus to buy the same offering.Mike Kelly:                          Yes, that's different.Jeanette Rensha:             Both interesting but different. To the various personas, the Startup Competitors example, this is also something that matures as the company matures. Initially you either want to target one of those personas obviously to get your foothold and then your messaging would be aligned with them. As you expand your market to include persona two in your initial kind of ramp, then you have messaging that aligns with them and the various aspects of their persona is a reflection of how you message it and what they'd be using it for. The compelling differentiator to a startup founder that needs to make sure they're not going in too far before they know what is, is reasonably and rightfully different than selling to a venture who wants to constantly have that fueled. The messaging seems obviously different and just making sure the channels, the collateral, all of the ways that they ingest content is either high enough level that it's generic and yet specific enough so that it can be navigated, the information still makes sense and everyone can see it no matter the person and it works. Then when you get into more detailed engagements that your messaging to them and the content you use is specific to them.Jeanette Rensha:             But when you think about a company reaching a level of maturity that they have the resources to really take that to the nth degree, a classic example is P&G and laundry detergent.Mike Kelly:                          Right.Jeanette Rensha:             They make all of them. It's like, most people don't think I could buy this or this or this and those are all different companies competing. It's like, no it's probably the same company but if you're the family person that has lots of laundry, you are marketing to this one. If you're the environmental friendly person, if you're the person that likes how your laundry smells, they have segmented their personas and their audience so specifically that they have entire product lines and sub-brands and companies built out for each persona. In a startup space it's not as realistic but the same concept is true about how you weight into your messaging for those personas even though you could be selling, at the end of the day, still just laundry detergent.Mike Kelly:                          Now go to the complex sale. An example of that, you have a, let's say you have a SaaS product that helps one area of the business and that's who your primary user is but there are then three other areas of the business that either have to, they are stakeholders because they either have to put data in or they have to consume the output data or whatever the case may be. To make the sale you need all four of those people aligned. How do you do that?Jeanette Rensha:             Me being the forever gray, nothing is black and white, it would depend. The ends of the spectrum will probably give us a good high level overview. On one side, it's understanding who are the essential decision makers and purchase either enablers or limiters. If I need, let's say five people at this company are my average leadership team members that contribute or reach consensus in order to secure this sale, then maybe two of them are going the be the primary users. Maybe one is the financial buyer that is not involved but needs to have the final approval and needs the understand the business case and then maybe two others are auxiliary departments that have a small stake in making sure they understand what's going on because it will impact them but they're not every day users. You would approach a buying audience like that differently where you would involve the right people in an appropriate sense and a lot of those also where you get to be human.Jeanette Rensha:             If I'm working with you and you have a team of people you're working with say, "Hey, who needs to be here from the beginning? Who will need to be here at some point but not necessarily from the beginning? What matters to them and when do they need to join?" You're like, "I'm going to keep this easy and keep our arms around it but having you under, tell me who plays what role." Then I can help us keep in mind, "Oh hey we're talking about this now" or "You've requested a financial proposal" or "Sounds like we need to get so and so back in the mix" or introduce that person and make sure that we're aligned. A lot of times you navigate those waters, "Hey I know that you shared with me earlier that this is important to this person. I made a task to help remind us to stay on track so we don't let anything get us behind the eight ball. That makes it more about them then just, "Bring the other decision maker in here. I don't know if you're actually going to be able to say yes, bring them all in." Which unfortunately is where sales goes. The number of times I've heard people say, "Are you the decision maker" on a phone call is astounding.Mike Kelly:                          That sounds very off putting.Jeanette Rensha:             Yeah. People don't warm up to that very well, especially if they're not the decision maker. Sometimes it's quite the authority boost but if you're approaching that side of the spectrum with all those different buyer personas at a single company then your goal is that you're solving the problem for the people that need the problem solved and your focused work is probably with them and the core messaging is with them. Then you're understanding when you're bringing in the other parties and how much they're going to have an impact in the decision. Some of those groups will get approval to choose a vendor and then the executive defers to them to simply bring their choice. In some groups will get to choose a vendor and will bring it to the executive team and do some secret presentation and they have a back and forth and no one is allowed in. Ultimately the executive makes the decision with no participation in the sales process.Jeanette Rensha:             That is where your differentiators have to be almost enablement both in training, your kind of white knights or key people you're working with to be prepared to sell for you as well as enabling them with content that is concise and that has the differentiators that speak to the executive team. Maybe you're solving a day to day grind but the executive way of presenting that differentiator is going to be an ROI of time savings and the bottom line of impact on the company. But for the user, that department head, it's going to be about giving your front line managers time to get back to analyzing the data and helping their team versus driving their team to enter the data or something like that, where they care much more about the details. The executive team is a different set of differentiation rhetoric that you supply to them. That's one.Jeanette Rensha:             The other side is when you are differentiating in a complex sale and it's a solution that every company or every of the major stakeholders will also have to choose and buy into. This is where the split, SDR to a closing account rep or not one rep owning the soup to nuts sales process becomes a really, really effective sales process when you have high quality people working collaboratively. What I'm referencing is, if I'm an SDR or a BER and I prospect and qualify an opportunity for my AE but it's a complex sale-Mike Kelly:                          I'm just going to stop you for a second.Jeanette Rensha:             Yeah.Mike Kelly:                          Unpack the acronyms just in case somebody listening has no idea what you just said.Jeanette Rensha:             Yeah. It's just an alphabet. No, it's convoluted. That's a good point. There's the prospecting leg sales development or business development rep, SDR, BDR, the account executive assigned to the closing rep, usually they own the back half of the sales process. There's a lot of other flavors and people that fold into that depending on the industry but in the most complex ones where there are those other people buying teams, selling teams, you first get someone interested in having the talk. Then you have to delicately try to stay in touch between the different sales folks helping the process along of is our person we've engaged at the target company interested in bringing other people in? Are the other people aware of our discussion? Or is the prospecting rep, the SDR, are they also still prospecting these other department heads that will either keep pointing us to the right person? It's almost like you have to find five potential qualified leads of these target personas all within the same company. That's a delicate balance to walk the line back and forth and help the AE keep track of everything and help make awareness of your offering to the whole buying audience as you wade in.Jeanette Rensha:             Then when you're doing those initial conversations is where you speak to the value prop of everyone so they understand the impact of them and that way when the group gets together and it's a busy demo and no one has time to talk and you miss all the questions because you are demoing but there's a bunch of important people in the room, they're going to hear more high level things or things that might not apply to them but you've got in a relationship with each of them so you can speak the language they each need to hear in order to understand what's in it for me. Why is this product the right one for me, specifically. These are all very, very granular differentiators deep in the sales call but they're all going to branch off of your certainty and your confidence in your company, your general offering differentiator. Why do you do what you do, why are you versus anyone else that does similar or the same thing as you.Mike Kelly:                          How do you go from that, the why do you do what you do and how are you different from anybody else that does what you do to what you just described with a high functioning team that's attacking a prospect from five different angles?Jeanette Rensha:             A lot of times you'll see companies segment by vertical. As a simple example of training to personas, I'm going to learn especially persona in their language because I may have learned the company level one and then I get to go work on all accounts to target prospects within that industry and I get to learn their language and how they speak. I'm going to get good at that. Then people organize it differently but you might stay in that vertical and be the champion of that or you might continue to kind of diversify your skillset and knowledge and move between verticals so you could work any vertical or you could speak the language, maybe that's how you're pathing yourself to an account executive role from a prospecting role is you now can speak that language of the various people you might be talking to and you know how to tailor your approach depending on who is in the mix for any given company.Mike Kelly:                          Got it. I don't. It's okay.Jeanette Rensha:             We're really in the weeds.Mike Kelly:                          It's all good.Jeanette Rensha:             I don't think it will come across very effectively.Mike Kelly:                          It's all good. All right. Let's switch gears a little bit. Let's say you've gone and you've done an initial assessment with a client keep walking me down that journey from their experience. What happens next? How do you engage with a team to start actually making these changes, whatever the changes are that you recommend?Jeanette Rensha:             Yeah. Well, whether if it's not a slam dunk differentiator, then we've got to fix it or create it. That is starting with really unpacking why but also how are we going to differentiate ourselves, because unfortunately when we're fixing it, it's usually because people believe they have a differentiator but it's one that's not going to last and they just have been nearsighted to that point.Mike Kelly:                          Give me an example of one that's not?Jeanette Rensha:             One could be a small feature distinction.Mike Kelly:                          Okay, got it. Easy for somebody to catch them in the market.Jeanette Rensha:             Yes. Anything that's not a proprietary secret sauce feature, you should never bank on it being-Mike Kelly:                          Perfect.Jeanette Rensha:             ... a differentiator for a long time. The other one that shouldn't be thought of as everlasting or be a lead differentiator is your price.Mike Kelly:                          Yeah.Jeanette Rensha:             We're not Walmart. Or if you are Walmart, I'm probably not working with you and you probably have your differentiator pretty nailed down.Mike Kelly:                          Okay. Nice.Jeanette Rensha:             But I mean there's a place for price differentiation. I will say that I wouldn't just leave it at price because I think that, again, in my world of gray and the details of making things custom, I think that's a really fun opportunity. In prepping for speaking with you today, to organize my thoughts I just reviewed a bunch of different sources I like for how they attack the topic of differentiation because I wanted to see the different approaches but a lot of them miss the nuance. Like, price is mentioned all the time. People fall into it, all the common stuff but pricing structure highly undervalued and a significant differentiator with the companies I work with because software is a really easy solution or like, sample for this where people know software as a subscription model and traditionally it is. But that means a lot of things and most people interpret it to mean user based, month over month. A lot of these core or maybe legacy criteria that we used to always do or sell software by. Well, that's not applicable for all softwares. I mean, there are certainly ones where it would be nonsensical to do it by user and then it's like, what now?Jeanette Rensha:             They're lost. They try to fit into something, hopefully. Some of them are really loose, some of them are really all over the place from pricing, there's a million a la carte things. But organizing it and selling it in a way that's logical to the people that consume it, they understand that technology scales and cost scales differently. It's not one the one. You have the technology that scales and your resources scale some but they know that. They don't want you to charge one to one all the way up through scale. What is the thing that you're providing? When do they get benefit? Is your pricing model and structure aligned on that? Is it clear? Is it easy? Other major differentiators that people are really focused on today with the price of structure, with customer service or support it's this we're not everyone because we're us. It's usually also we're like you. We know you. Either you're safe here because we're like you or we're the experts and you need experts but really you're buying our software and we're going to be experts when we help you and that's an added bonus. You get more than what you sought out to buy. There's a lot of support functions.Jeanette Rensha:             Then I think the world is catching up to this trend or at least they're starting to have it more top of mind but there's a concern about ease of use, onboarding trial and implementation, how do I get to buy your product, get on it and use it? It doesn't always happen in that order but historical sales is I control the process as the sales person. You come to me and I'll tell you what comes after what and then I'll get you the proposal. We can be on the phone and go over it. I'll sell it to you and we can do that. It's very rigid and usually involves the buyer being required to talk to someone live. It's really not that way anymore. The more you can enable people to self buy, self teach, self learn, self use, the easier it is for them to buy, the less time they have to give and the more likely they are to try and adopt your product. You can even create what they're looking for in the market because they might not have tried any of them. While they're waiting for demos for other companies, they're clicking around in your stuff.Mike Kelly:                          Why do you think so many SaaS products in particular still have call for pricing or fill out this form for pricing and not just enabled self signup, self purchase?Jeanette Rensha:             Yeah, it should be clear that some of those instances are incredibly legitimate and those product offerings could not be self service and that's rightfully so.Mike Kelly:                          Give me some examples or what drives that maybe is a better question.Jeanette Rensha:             Yeah. It would be complexity and implementation, time, effort, resource that is unavoidable. If I have to build up a bunch of things to make it work your way and organize it and install it before you could ever try it and it's a significant effort because it's a technical infrastructure item or something of that nature, no one would want to do that with the option of not paying them back out. There's a lot more nuance. Certainly there's no way to self service that. There are many examples on that side that would eliminate that.Mike Kelly:                          Okay.Jeanette Rensha:             Other reasons, one major one especially with companies that are more mature and still won't do it is because they're not equipped to do it. They don't have the right support. Their technology or their user interface, whatever capacity it's in is not intuitive enough nor do you have enough guidance to get through it. You'd get in there and even if it worked really well, you wouldn't know what you're doing and you wouldn't be able to teach yourself and then it would be crap because you just are floundering around and no one is there to help you because you let them in but you didn't enable them to be successful. Companies that are aware of this when they're early, early design are planning for it. They're looking at making sure they have usage data, guides embedded in there, tools so that you can do your own tours, support articles and things that are easy to find in specific instances so that if you appear to be stuck, it's right there as opposed to you having to go find a knowledge portal and dive in to find your answer.Jeanette Rensha:             Things like that are helping people get ahead of it. People playing catch up are struggling. Or when it comes to the pricing being customer facing or behind the wall, it used to be they were just afraid people would get shocked and run away. To some degree that's still sort of true but in those industries where everyone hides pricing, I'd like to explore what it would mean to put it out there because what people want more than anything is to trust sales people. That's a very steep hill to climb. But when you make it feel collaborative and you say, "We're here for you. We structured this pricing because we think it's how you would want to buy it because you're who we think would want to buy it and if not, we need to know but we're trying to make this reasonable and we don't want to hide it. We're not going to manipulate it, we're going to be transparent and we're going to put it out here. I think that's a really interesting differentiator as well when it's not too complicated, where it baffles people.Mike Kelly:                          Yeah. How much of your process is looking at pricing when you come in to work with a company?Jeanette Rensha:             It depends on the engagement. Some of them have really well thought out pricing models-Mike Kelly:                          Because I would imagine that is a big component of a sales that isn't working, right? Sometimes it could- be. I think your intuition around the pricing model might even be more important than the actual price-Jeanette Rensha:             Yeah.Mike Kelly:                          ... when it comes to it not working, right?Jeanette Rensha:             Yeah.Mike Kelly:                          How do you uncover that that's the problem and then what are the steps you take to figure out what the right pricing model is?Jeanette Rensha:             It becomes pretty apparent if it's a problem real early. Like, one, how certain are we about the pricing of today? If you get any wavering there, it's not good. Just in the sense that if they had any hope of confidence, they're usually like, "I think it's pretty solid." I find that people are overconfident and they want to believe in what they're made and so when it's not good they waver but when it's got some traction and people receive it well, they tend to stand on it as least lukewarm. But when you start to look at the sales data, assuming they have some, about where things fall off in the process and why people cite their reason for not choosing, if there's accuracy to that data you can start to get some idea of how many deals fall out of your funnel based on a pricing consideration or when that is a topic that is coming up in conversation and how do those go. I mean, part of my discovery process is talking with front line sales individuals, whoever that might be and they know. They know how well it's met or not.Jeanette Rensha:             There's never an offering where everyone says, "This is so agreeable. I love this price." But having a responsible conversation about price and figuring out if we can make it work is different than people saying, "Holy cow" and hanging up on you when you finally get there after you've held it close to your chest the whole time. Those are pretty indicative. When you go to approach it, you start back at the customer. Who are these people? What are they using it for? What value do they derive and what is it based on? Can we report on that value metric? Can we structure pricing around it? What would that mean for us? What would it look like? What are the other operational business considerations we need the entertain? Now let's start plugging and playing some numbers with our current customers and see what it would mean if we used this hypothesized new model and put them in there. What would it mean for our financial forecasting and then you plug and play behind the scenes but only so long. I wouldn't advocate you take a bunch of shaky pricing models to market. It's one of those things that especially once you're in market, you don't want to pivot constantly in a confusing way but that's rarely the issue, unfortunately. It's people get really rigid and hold onto their pricing.Jeanette Rensha:             It's maybe a bit of both. They either change it constantly or they hold onto it forever and they think it's in stone and it should be responsible iteration through growth. Constant reevaluation and specific responsible iteration as you learn. But like anything, you're testing anew, go to the people you already have in your network and trust and get their feedback. Test your hypothesis for learnings before you take it to market and try to get revenues with it.Mike Kelly:                          I'm thinking about a specific conversation we had in one of our product companies with a prospect. We had sold I think two enterprise clients, this is like a 40 to $60,000 a year spend. Not small, not massive. I want to say we had two to three clients at the time and we went to a, this would have been a whale for us. This was a big account and we were pretty far in the process. We started talking about pricing and I remember, I was the one selling this. Sitting across the table from, call him Mark, the guy I was selling and Mark was like, "Yeah, we really want this software but your pricing model sucks. I don't know how to make that work in my business." I'm like, "What do ... No it doesn't, it doesn't suck. What do you mean?" That was all inside my head. I might have said, "What do you mean?" He goes, "Well, I mean you're doing this flat monthly fee and it's just not the way my business works. I want to be able the take the cost of who is using that software and assign it out to the individual entities" think of a shell game of LLCs. It's a whole bunch of different companies.Mike Kelly:                          "I want to be able to take the cost per use and funnel it into each of these companies so we can accurately account for where this cost is coming from. In a flat monthly fee, I don't know how to do that, which means it really just sits on my balance sheet here at corporate and I'm going to get looked at for that at the end of the year. That's not working for me because I don't want it to sit on my balance sheet. I want to push it out to everybody else. I can't really do that with your pricing model." Then I was like, "It seems really insightful. How would you price it? How would you want to see it priced?"Jeanette Rensha:             Yeah.Mike Kelly:                          He was like, "I would want to, can you just charge me per use? Every time we create a new deal in the platform can you just charge me by the deal? Then I'll know exactly who created that deal which means I can, at the end of the month I can allocate that cost to them and all I need from you is an invoice at the end of each month of by operating entity, they did this many deals and you're charging me that much." He's like, "I'll even pay you more for that. I would pay a higher per deal cost for that then a flat monthly fee that's predictable."Jeanette Rensha:             Oh yeah.Mike Kelly:                          "Turns out any time we make a deal I'm making money. It's not even something that I think about versus every month when I look at your flat monthly fee I'm going to ask myself the question, did we do any deals? Did we use this software this month? Is that worth the 10 grand?" Whatever.Jeanette Rensha:             Tit for that.Mike Kelly:                          It's super insightful and I was like, "Yeah, we're doing that. That sounds great. We'll take that. Can we negotiate a per deal price now or do you want to do that later?" Now we have two pricing models because it turns out he's not representative, he is representative of about 50% of the market. Then there's 50% who work the other way and they're like, "No we don't want any cost in these individual companies. We want to carry all of that here at corporate so that they look very profitable and healthy. We want to carry as much of that as we can." Which is super interesting that market-Jeanette Rensha:             Fascinating.Mike Kelly:                          Yeah, just a segmented market. So we have two pricing models that we go to market with and we early in the process, I can pretty quickly tell you which one you are without you having to tell me. Then when we go to present pricing we say, "We have two pricing models, this is the one I think you would like. We have this other one, too, if you want to talk about it but this is where we'd be at." 80% of the time they're like, "Yep that sounds reasonable." Then sometimes we're wrong and they're like, "What's that other pricing model? What would that look like?"Jeanette Rensha:             Yeah, I think that's a really interesting example and it hits the major things that I think about, like how do they want to buy, how do they get value, how do they want to pay. Same sort of thing.Mike Kelly:                          Yeah.Jeanette Rensha:             Then is the way that the want metrics, in your example, the quantity of deals is how he saw the value being divvied up between the various entities that were using it rolling up to him. It's like, if it's not all thing equal, which it sounded like it wasn't-Mike Kelly:                          Not.Jeanette Rensha:             ... and then the metric of differentiation is quantity of deals created and that's a trackable metric that's easy to report on, done and done.Mike Kelly:                          Yeah.Jeanette Rensha:             Yeah.Mike Kelly:                          It's had this great side effect, too, because we do nothing related to users, we have no per user pricing. We're like, "Yep, you can let anybody in your company in. That's cool. We're happy. You've got a maintenance person? Bring him in." True story, maintenance people. We have everybody. Lawyers, managers, maintenance people, you name it. The magic of that is without even intending to do this, I'd like to say we were super insightful and planned it this way, we weren't but we now have 50% to 70% of a company in some cases onboard our software using it. They're not getting charged for it but the magic of that is imagine replacing that software with a competitor. Right? If somebody comes in down the road, now it's not just like, the five core users who you have to train and convince, which is five is not that many. You can probably do that pretty easily. But when it's 50, when it's 80 and it's like, "Oh man, I've got to retrain a property manager out in the field?" It's just not worth it.Jeanette Rensha:             Yeah. I think about, I see pricing models getting away from metric like a user based metric that both messes with financial forecasting, especially with longer contract terms but also where the operational headache of managing, allocating and retracting licenses across business units through attrition and new employees, I'm sure you've done it. I know I've done it ad nauseam. It's not fun. It's also really not fun to go to your financial head and say, "Hey, really excited for my new hires. We need to buy five more licenses for them from these seven vendors that we use in our tech stack." They get mad at you, no one specifically but in general it's a frustration because it's a cost they hadn't budgeted for. It's like, well I got the hires approved. They're going on the team that uses the technology. We know all these things. Somehow I'm the bad guy. Companies don't like that. Everyone is too busy, no one likes that part of their day and it makes using the software, that's a friction point. Make it easy to buy, make it easy to use, expand and share. Why would my CEO not get to look at my charts over here because they don't have their own user license. This is infuriating.Mike Kelly:                          Yeah.Jeanette Rensha:             I think one of the other things that's coming up a lot is make it easy to use across the business, not just in a permissions user perspective but more and more technologies are on the scene. They're more and more crowding in in a single tech stack for any given department. Just feel like there's a big wave kind of happening where at first it was a lot of all in ones trying to do rudimentary technologies and platforms and build it out. Then it became best in class so companies had an aggregation of many vendors all serving their purpose and then the breakdown of them trying to talk to one another, the complexity of training all these different solutions, all that falls into that, became so unbearable and the opportunities for new stuff kept coming in that now it's almost like, I don't want best in class unless you can easily talk to my other stuff and you prove that it's worth even trying to get you guys all to work together.Mike Kelly:                          Yeah.Jeanette Rensha:             You guys being the inanimate vendor technologies. Yes.Mike Kelly:                          Right. Right, right. Give me, only because I'm watching the clock and I probably, we're way over on time as it is so I probably should let you go here soon but before I do that, when you go in to consult with a company on changing the sales process, what are the biggest roadblocks you get from that company? Your client?Jeanette Rensha:             When I'm actually changing things or when I'm proposing my work?Mike Kelly:                          Yeah. Start with proposing your work.Jeanette Rensha:             Proposing my work is simple. It's I get why you don't have it defined as what you do and what comes first and what I should expect because you don't know enough yet but also how am I supposed to be sure of anything. That's a very fair counterpoint. The way I structure things is meant to give frequent checkpoints, constant, not constant, that sounds tiring but comfortable frequency of alignment on what's next, why do you need to learn, do we just need to do, those kind of things. It's all about communication in flight. Helping them understand that they have outs so they can feel safe. I always let people leave. I've defined checkpoints where I say, "Here's what we've done, here's where we're going." Thankfully I'm betting on myself so this proves to just give them time to meet me and get in the flow and see how I work and how I communicate. Those checkpoint are never really needed but they allow people to enter into the unknown feeling safe. That's the biggest obstacle there.Mike Kelly:                          Then once you're working with a team if they don't want to change?Jeanette Rensha:             I think a lot of teams and it's a tough thing to ask of anyone but they don't want any of the learnings we'll glean as we wade into stuff to be telling them they shouldn't go there but sometimes that's the most important message. If you go take the startup landscape or the competitive landscape. If you didn't do your diligence in evaluating it and you think that you have a certain kind of position, whether it's just you're the first person to the market or one of the early folks or you think you have some crazy differentiator and then you find out later that had you looked harder, you were wrong and that might actually be the critical piece that says, "Going further this way you'd have to do something drastically different than what you have planned or it's a bad idea and we shouldn't do it." Very, very difficult place and I wish people were more willing to see that that would allow them to figure out what they were trying to solve and if there is another way versus being upset. It's a gut reaction, natural thing but that inevitably happens.Mike Kelly:                          Nice. All right. If people want to get ahold of you, how can they do that?Jeanette Rensha:             There aren't a lot of Jeanettes out there anymore but I'm easy to find on LinkedIn, my email is my full name at Gmail. Just, Jeanette Rensha. I'm a frequent responder so I'll entertain anyone with a respectful approach. I have a lot of really fun conversations and meet a lot of cool people. I'm happy to connect with anyone.Mike Kelly:                          Awesome, Jeanette, thank you so much.Jeanette Rensha:             Thanks Michael.
Plan Forward: Become an Early Authoritative Expert to Differentiate From Your Competitors
Subscribe on iTunes, Google Podcasts, Spotify, Google Play, Stitcher, or Podchaser. In this episode, I talk with Megan Lohman, co-founder and CEO of Plan Forward, a platform that enables dentists to offer subscription plans to their uninsured patients. The role of Plan Forward is in managing the membership plans that are provided to the patients. When Plan Forward was creating it’s business plan, there were only 2 direct competitors at that time. However, when they launched in 2018, 3 other competitors launched as well. Megan shares the importance of good customer service, high-touch implementation, and the unique perspective that her and her co-founder have, as the driving force of their differentiation.  “The biggest thing I’ve learned is that, don’t put too much stock in any one meeting, and don’t write off another meeting. Because, when you think something is really going to be this answer to your questions or your problems, it doesn’t ever pan out. But then some of these chance encounters become what the answer should be.” — Megan Lohman In the year leading up to the starting of Plan Forward, Megan ran a marathon, which she says gave her critical tools in running a small business, and for handling the tasks that she may not like to do, or may not excel at. She details her daily habits and routines, which have helped her be the most efficient.Topics in this episodeProcess of growing from 6 beta practices to now having 18 customers Roles within the company looking to be filled after the next found of fundraisingExpected growth over the next 5 yearsOpportunities in other verticalsImportance in being an early authoritative expertUsing your expertise as a referral sourceBiggest lessons learnedContact Infomlohman@planforward.ioLinked inFacebook: @teamplanforward317-416-8548 TranscriptMike Kelly:                          Welcome to the Startup Competitors Podcast. Today I have Megan Lohman, who's the co-founder and CEO Plan Forward. Megan, welcome.Megan Lohman:               Thank you. Thanks for having me.Mike Kelly:                          Why don't we start with a quick pitch for a Plan Forward.Megan Lohman:               Wonderful. So Plan Forward is a software platform that enables dentists to offer subscription plans to their uninsured patients. So to give you a little context, there's a huge population in the United States that does not have dental insurance. Those same people are also not buying traditional insurance. And for dentists, their reimbursement rates from insurance companies are declining and they continue to decline. So to try to solve this in a creative way, dentists have started offering these subscription plans to uninsured patients, and now they need a management system to run those. So that's where Plan Forward comes in.Mike Kelly:                          Nice. So Plan Forward, do you also do dental practice management or is it just the management of these membership systems?Megan Lohman:               Just the management...Mike Kelly:                          Programs?Megan Lohman:               Yeah. Of the membership plan.Mike Kelly:                          Okay, got it. Current status of the company, paint a picture for somebody who's listening. Are you still at three employees, 50 employees? Venture backed? Number of dental offices onboard? Anything you can share to kind of paint a picture for where you're at?Megan Lohman:               Yeah, so we launched our MVP last September with six beta practices and worked out the kinks, the bugs. And we had our soft sales launch in November of 2018, so we're not quite at a full year of selling. So we have 18 customers across four states. We have about 25,000 in ARR. We have secured the endorsement from the Indiana Dental Association. We were vetted against our competitors for this, and we came out on top for our membership plan administration. And we're currently in our first round of fundraising doing a friends and family and angel round. And once we close that, we're excited to add to the team. Right now it's myself full time and my co-founder plays an advisory role, but also obviously he's the dentist and so he's involved in all the dental communities. And so he's our big referral source. We have an intern and then our developer also is obviously operational. So, yeah, we're excited to add to that team.Mike Kelly:                          Awesome. Talk to me a little bit about competition in the space. How many people are there that are direct competitors to what?Megan Lohman:               So that's a great question. Actually, when we first did the market research to put this business plan together and decide to launch it, there were only two direct competitors. And they were both launched in 2013. Ironically, that was the same year that my co-founder and I started his subscription plan in his practice. So that timing is coincidental, but three software platforms all launched last year.Mike Kelly:                          Oh, wow.Megan Lohman:               Yeah. So they weren't on our radar when we put our business plan together to manage dental subscription plans. So it's exciting because it really does show us that this is a ready market, and people are excited about finding creative ways to provide healthcare and to provide quality service to patients in an affordable way. But at the same time they're competitors. So we're demoing against them and we're having those conversations. Constantly looking for that differentiator.Mike Kelly:                          I was just going to ask, when you go into a dental office to make the pitch, how often are you being stacked up against other people in the same space versus just educating them on, hey, maybe this is something you should consider doing here and this is how it works and this is how our software enables?Megan Lohman:               If it's a referral, typically I'm not demoing against competitors. But interestingly in about the last six months, this is really our competitors, we all emerged in 2018 so we're all starting to get a little bit more traction and some brand awareness. So really in the last six months, it's like every time I talk with a practice they're like, oh, we've talked to three or four other companies.Mike Kelly:                          The other companies, yep.Megan Lohman:               So it's becoming pretty common that they're stacking us up against them.Mike Kelly:                          How do you think about differentiating your product?Megan Lohman:               Every time it has been a couple of things. Customer service, has been number one, which I pride myself on. And that's the way we're going to build the company to make sure that we do have great customer service. Also we have a higher touch implementation. So we help them, these are small businesses, and we help them through this couple week process of creating this plan if they don't have one.Megan Lohman:               And also our pricing structure is tiered so that it's a lower price point when they don't have a plan, and it increases as they add patients to their membership plan. So that's also attractive.Megan Lohman:               And the software platform is very simple. You have all different levels, skill levels in the front office that are entering patients into these systems. So it has to be really simple so that anybody can work with it.Mike Kelly:                          I'm thinking about the right way to ask this question. So when you think about growth over the next, let's go five years out because I'm sure growth over the next five years is...Megan Lohman:               Oh, you had to do five?Mike Kelly:                          Yeah. Growth over the next five years is easy, right? Because you're just land more dental offices.Megan Lohman:               Right.Mike Kelly:                          What I'm trying to get to, and maybe you can tell me what this timeframe is. When you look at the roadmap and you think, okay, here are the real inflection points for this business that could be in terms of how do we need to build out significantly new features in the product to enable, whether that's moving up market or whatever the case may be. Or even, I can imagine there are other types of healthcare practices that could potentially benefit from the same thing. It doesn't just have to be dentists. So I'd love your thoughts on at the point where it's not just start up hustle, scale the business, acquire, the core customer that you're trying to serve today. But when you reach that first inflection point, what do you think that looks like?Megan Lohman:               I know there are other opportunities within dentistry and within the platform to really almost serve as a full financing platform. So one of the biggest issues with patients going to the dentist is cost. So a lot of practices offer in house financing or they accept other types of financing plans. So there's been a lot of talk about especially in ortho. Right now, our model doesn't really support ortho because that's just treatment. It's not recurring preventive care. So expanding in other areas and other features and platforms that can support anything around that financing piece within dental care. But then also there are so many other verticals that are, they're healthcare related. They're parallel to dentistry where routine preventive care is recommended and highly encouraged. But a lot of people aren't going to do those things if they don't have some type of benefit plan to help either give them discounts or they're on a subscription plan to maintain that care.Megan Lohman:               So whether it's veterinary, vision, chiropractic care, dermatology, these are all very similar business models to dentistry and it sort of becomes this stepchild almost from major medical. So your medical care is one thing, but some of these other ancillary industries aren't always covered fully in those benefit plans. So the providers and the patients who find the need to create the subscription plan and can offer that to their patients, it benefits both of them perfectly. So we're really excited to dive in and put some resources into research on what markets are viable.Mike Kelly:                          Nice. Talk to me a little bit about the process of as you built out the... If one of the strategic differentiators is customer service and you mentioned the kind of two week process that you might build out with somebody who walks through, which if that's secret sauce, you don't have to go into that, but I would love to know how you figured that out. Talk a little bit about that journey in terms of going through the beta clients and then bringing on the 18 practices that you have today. What was your process in figuring out, oh no, if we're going to be successful, this is really what we need to be doing, and how did you come to that?Megan Lohman:               I love that you ask this because it lends itself to the fact that I did this job. I have sat in their seat, my partner was my boss. We literally did this. I know exactly what they're going through, the conversations they're having with their patients, and I know the obstacles that are holding them back from launching these plans and understanding how to do it well so that it's profitable. So A, I know what they're going through. But we initially built our business to serve the customer profile that is my partner's office. So essentially they've already launched the plan. They already have over 50 patients on it and now they figured out, wow, this is an administrative nightmare. We need a software platform to manage it. But what's happened is we've become this resource for anyone, all these referral sources, these sales reps, these dental associations, these consultants, we're now their resource.Megan Lohman:               Oh you want to talk memberships, call Megan. And so now it's like we're actually really helping people from the ground up. So that process has evolved. Three of our beta clients, we did create the process from scratch. So we had six beta clients, total. Three had existing plans, three we created from scratch. So that process really started before we even launched our beta. So I helped with this kind of pricing calculator. We do a fee analysis and then really kind of dig into some details of their services and their patient population and what things they think are important. And then kind of go through a couple of phone calls, and we do a staff training and then we launch the plan.Mike Kelly:                          An interesting thing that I'm thinking about. So I just finished an interview with Eric Baum, who's the managing partner at Solidea Capital. His episode will air just before this one. And what's super interesting and this is what's going through my mind as you're talking to Eric, basically when he thinks about the early stage companies that they invest in, he has a really great model that he articulates for the three types of companies that you can have in terms of what kind of market they're going after.Mike Kelly:                          And the one that I'm kind of mapping you to based on that model is the one that he talks about, which is, I can't remember what he calls it, but it's basically where your go-to-market strategy is to educate the market. So, which is very much what you're doing, right? You're the referral source. oh, you're thinking about doing this, talk to Megan. And what that does is that allows you to become the early authoritative expert, form that relationship, walk them down the path that you've architected to do that. So as you think about scaling going forward, particularly if you're bringing in early stage capital to help you build the team around you, what does that free you up to do to become more authoritative? What do you think that looks like?Megan Lohman:               That's another great question. I just had a call with a dentist who practiced for years and years and years in Southern California. And now he just moved to Alabama, a rural area in Alabama and...Mike Kelly:                          I'm sure that's just like California.Megan Lohman:               Just like Southern California, so many similarities. And he was educating me on the differences. And from that call I basically was like, wow, we really need to understand each area before we try to market to them. Because in California, this membership thing, it's kind of the wild west because there are no laws on the books around this protecting providers or any language that gives any structure around these direct primary care agreements. But they're doing it and the patients expect it. And so it's already being done in their own way. In Alabama, this is completely unheard of.Megan Lohman:               It's a big need. Patients need it. There's a huge demand for preventive dental care. And he was telling me, "You have such an opportunity to be the person to create this." So a big part of our plan come October, which is when we hope to be able to start executing this plan after this fundraise is PR and education and marketing. Because once we start educating not only through dental mediums, dental industry channels, but also to the public. I mean we're not going to be successful unless people know about these plans and know to ask about them or where to find them. So that is a big thing that I'm learning as I go too is that we have the opportunity to build what this looks like and how it should be done well so that it's benefiting both patients and providers, not just one.Mike Kelly:                          Nice. When you look at the technical roadmap for the product, what are some of the things that are coming up that have you excited about, particularly as you think about new capital, use of funds? What are some of the technical things that have you excited?Megan Lohman:               I'm so excited to have a technical partner because I have been this product strategist and the architect and leading this whole charge literally based on no technical experience and just my own working experience. So now that I've sort of started to get plugged in with people who actually understand digital products and leveraging them, I'm so excited to work with Innovatemap. They're part of our plan at least in these first few months in the winter. To be able to deliver a more seamless process for our customer.Megan Lohman:               So really taking some of that off of our plate with education and having the product essentially educate our customers so they can just log into their account and the product walks them through it without us having to tell them how to add a new member and how to change payment issues and things like that. So just making it more of a seamless product for the customer, and allowing the patient to have some access to that as well. That's on the roadmap. And just having someone who understands from a technical perspective where we're going and to make sure that what's being built today supports that. So I'm just excited to be able to get some technical expertise lined up on our roster.Mike Kelly:                          Yeah, even when you're surrounded by technical people, sometimes it's nice to know that there's somebody who's dedicated to focusing on your problem and what growth looks like. I can totally emphasize with that.Megan Lohman:               Yeah.Mike Kelly:                          So you've been doing this for two years, is that about right?Megan Lohman:               We launched our MVP a year ago.Mike Kelly:                          Right, but how long leading up to the MVP?Megan Lohman:               Oh yeah, a year before that.Mike Kelly:                          A year before that, okay.Megan Lohman:               Just some market research...Mike Kelly:                          That's a good guess. All right.Megan Lohman:               Great guess. Market research and getting all the legal ducks in a row to form the business.Mike Kelly:                          What's the biggest thing you've learned through that process? Or a couple of things. You don't have to pick one.Megan Lohman:               Nobody moves this, if I don't move it. And that's the one thing that's been the biggest source of stress, but also the biggest motivating factor for me. It's really amazing to look back and think, if those phone calls don't get made or those followup emails don't get sent or these meetings don't get scheduled or you network and you come up with new ideas and you create new relationships.Megan Lohman:               The biggest thing I've learned is that don't put too much stock in any one meeting and don't write off another meeting because when you think something is really going to be this answer to your questions or your problems, it doesn't ever pan out. But then some of these just like chance encounters become what the answer should be. So it's just really been a process of just paying attention and going with my gut, taking customer feedback and asking for things, which is something new, whether it's asking for the sale, asking for the referral, asking for capital, asking for advice. There's so much asking that goes on. And then also being a good customer. Make sure that I'm offering value whenever I can and that I'm being the customer that I would like to have. So that's kind of a lot that I've learned.Mike Kelly:                          That's awesome. So a couple of things in there really resonate with me. One, that nothing gets done unless you move it forward that's going to continue for a long time. Just so you know that. Two, the idea that there's no meeting that's too small, right? Or introduction or handshake or whatever, right? Everybody can play. Turns out when you're a startup, everybody can play a massive role and not knowing where that is and having the humility to recognize that is phenomenal.Mike Kelly:                          And the last one while you were talking about just not being afraid to ask for stuff. There's this great book I read years ago, it's not super applicable to entrepreneurs, but I reference it a ton in my life. It's called the Secrets of Consulting 2. The Secrets of Consulting is also good, but Secrets of Consulting 2 has this thing called a Consultant's Toolkit and just think these 12 items that you carry around with you to remind you of things that you should be doing, right? So they're kind of cheesy but they also really are true. So one is like yes, no medallion, right? So that you're empowered to say no to things which very few entrepreneurs say no to anything, which is hard. But it's this physical reminder that you can say no to things.Mike Kelly:                          Another one is a heart which you like. I actually carry it around, a little glass heart for years to remind me to not be so angry and be a little bit more compassionate in my interactions with others. The one that you had me thinking of is there's this thing called the wishing wand, which very, very, very few people, consultants, entrepreneurs, employees, doesn't matter. Very few people are brave enough to ask for what they Right? To like paint this picture for you. Well you don't want to be perfect for me is I want this and this and this and then just be comfortable with, you're probably not going to get that, but that's okay. You're never going to get anywhere close to it if you don't ask for it. Right? So just being able to articulate, there's a entrepreneur that I'm coaching right now who's going through a very difficult negotiation with an outsource development partner and that has gone bad.Mike Kelly:                          Their relationship has gone bad. And so she was asking me what's reasonable here? Which is always interesting for me as a outsource development partner. Sometimes what my answers to that will be, because I can see, totally have experiences on both sides. Right? So our last conversations was around the best thing you can do right now because they've had the first step of the critical conversation where she's expressed she's not happy, she's expressed the problems that she sees. They've heard that and accepted it and said, hey, we're going to get back to you on what the right next steps are. Which is great. That's a perfect response on their part. And so she called me frantically after this meeting and she's like, what do I do now?Mike Kelly:                          And my answer was, well you wait, just wait, give them time. Let them come back to you. Because you probably brought up some points from perspectives that they haven't been considering. So they need time to process that. But the single best thing you can do is now think about what you want. They're going to come back to you with an answer. What you can't do is wait for them to come back to decide whether or not that's good enough. Because that's basic anchoring and negotiation, right? If you wait for them to come back, then now suddenly your expectation for it's possible is going to be anchored on what they said. So my guidance was write down three scenarios. One, is pull out your wishing wand. What is what you want to see happen? In your perfect world, what would you want that to look like?Mike Kelly:                          The next one I want you to write down is what's the least optimal solution that you will accept, right? So if they said this, I would say okay, and I would hate every minute of that. But there's no lawsuit, we're still probably working together. You know what I mean? It's just like I'm not happy but we're moving forward. And then I said, then the real challenging one is going to be, what's the middle of those two? What would be between the thing that you really, really want and the thing that you would live with, what does that look like? And as soon as you do that now when they come back to you with something, you now have these guideposts that you can start working off of to say, well, okay, this is better than my least optimal solution. It's not as good as my middle solution.Mike Kelly:                          Can I work them up to my middle solution and I'll be kind of happy with that, right? This is really close to my dream solution. Maybe I should just say yes and be thrilled, they're really a good partner, right? But you have no context for that if you're just waiting for them to come back. The one that you really said there that really resonates with me is just not being afraid to ask for stuff and then really having a clear idea of what is the thing that you want. And being able to articulate that to somebody I think is really important.Megan Lohman:               Trying to figure that out. When you haven't gone through the process, what do I want? What does the business want is sometimes the hardest part. The thing that I have been blown away by in Indianapolis is, people are so willing. I'm going to write a book, The Power of a Cup of Coffee because I've literally built an amazing business, got it off the ground, have great partners, made great connections over a $2 a cup of coffee. And I mean it's been incredible. Not lunch, not a $20 lunch. It's a $2 cup of coffee and people are just really willing to take an hour out of their morning to meet you for coffee and so I've kind of learned, you know what? They want to help. So I'm going to tell them what I'm trying to do and ask for something, see how I can help them in return. But it's amazing if you're able to figure out what it is you want and try to figure out who can help get you there, people are willing. So I hope I can pay that back somehow.Mike Kelly:                          We have a great supportive culture here in Indianapolis.Megan Lohman:               Absolutely.Mike Kelly:                          That I think is not reflected. I think every market has people who play that role, but I feel like here it is very large.Megan Lohman:               There's just this is a world, this tech startup space is just a world that I was completely unfamiliar with before two years ago. And there's just this energy that everybody wants everyone to succeed. Doesn't matter if you're directly involved, but if I can make a connection or a referral or an introduction, it's just.Mike Kelly:                          Yeah.Megan Lohman:               Everybody wants everybody to do well and it's pretty amazing.Mike Kelly:                          So you were doing this job two years ago and you decided to make the leap into building a tech company. Why?Megan Lohman:               I actually spent a year at home. I had my second child, so I have two little kids, also.Mike Kelly:                          Congrats.Megan Lohman:               So I was... Thank you.Mike Kelly:                          And starting a start up. You're crazy.Megan Lohman:               I'm crazy. I was literally training for the Chicago marathon, raising a, what was she? My son was three and my daughter was one and I told my co-founder, okay, I have to run this race before I actually can start focusing on trying to dive into this software solution that you're wanting me to find. So I finished the marathon and that Wednesday I started these meetings and...Mike Kelly:                          Oh, we're going to be friends.Megan Lohman:               I was crazy and I went on no sleep for two years, thankfully I'm past that now. But I am typically the only mom of young kids in a room of startup founders. And there's a reason for that. Not to discredit dads or anyone else who has a family, but a mom of young kids trying to juggle everything that goes along with that plus a startup and being available and being flexible. Having no money, putting all of that into the business. It has been an adventure. So I don't even know where I was going with that. But it's been an interesting go.Mike Kelly:                          You've ever reflected on where that drive comes from? This is way off the rails, you don't have to answer this.Megan Lohman:               I know. Well I know where I took it off the rails is, I was saying at home for a year when I started this, so I wasn't working and chose to leave the dental practice to do this, but I love working. So that's why I made the leap. But anyway, what was your last question?Mike Kelly:                          Where does that drive come from? To cherry pick a couple of things here. Not everybody starts a company. Not everyone runs a marathon. Not everyone does that while they have small children. I'm just genuinely interested. Do you have any idea where that was developed, where that came?Megan Lohman:               You know, I've always loved a challenge. It's always just driven me. Staying at home with my kids, was by far the hardest thing I've ever done. And like any stay at home, mom will tell you it is the least rewarding job, nobody celebrates anything, you know? And at least now I get to celebrate if I get a win or a loss, I don't know.Megan Lohman:               But that drive just, I've always loved a challenge. My parents have amazing work ethics. I don't know, just the taste of success I think when you get there and learning. I think I ran the marathon and trained for the marathon right before this for a reason. I don't think that was coincidental. The training process for a marathon is the hardest thing. And as long as you follow your plan, even on those hard days, but you just go out, you put your shoes on and you run. Mine had to be before the sun came up because then my kids were awake and I was home with them. So they were early mornings. And it's just, you have to go through that training process and then all of a sudden when you get to the race, it's the easiest race I ever ran. My last mile was a seven 24 and it's just energy...Mike Kelly:                          Pretty sure if I tried to run a seven 24 for one mile, I would pass out.Megan Lohman:               The experience of being well-trained and following your plan and just doing it. Even if you don't want to on the days you don't want to, that put the ball on the tee perfectly for this experience. Not every day is super exciting, and you're motivated to go out there and build this business, but you just have to put your shoes on and go through the motions.Mike Kelly:                          So I'm going to go full Tim Ferriss now and ask about personal habits. Because now this is amazing. Talk about today, so like just daily habits and routines that you have today, particularly related to the business that you think are reflections of that, right? Like, I don't want to go out and run the five miles today, but I have to do it. Do you have any of those practices built out daily, weekly today that you do for the business?Megan Lohman:               Yeah, so I really struggle with sales. It is not what motivates me. I would rather go pitch a venture capitalists then make a sales call.Mike Kelly:                          That is sales.Megan Lohman:               I know, right? That's what everybody tells me. The sales process, keeping that funnel built is the thing for me, that's easiest thing to push aside. And I am the best in the morning. So I learned that A, I can only schedule two coffee meetings a week or else none of the sales gets done because it's easy to push that. So I have to start in the morning, get my coffee, check my email, and then go straight into HubSpot and look at my tasks, follow up on referrals and anything that I need to follow up on and then do new outreach. And so that's the first thing I do in the morning before the day can take a hold of me.Megan Lohman:               But it's still kind of a learning process because I wear all the hats right now. But if I don't keep that pipeline full, which is the hardest thing for me to focus on. And honestly once I talked to the clients I'm great, but it's that process, the chase that some people thrive on that I don't. I'm like get me to the demo where I can actually talk and I can talk your language. That's where I'm better. So that sales process has to be first for my day and then trying not to check email too much and be too responsive on email because I've realized that is an easy way to let your day get ahold of you. And then the afternoon is usually when I kind of need that second cup of coffee, I kind of start to get a little sluggish. So that's when I do a lot of more business administration type stuff, current existing client follow up or questions or anything like that.Mike Kelly:                          Two things occurred to me in there. One, and it's still, I would assume overall if there's only a handful of competitors, it's still really early market and very education focused. But at what point do you see the funnel flipping where more leads are coming in through marketing activities rather than out?Megan Lohman:               I hope we can do that quickly. We did a Facebook live event, my co-founder and I, and we've done very little strategic social media posting and things like that. Google ads, Facebook ads, we've done just very little and it has generated a significant amount of traffic.Mike Kelly:                          The Facebook live event, did?Megan Lohman:               Yeah, the Facebook live and even just Facebook ads, posts. So our number one thing is, hire this implementation person and a marketing person and start that PR because I do believe that we will be able to generate a significant amount of inbound. So if we get more than we can handle, great. That would be a great problem to have. Hopefully I'm telling you, that's our issue in December. You know?Mike Kelly:                          Turns out there's no such thing as more you can handle because then venture capitalists will gladly give you their money.Megan Lohman:               Right.Mike Kelly:                          To go solve that problem.Megan Lohman:               But you just have to find people to help you.Mike Kelly:                          And then the second thing that you mentioned in there, which is much less important, is trying to not check email and talk to me about that. What kind of habits do you have there that seem to work or not work?Megan Lohman:               This is a new strategy. Because I just realized, wow, just responding to incoming emails, you can take a whole day doing that.Mike Kelly:                          Spend the whole day doing that.Megan Lohman:               Yeah, absolutely. So I'm trying to check it at 8:30, 10 right before lunch, right after lunch and then once in the middle of the afternoon.Mike Kelly:                          Wait, that was five times, that's pretty much all day.Megan Lohman:               Is that all day?Mike Kelly:                          Yeah.Megan Lohman:               Okay. For me, that's not very much. So check it and only respond to things that are pertinent right there. Especially in the morning when I'm trying to do that sales stuff and then anything that can wait, until the afternoon. Right now, I'm kind of in a critical time where any sales, inbound response, lead, anything. I have to be responsive.Mike Kelly:                          Yeah.Megan Lohman:               And also with fundraising, questions, I want to show that I am responsive. I want to be responsive so I kind of have to be. But as soon as I have support I feel like I'll be able to put up some more boundaries around responsiveness.Mike Kelly:                          Yeah. What do you do with the stuff you can't get to?Megan Lohman:               Do it on the weekend.Mike Kelly:                          Just let it go, or to do it on the weekend?Megan Lohman:               No, do it on the weekend.Mike Kelly:                          All right.Megan Lohman:               Another thing that happened I don't think was coincidence is I had a girls trip in Scottsdale the April before, it was April 12th through the 15th right before we started development. So I came back from that trip. It was literally April 16th that I started my first day...Mike Kelly:                          This was last year?Megan Lohman:               Last year and I sat on the plane next to this guy who had started a business 10 years before and we just kind of started talking and you know, he...Mike Kelly:                          I never get to sit next to these people.Megan Lohman:               Poured all of his wisdom out. I didn't know at the time what a blessing that person was. I don't even know his name. And he said, "The first two years you are going to feel like you're not getting anywhere, but just keep putting one foot in front of the other and I promise you will look back and you will see all this progress." And he's like also for those first two years, you're probably not going to have a lot of boundaries. So that's basically what I've given myself. The guy on the plane said it. So if he told me this is what I need to do, then I'm going to do it. So, it's pretty much been true. There haven't been a lot of boundaries. I've done a lot on the weekends, evenings.Mike Kelly:                          I'm nine years in, there's still no boundaries. So yeah, that's not going to change.Megan Lohman:               It's hard. It's a really hard thing.Mike Kelly:                          It's hard if you don't love it. If you love it, it's okay.Megan Lohman:               Yeah, that's true. With my little kids, sometimes that pains me if they're doing something and I'm trying to get work done or you know, so it's just that balance.Mike Kelly:                          There have been small children here at developer town doing yard work outside the building.Megan Lohman:               Yes. Because the boss says that work has to get done. Yeah.Mike Kelly:                          That has happened on weekends, yeah there's lots of ways to blur the two.Megan Lohman:               Exactly. I'm learning.Mike Kelly:                          All right, so maybe refocus for the end. As you think about the market going forward in particular, those new competitors that have emerged. Particularly if you think of raising capital and continue to differentiate in that market, what do you think the strategy is going to be going forward?Megan Lohman:               You know, we have a proven market, there's no doubt in my mind that there is a market and since we have competitors who are also newly emerged, it is an execution play at this point. There's nobody that's substantially differentiated within the product or the technology or really even the pricing. I mean we're all fairly, the biggest differences, best service at this point. So what excites me the most about capital is being able to get people in there to fill the voids where I don't have the experience marketing and the product. I mean those are two big pieces, senior level roles that we plan to fill this year. So I'm just excited to get people on the team. I know that we have, the industry experience. We have the market, we have the early success. We have some really big wins, that if we can just plug in some more people who have all this expertise in these other areas. I don't see how we can't win. I mean, I really don't.Mike Kelly:                          If somebody would like to get ahold of you to talk to you about investment, job opportunities, having you come to their practice and make the pitch, how do they do that?Megan Lohman:               Yeah. Email me is obviously pretty quick. @MLohman, M-L-O-H-M-A-N Also, we're pretty active on LinkedIn and Facebook and it's @teamplanforward or call me 317-416-8548.Mike Kelly:                          So brave.Megan Lohman:               Maybe scratch that.Mike Kelly:                          No way. That puts you in the elite five people out of a hundred episodes that have given their phone number.Megan Lohman:               But it's on my website. It's kind of everywhere.Mike Kelly:                          It's fine. I totally get it. Megan, thank you so much.Megan Lohman:               You're welcome. Thank you for the opportunity. It's been fun. 
Solidea Capital: How to evaluate a potential investment, and the key role market and competition research plays in that process.
Subscribe on iTunes, Google Podcasts, Spotify, Google Play, Stitcher, or Podchaser. In this episode, I talk with Eric Baum, co-founder and managing director of Solidea Capital, a venture advisory company. Erick explains the difference between venture capital versus venture advisory, and that their value is really in working with early-stage and emerging companies to help them accelerate in growth and momentum.Some of the companies within the Solidea Capital portfolio include Tennant Tracker, Club Caddy, and Allergy, and they span many different industries. He shares some of the important factors they look at when considering an investment, and how important competition and market research is while in this process. Topics in this episodeTrajectory managementCriteria of a company that is a good fit for SolideaThe evolution of the sales strategy within a companyEvaluating the market and competition to determine if a start-up is a good investmentPioneer versus me too The role customer profiles play in the investment process Industry reporting as a source of market researchThe importance of a team to be able to pivot and coaching them through that processContact InformationWebsite: ebaum2611@gmail.comTranscriptMike Kelly:          Welcome to The Startup Competitors podcast. Toda, we have Eric Baum, who is one of the partners at Solidea Capital. Eric, welcome.Eric Baum:           Thank you, Michael. It's great to be here. I'm looking forward to our discussion.Mike Kelly:          And I said partner at Solidea Capital. Is there a different title, better title?Eric Baum:           I kind of go by co-founder and managing director. So we kind of have a more sort of flat organization, so we don't use.Mike Kelly:          Got it. Well, I know your organization really well for a number of reasons. We've collaborated on a couple of projects, but for those who might not be familiar with Solidea how about you give a quick overview of what you and your team do?Eric Baum:           Sure, that would be great. So Solidea is a venture advisory company, and the reason I say venture advisory versus a venture capital, we kind of straddle both sides of that. So while we do make small investments into portfolio companies, really where we see a lot of value is actually working with early stage and emerging companies and helping them to really accelerate growth and momentum. And so we would be helping companies on some of the key pitfalls or challenges that we've seen over time that startups hit. So that could be things like trajectory management, which from our side is all those activities and determining as a startup how much capital do they need? What does my next three or four years look like from a funding perspective? What is the different value accretive milestones I need to achieve to get to where our company wants to go?Eric Baum:           For example, in that area sometimes we see that people or some of our founders are really just focused on raising a million dollars and that's going to get us eight month's runway, versus we kind of need to step back. We'd say, "Every fundraise is a journey, and each journey should have a discrete beginning and an end." Really, it's about value-accretive milestones and at the end of the journey it's a discrete ending point and positioned in a natural way to raise the next round. Trajectory management is a process where we look at that. There are other things that we would work on, things like cutback position strategy, go-to-market strategy, governance setup and structure. As our companies are growing, organizational design and development, so who's your next employee and the employee after that?Eric Baum:           So we kind of work with our portfolio companies from both perspectives, and we do that from mainly an equity for service nature that I've mentioned. The reason we do that, because we do have the ability to put some capital in like I mentioned, and we do have funding sources around us, is it's important to us to sort of align interests. So Solidea Capital is an affiliate company of a group of different business myself and other partners have that can pull on each other. So we're a cost center, and so we know when we take on a company that we're going to put and deliver a ton of resources and time. And so the only way we make an ROI on our effort is for that company to be successful.Eric Baum:           Our staff would be your classic private equity and venture trained, but we can also call on the resources of a variety of other companies we have, like a strategy operational consulting firm, a specific form of companies and other startups that bring those information to bear. So I'm not sure if that gives the kind of background that you were looking for, Mike. I know it's a little bit complex, but I'll kind of pause there and see if there's any questions.Mike Kelly:          No, I mean it's hard since I know you guys so well, so I think that's a great background. Who's a good fit? So when you guys evaluate a company that's going to be a good fit for Solidea, that could mean a number of things, right? That could be the type of company, the stage of the company, what they're doing, as well as all the other things that I think probably a more classic investor is looking for. I'm sure you're also looking for those too, because you want to make good bets with your time, so talk to me a little bit about that. What criteria do you guys look for when you're looking at a team or a product?Eric Baum:           Great, great question. We certainly evolved our thinking over time, as we kind of get the lessons learned and we kind of tweak over where we see the attributes or characteristics are more likely to lead to success or kind of bend that probability curve. So some of the areas that we look for, first is we like to see a product that's in the marketplace today. So what that means is that product may have one customer. It may have one dollar of revenue, but what it allows us to do is go and be able to do some analysis and market research on that product, but also to have the ability to try and test it out or to know that whe new are working with a company, we can actually affect change and look at it.Eric Baum:           We like to see that the product validates in the marketplace. We like to see that it's earned some revenue, which means that there's someone out there, that sort of value there even if it's small, and so that again we can get to the data. From a team perspective, we do look for experienced teams. We do like serial entrepreneurs, because there's a lot of lessons learned in failures, and then also having gone through the process. But that's not a requirement, but we do look for the team to have started to have been built out so a lot of the key gaps are filled, and that we know that some of the key things that we worry about startups are there.Eric Baum:           So for example, you need the founder and the visionary and the person that has kind of a strategic road map which also for us we feel is extremely important with different companies to have the internal sales capability. Again, so when they do have the product they have a starting point in understanding how to sell that. It doesn't necessarily have to be a visionary sales leader, but someone that has experience within sales or the ability to be able to move product. The third piece is, we look for is kind of on the funding side. This has evolved over time. What we've kind of noticed is that when we work with companies where, as I mentioned earlier, while we're not a funding source, Solidea's value is really the strategy and expertise we're bringing into really accelerated growth companies. We have for many of our portfolio companies led the charge is raising a lot of capital, because we do have angel investors, super angels, VC relationships around us that we navigate our companies through as they grow and move stages.Eric Baum:           But what we've found is that when we were reliant on sort of raised capital, the companies struggled a lot more. And so we kind of have an internal metric where we look for our companies to have demonstrated that they can independently raise some amount of capital. It doesn't have to be large. Usually we're looking to see that they've raised at least $100,000. What that kind of shows is that the founding team has a network. They have ability to articulate the story. They can get other folks around them. Generally for us now it's a caution flag if we see a good company and a good product and they haven't been able to kind of bring capital around them.Eric Baum:           And then we also look for companies and products in spaces that are scalable, that you can kind of move through the sales process. So we always think of it as first you're kind of selling a product one-to-one, so I kind of meet with someone. I try to sell it, and there's certain techniques and tactics that make sense for that. Ultimately, you're trying to shift that to now what I call many-to-one, where I might be able to do a sales messaging or pitch with many potential customers. That might be speaking at a conference or other tactics, and eventually you want to get to many-to-many, where folks are sort of out there, advocates and channel partners for you. So we look for companies that we can see that evolution, that there are areas to be scale channels and channel partners, and the ability that once we get the momentum we could be able to fund that.Eric Baum:           In a lot of ways, that's more important to us than necessarily the size of the opportunity. We're different from venture capitals in that we're not necessarily looking for the billion dollar, two billion dollar exit. That'd be great, but we think there's a lot of great businesses that can build businesses around 50 million, 100 million dollar businesses. We put more emphasis on the ability to create traction and grow and scale than on that topside. So those are kind of the aspect that we look for.Mike Kelly:          Love it. Are you open to give a couple examples of companies that are in the portfolio today?Eric Baum:           One exciting company that I love talking about is Tenant Tracker. So Tenant Tracker is a company that has developed a suite of tools that really help in the kind of supports tenant briefing and placement. So if you think about, I like to always use a retail site, if you think about a mall and as you have storefronts moving out or stores moving out and new tenants going in, there's a series of steps that are complex activities that happen in order to facilitate that. You've got to be able to pick those out. There's potential improvements that need to be made in the space. Some of that's going tenant paid. Some of that's going to be landlord credit. There's a scope of work that needs to be done. There's a move-in.Eric Baum:           What you typically see happens is that that life cycle becomes fairly long, because there's not a lot of great tools that manage that process, that manage different stakeholders and constructions and contractors, the tenant and the lease. And so what Tenant Tracker has done is be able to kind of manage that process from the very beginning, automate it, create a great repository that connects all the stakeholders. What that ends up doing is shortening the length of time that a vacancy exists, or getting units in there quicker, faster, which ultimately benefits both parties. From a landlord, they're getting rent in there quicker and filling that vacancy. From a tenant, they're out there selling their wares and getting their stores up quicker and generating revenue. So they've been doing some great stuff in terms of really starting to build and scale, and I think the real estate technology speaks to.Eric Baum:           Another one of our companies is in the golf technology space. It's Golf Club Caddy, and they're out of Michigan. What they're doing is really in the golf industry. You really have, if you look at golf courses, you have 15,000 golf courses in the Midwest. 50% of them are on a technology called Golf Now. Essentially what Golf Now does is it aggregates all these tee times at different courses. It discounts them and brings eyeballs onto them, and provide a very low-tech sort of course management software. What was interesting at the time is that instead of charging fees, because a lot of courses cash flow is an issue especially during slower months, they took tee times. So they would give Golf Now a few tee times in which they could sell. As I mentioned, Golf Now actually ended up aggregating a discount.Eric Baum:           If you think about a dissonace in the industry, courses were very frustrated. They didn't really understand the vision that Golf Now was going to do. They did a lot of couponing and discounted play, and it ended up costing the courses a lot more money because of this lost tee time, that some courses the fee is $20,000, $30,000 a year. What Club Caddy has done is, it was started by a course owner. While I mentioned 50% on Golf Now, 50% of courses have no technology in place. There wasn't enough interest in Golf Now and they couldn't afford it, so they're doing everything manually, the pen and paper. So what Club Caddy has put together is really kind of a best in breed course management technology. It handles tee times. It handles the ability of equipment, the food service, bringing food out to the golfers, the HR and payroll.Eric Baum:           They provide it for free, because the business model is they make revenue or we make revenue off of the credit card processing. And so what we say to courses is, we're going to be transparent to you. We roll you onto our credit card processor. You're going to pay the same or below, and then that's how we're going to make our revenue so it becomes a great revenue source for us. Any course is worth $10,000 or $20,000 for us. It's great for the courses. They get top-end technology without really having to do an out-of-pocket payment, and a way to kind of move off of that giving up tee times, and so that one has been growing extremely, extremely fast.Eric Baum:           Another company we have, kind of switching gears away from technology or SaaS-based, is a company called Allergy. They do something interesting that's dear to me. If you think about a lot of people around the country, there's food allergy is very common. What's also common is a lot of people don't carry EpiPens that should be. My wife has some serious allergies. She rarely carries her EpiPen. It creates a lot of stress for the care circle around them should anything happen. It causes stress on the pharma companies that want to make sure EpiPens are available. It creates stress on the insurance companies, because when you go to the ER and deal with an allergic attack it's much more expensive than if you dealt with it at the time.Eric Baum:           And so what this company does is they came and they said, "Okay, well, the biggest issue with people carrying an EpiPen is it's inconvenient. It's easy to forget. What's something that everyone has? Everyone carries their cell phone." So Allergy's kind of way of approaching this problem is they're again identifying that the one thing that most folks carry with them and have on them is their cell phone. So they thought, "What a great idea if we could engineer," and it took a lot of time and a lot of iterations in engineering, if you can put an auto-injector into a cell phone case that's all around you, and it would mimic the size of your case. It's very subtle, but that should you have any kind of issue it automatically, the auto-injector comes out. You've got an EpiPen, but then you also have the software integration.Eric Baum:           It communicates with your care circle. It can provide more information, and then later on, phase two, it can do some interesting things as well. When you think about a lot of elderly people, one of the challenges is there are a lot of pills they take but it's really hard for them to remember when to take them. Obviously compliance in a lot of cases is an issue there, and so again you could use a mobile case or a cell phone case where you could integrate with software and say, "Okay, it's 2:00 pm. These are the two pills I need." You could load all your pills into the case and then it would open up and give you the pills as you needed them and remind you.Eric Baum:           So I think they're doing some really interesting things to solve the issue of compliance with life-saving technology by tying to convenience and mobile cell phone around us, while also integrating with the software and communicate information to others. Right now it's an exciting time for them. They're in the process of getting ready for FDA submission for regulatory. They've got some great partners. They've worked on several rounds of product and are really getting some great crest out there and I think they've got a chance to really inform that market.Mike Kelly:          Dude, that's nuts. I know you've mentioned them to me in the past, but I had no idea that that's what they did. That sounds awesome, truly. That's really cool. I guess you kind of went into competition a little bit with Club Caddy and a little bit of the market opportunities that Golf Now left in the market. I would just be interested, and you don't have to pick a specific company. This can be a little bit broader in terms of how you guys look at the market in general, because there's really two aspects to it when I think of your business, right? So one aspect is, how do you guys take into account competition when you're looking at whether or not this is a good investment for you, right? Like, is this worth spending my time on? Is this like we're just competing with an established market and maybe it doesn't make sense?Mike Kelly:          So I'd love for you to talk a little bit about how you guys look at competition from that deal selection perspective, but then I know from first-hand experience that then once you're in a deal, you're also looking at competition from a go-to-market strategy perspective, and how does this business scale, and who are the different segments of customers? Which all competition clearly comes into play in that analysis as well, so maybe start with, from a Solidea perspective, how do you guys think about it on the first order. And then when you're in working with a founding team, what are you looking at to help give them advice for how they start to dissect that competition?Eric Baum:           Sure, great questions. So the first thing we do, and if I take it a little bit broader to give you a sense of how we look at it, we believe that most companies or startup companies, they fit into different buckets that give a sense of sort of where they stand from a competitive set, or where also that market fits. So for example, I use the term of pioneer and so that would be like a first group. A pioneer to me would be a company that's solving a problem that people don't yet know they have. That's why in my mind they're kind of pioneers. They're out there, and in many ways Apple and a lot of things that Steve Jobs did early was a pioneer. He was creating product that people didn't really know they had the use for yet.Eric Baum:           The reason it's important is that in each category that you're in, there's different techniques and tactics of how you respond to competition and how you really build awareness in the company. So for example if you're a pioneer and so you're solving a problem that folks don't know they have yet, then kind of doing SEO and kind of blasting, those sort of initial techniques aren't really going to work. Instead, what a lot of pioneer companies are doing is creating education, right? You're trying to create thought leadership and awareness. It's more important about being on blogs and talking about friends and getting people to it. So in a pioneer scenario, you really don't have a competitive threat yet. You're really focusing on creating a market around it, and then as competitors come in now you're really relying on your first mover advantage, right? You've helped educate and be a thought leader. People have connected to you, and now as you've kind of created that need, a lot of your techniques are going to be there.Eric Baum:           Another category would be sort of the product already exists, so there's an existing need you're solving but you've added incremental improvement, right? So it's kind of improved, and so again from that standpoint there's a little bit of a different technique, right? You're really stressing what competitive advantage that you just brought to the table, so it might be a new product feature. It might be a cost or some other element that's kind of changed the risk reward that's out there. And then if I simplify it, kind of a last big bucket is a me-too product, right? And I think of me-too, it's really kind of as a startup I'm putting out a very similar product with someone else. A lot of people look at me-too products and say, "Well, those aren't really exciting. We're not interested in that." Well, not really so. Each of those models can work. It's just you have to have the right techniques and tactics.Eric Baum:           So if you're going to be a me-too company, that's okay but you probably want to be focused in a new geography or be in an area that someone isn't. So for example, people that were doing online delivery of meals all around a big urban center, there were small secondaries that no one was there, that might be a me-too opportunity. Or, you're providing it to a new niche or a new demographic of folks that weren't in that service. So the reason we're kind of rolling this together is when we look at companies, one of the first things we say is, "Okay, where does this company sit?" Depending on where it sits, then we have kind of a viewpoint of competition.Eric Baum:           So if it's a pioneer, I'm not as worried about where the competition exists today but what I am worried about is kind of usually you have a much longer cycle and length of time it's going to need to get to revenue and other areas. So, what's its funding situation? How strong is the team? Are they prepared for it's going to take longer? Is their marketing and sales skill set aligned to create awareness and education? If it's a me-too, I'm going to be looking at this company and saying, "Okay, I want to understand, what's its?" Its go-to-market strategy is going to be really important to me, because it's not the actual product or something novel. What is it about it? If they can convince me to go to market like, "Look, this is out there and we are taking it to this new geography and this new demographic, and this is where we're going to be uniquely qualified to do that." The product itself is de-risked because know it's interesting in its own fashion. That becomes interesting.Eric Baum:           If it's something where it's coming with a new competitive advantage, then I'm trying to understand how sustainable that advantage is. So is it something, so for example now I'm going to have due diligence to companies and say, "Okay, what's going to stop existing competitors from being cheaper? If you're competing on cost, is it something proprietary? Is it ID protection? Is it a secret process, or is it something that's easily replicable?" So from a Solidea perspective, going back to your question, we look and see where it is and based on that we see, "Well, how does this company, how is their technique and tactics aligned with what we think is going to be successful there?" A lot of times we'll see disconnects, because a lot of companies aren't necessarily taking the time to say, "Hey, I know I'm a startup but let me think about what bucket I fall in and how that really does affect some of my strategy and tactics."Eric Baum:           So sometimes we see companies that are in pioneer space and they're talking to us about how we're going to do SEO, and we're going to be meeting with 10 companies and hiring a sales force, and we can tell right away that's really not going to be successful because people are not yet ready to purchase. You haven't created that awareness. Or, we're talking to a me-too company but there's nothing unique in their go-to-market strategy that's interesting.Mike Kelly:          Totally just curious, there's no right or wrong answer here. Which of those do you see more, between pioneers and me-toos?Eric Baum:           So I think pioneers are going to be kind of a small minority, right? Because a pioneer really is a hard one. It's that you have enough vision to know that you have a strong compulsion that this product and messaging resonates, and you've been able to get other people around you, but that you're way ahead of the market that you really have to educate. So I think there's very few companies that call that say, "I've got a product that somebody will need that someone doesn't yet know," that can get enough momentum to even get to that beginning point. Most of the time, we don't see too many pioneers that are truly pioneers, right? What happens is either their idea of product is probably not as realistic or sustainable or as mass consumed as they think it is, or there's just no real path to create sort of that education.Eric Baum:           I think me-toos are probably much more popular, or we see them a lot more, and we see a lot more on the competitive advantage side what I'm calling, they're existing, you've improved it, and really that's probably the biggest bucket. What we're digging in there is to understand how sustainable is that competitive advantage? Again, is that backed by IT? Is it backed by special process, or is this something that?Mike Kelly:          Awesome, thank you. Sorry for that digression.Eric Baum:           No, of course. And so when we start to work with companies, so we've kind of then made the assessment, so when we work with companies it kind of follows that time, one of the first things we're sitting down is kind of talking through like, "Hey, we've kind of had this spectrum of stages of companies, and here's where we kind of feel like you fit. What's your thoughts?" And kind of have that dialogue, and we kind of talk about that, that recognizing where we are is really important because it informs us of the different tactics and techniques, and we kind of go through that. So as we're sitting with companies working with them if we say, "Okay, we both agree we're a pioneer," that's going to help us really have a good shared view to competition.Eric Baum:           Okay, pioneers setting competition is a friend, right? Because ultimately, the new industry that's just burgeoning, the more players that are out there talking about the value or the problem you're solving, the more it benefits everyone in that, right? So it's a new light space. You can create a market that's going to be big enough for the first couple players in it, so you kind of look at competition to say, "Great." You're almost not joining forces, but you're almost trying to see how you complement each other or how you create that thought leadership. You're looking at tactics. Okay, within that I want to position myself if I'm a pioneer to be at least viewed as a thought leader, right? So as I'm getting that dialogue, I want to establish credibility so as this market starts to develop, there is sort of that first mover advantage. But again, recognizing that if you're in the right market all the competition creating a market is really kind of lifting everybody.Mike Kelly:          How, and this is not a well-formed thought obviously, how critical is I guess the founder or the founding team when you look at that space versus new market, me-toos? Specifically what I'm going for there is basically if you're trying to create the market, I would assume you have to be way more of an influencer in the given space that you're going into, rather than if you're in a me-too, that's much more about reaching down. Nobody needs to know who you are, right? I think it would be great if you were an influencer too, but it's not like you need to be on stage presenting, talking about making this market happen if you're in a me-too, whereas from a pioneer perspective that seems to me like that would be a big question in your mind of like, who on the founding team is going to be that person who's going to be the front person who's driving a lot of that energy? Is that real? Did I just make that up?Eric Baum:           No, that's exactly right, and that's a great point, and that really helps reinforce, remind me of a couple points that I probably skipped over. I haven't given my spiel on this in a while, so you're absolutely right. When you think about, so what's great about the framework of trying to understand where a startup, what kind of stage they are, and kind of saying not all startups are in the same stage of life, is it does inform all these pieces like we were talking about, marketing, funding. But what you're also hitting is team, and you're absolutely right. So when you're a pioneer, what's really important is that team is folks that are thought leaders. They're folks that were kind of inspirational, like they sit in the room in a conference and talk about where they see the future, and they can bring people along.Eric Baum:           When you think about a Steve Jobs or Elon Musk, and again I'm going straight to the 1% of them, but that's what they're able to do. They have that vision and they're bringing people along because they have to get people to see two or three steps above. And so they've got to be able to articulate the kind of storytellers, right? It's not as important for the executioners and the operation of folks. It's the folks out there getting people to believe, so absolutely, versus when you look at a me-too one of the things I forgot to mention is, so when we look at a me-too we say, as I said earlier, the me-too is not bad. It's just, these are the things that you need to be successful. So one of those things is, I was kind of mentioning, are you taking an existing product to a completely different marketplace, right? We've seen that all the time where business models get altered.Eric Baum:           Are you taking it to a different market segment? But the other area is, if you're a me-too, is your team much stronger executors, right? So a lot of times it's not about, you think about an industry and there's a couple competitors. It's not always about who's been there first and what size? Which team executes stronger and better? So again, a great point from the team perspective, if it's a me-too now it's looking about, a team about it's great, we want them to have vision, but does this team have amazing execution? Do I look at this team and say, "These guys are going to execute so much faster, smarter than the next guy?" So you're absolutely right where you are with what impacts sort of that makeup of the team.Mike Kelly:          Awesome, thanks. Sorry, continue. Didn't mean to derail.Eric Baum:           Sure, so once we're working individually with the companies, again going through, if we're looking for a ... if we're working with a portfolio company and we think, "Okay, you've kind of made a novel improvement," or you think you're solving a problem in an incrementally better way, we're going to focus a lot on the competitions in terms of, okay, really understanding who's out there today, what our differentiators are, but also how sustainable they are. We're going to look at areas, and so we're going to do a lot more profiling on customers today, and where we think different customer profiles are going to go in the future. So, what do they want today and what might they want in the future? What does the competitive landscape look today, and what is going to be that sort of product mix in the future?Eric Baum:           We kind of look at the competition and say, "Okay, which are the ones that are uniquely positioned to kind of evolve in the right way? Where do we think we need to be? Where's some of the differentiation?" But what we also focus on is our go-to-market strategy a lot of times for companies is early on it's easy to be distractable. You've got this company and you're like, "Look, I think my product is great and everyone should use it." It could be that you do have 10 or 12 segments. We're very focused on niche segments within niche segments, that you start and you try to find in these areas your stickiest customers. You say, "Okay, here's my competitive matrix. Here's what people are doing." Now we look internally and say, "Where are we the strongest? Where's our differentiation, and what are the smallest subset of customers that would appreciate that? How do we go in and target that deep?"Eric Baum:           So for example, some of our competitors might have a foot in a bunch of segments but we might want to go that deep in one or two, so we're really focused on where do we particularly show the most value, and hit those customers first and use those folks to kind of grow and expand from there. If we were looking at sort of a me-too company, again on the customer side we'd be kind of aligning from the competitive side as to say, "Okay, where do we think we're the strongest?" So for example, one of our companies, they're not me-too but they've got similar competitors. What we've learned or what we saw is our strength really is an RP process. We felt like we really understood what company. We understand from a consultative side how companies view RP processes. What are enterprise scenarios, implementation? What some of the common challenges are, what some of the mistakes that companies make in RP processes.Eric Baum:           So for us we knew, "Okay, what we want to do is, every time we're in an RP process we're going head to head in this kind of activity, we're going to have an 80% win rate." So when we're going after a competitive strategy to say, "Okay, here's where we want to compete." And so we focused more of our energy in looking for companies that were already playing our field, getting the right channel partners that brought us in, versus necessarily looking for that one-on-one sale where there's no competition. We felt like in that scenario we stood so much stronger than our competition from a flexibility from our messaging. So from a me-too, we kind of think about that. In the sales cycle, where are we strongest and how do we kind of leverage that about our competition?Eric Baum:           Across all cases, we're looking at the competitive matrix and we're really trying to understand, where are competitors strong and where do they have gaps? What happens a lot with companies is that you're never ... Early on, you don't always say no to business and companies take businesses that they shouldn't. And so we love to find out where our competitors are playing where they shouldn't be playing, and take advantages of those segments first where we're strong, and using that kind of story to launch pad other sites. So I know that was kind of a long-winded answer on that, so I'll pause and see if I've kind of covered some of that or missed anything.Mike Kelly:          That's phenomenal. Are you kidding me? You listed, you could talk about this all day. Oh man, that last thing you just said which is when you find a competitors who's maybe in a space that they shouldn't be you look to maybe exploit that. How do you discover that? Where do you go to find that?Eric Baum:           Great, great question. No silver bullet, and that's one thing I'll say for the audience. One thing I've always seen or just kind of my opinion and perspective in emerging ventures is there's never a silver bullet. Usually change and success is a series of small things that are coordinated. There's not like one magic piece, and same here. I think conferences and educational and trade associations are great ways to kind of get the feed on the street, and kind of here water cooler talk. You kind of put yourself in a position to, "Oh, what are you hearing?" At your more industry events, you sort of get to hear what some of the frustrations are. People like to talk a lot more about things that are going wrong with something than going right, so in the right environment I think you can get it there.Eric Baum:           Second is really looking at a lot of sort of the industry reporting, so obviously there's reporters generally from every industry. There are travel reporters. There's folks covering real estate, and I feel like if you kind of have your finger on the pulse and you're reading a lot of that, they do a good job of comparing and contrasting and they themselves are out there going to existing customers, customers they lost. So the industry reporting, which sometimes has small followship but if you make sure you're staying current to that. It's talking to, a lot of times when you're getting new customers you're getting customers that are direct competitors. That's a great way to really understand what's behind the change, and so sort of getting from folks that you might be winning, where they see are some of the pain points.Eric Baum:           The other area is channel partners, and partners a lot of times particularly if you're a SaaS-based technology you might be integrating with a major player in the space. You may need to integrate with SAP or incur expense if you're on the expense management side. I think as you're talking to [inaudible 00:35:28] or talking about them, they're a wealth of knowledge of kind of where they see they're playing, or what are some of the strengths and weaknesses. So I think really kind of having a pervasive look at the different stakeholder groups, and then also trying to kind of build backwards your strategy, right? Again, the way we do strategy with our portfolio companies is to say, "Okay." I know Mike has sat in on a few of these sessions too when we say, "You know, when we think about go-to-market we say, what are the different attributes that are important to us uniquely as the customer?"Eric Baum:           It might be the length of the sale cycle, the revenue potential of the customer, our access to decision-makers, the reality of that particular customer to refer us to others. So each company we say, "What are those important pieces?" We try to rate them, and then we take different segments and demographics that kind of overlap. And then you kind of create more of an objective system that says, "Okay, you have these 10 segments but based on what the inputs you just put in, these are the initial segment that kind of meets your requirements and so that's where you should focus." And we do the same for our competitors. We kind of look at that and say, "Okay, from what we can see in their client list or what we can see for the information available, where are they playing?" If they're all over the place, well we're going backwards and saying for example, their strategy and their technology, they really are well-suited for Fortune 100 companies A, B, C, but we see they're at startups and mid-size companies, well that's a gap. That doesn't make sense.Eric Baum:           Or if we're seeing a player that hasn't evolved their technology from a security perspective and they're calling on Fortune 50, 100s, we know that that's a challenge and we can kind of play off of that. So out of all those areas, I'd say industry, resources, cold calling potential customers, and one thing I would say you always have to do in an ethical way, but don't be afraid to call companies and ask them a lot of questions without necessarily like, "Hey, we're looking at different types of technologies. We'd love to get a couple minutes with you, see what your experience is with them." Sometimes you can get good information from folks there from making a few phone calls.Mike Kelly:          Dude, that's awesome. What are some of the other things when you're sitting down with ... And this doesn't necessarily have to be specific to competition. When you're sitting down with a portfolio company, or even maybe you're evaluating a portfolio company candidate and so you're obviously learning their business and meeting with the team, what are some of the other things you're looking at to maybe assess health of that company and how good of an investment it's going to be?Eric Baum:           There's a lot of different areas that can give you different tells. Sometimes what ends up happening is as you're having a meeting, you kind of see different tells that you might want to dig a little further in. One for me, and this is a brother one is, and it's one you probably hear a lot. When people talk about the team, and everyone says the team is the most important, but really one thing everyone has to figure out on their own, and for every venture advisory or venture capital investor, is what team means for you. It means different ... What a good team is can be very different for different folks. For us, one of the things that we really look for is flexibility, the ability to pivot. Someone who has ego enough that they want to build a business, but has control of their ego that they're not afraid to make mistakes and pivot and change.Eric Baum:           The reason I'm mentioning this is that we know almost every company that we take on, that at some point what your initial product is, what you think your initial segment is, where you think you're going to have initial success, 90% of the time it evolves. Products evolve. The market need evolves, and often times there's some big examples. Twitter and almost every big technology company, where they saw and where they ended is very different. What's really exciting about the right team is that they've got a vision, and as you're getting data and as you have a product you start to see, "Oh, it's really interesting. We never thought customers were really like this. This is what resonated, and we're going to pivot there."Eric Baum:           And so we know that we're going to have hard conversations with our teams to say, "Hey, right now you're a B to C, but you know in thinking about it, we think B to B pivot makes a lot more sense and here's why." Or with our golf company, they originally started as just kind of an [inaudible 00:40:02] food delivery on the course and we saw a brother application. And so for us it's really important that we know that's going to happen, that businesses evolve. All these founders, their eagerness, their vision, can they adapt? Are they going to be folks coming back and saying, "Hey, look what data told us"? Or are they going to be, "No, I know. This is my problem. I'm solving it. It doesn't really matter the feedback." So we do a lot of testing on that. What's their ability to take feedback, to take advice, to take pivots?Mike Kelly:          How fast do you think you know that, or how quickly do you think you guys assess that? Is that, I mean so is it more scientific where you're actually structuring tests for that, or is it anecdotal where after an hour in a room with somebody, I know whether or not that's going to be an issue?Eric Baum:           Great question, so it's more anecdotal in the sense that we go through our due diligence process. We have questions and conversation angles that we can take them down. It's almost like an interview, a subtle interview that you're trying to see how they react, and you're giving examples of stories and kind of saying, "What do you think?" You're asking questions to kind of draw that out. It's not scientific. What I will tell you though is that I think you can ... We can root out with kind of 90% accuracy the folks that we know that are stubborn and narrow-minded, and their way is the only way. You can get that out quickly, so we can remove those. Then the rest of them that appear flexible and say the right things, there's still a high percentage of those folks that aren't going to pivot or are going to create an issue.Eric Baum:           So I'd certainly say it's not a perfect process, but I think you can certainly kind of weed out very quickly folks that get really stubborn. Some of that is just almost playing devil's advocate. We're always challenging our companies, but sometimes we challenge them a little harder in the areas even if we're being overly harsh, just to see their response. Do they get offended? Do they kind of shut down or do they say, "Look, I understand what you're saying. Here's why I have a different viewpoint on that, but if we see data or if our customers start to tell us that, yeah, we're here to solve our customer problems, not our problems." I think it's hard. You can root out some of them quickly, the real hard-nosed ones, but you still face that. Because until people really face that first really tough adversity, you never know how they're going to react.Mike Kelly:          How do you identify, so go the other extreme which is not the market will know what it wants when I tell them what it wants, but the flip side of that which is not the ego-driven person, but the person who will defer every decision to the last person they talked to? So this is the founder that pivots the company or the product every couple of weeks based on one customer conversation, or one conversation with an industry analyst or something like that. I'm sure you've seen them. How do you identify that person in your process?Eric Baum:           Yeah, that's a great question too, and very fair, the other side of it. Similar as well in the conversation of really understanding how much, so in some of these conversations, what's the balance of sticking to their beliefs and convictions? There's a difference between having ... We want our founders to have a vision to say, "Here is a problem. Here's why we think it's a problem. Here's the empirical data that we have. Here's some of the initial validation," and that how we solve that problem could change. If someone folds very quickly on, "There's a problem" or the type of problem, that is a little bit indicative of how much of an opportunity is there. I want to see someone say, "Here's a gap that needs to be solved. Yes, we may pivot. We may find other gaps. We may find faster roads," so that's the anecdotal piece.Eric Baum:           On the more scientific piece when we're kind of with them, what we're really kind of pushing folks on our teams is to get away from the subjective and the anecdotal, right? And that's what I think we all do naturally. That's what startups do. It's very easy to be like, "Well, you know I think my demographic is 27-year-olds, and I had this conversation. This is where I think the success is." We try to remove that by making things very objective like, "Let's not talk about demographics. Let's not talk about customer type. Let's talk about the attributes and the trait that we think that is important to the company." Like I was saying, does the length of sale cycle matter? Does our access to customers matter, yes or no?Eric Baum:           And kind of define these things across the variety of stakeholders, right? Not just the management team. It's great to get some customer input, and again making it data-driven, if someone says, "Okay, this analyst said X." So my point is, okay, well, how do we know that that ... I always ask our founders, "Does this opinion or thought, is this yours or an individual person's, or is it representative of the masses? And if it's representative of the masses, how do we know?" Because again the biggest ... Well, one challenge a lot of founders make very early stage, kind of idea conception stage is, they're actually solving a problem, but they're solving a problem that they have. And then the first question is, "Is this problem you're solving, are you representative of 20 people? Are you more representative of more of the masses, right? Is this a problem that many people share like you?"Eric Baum:           And I do the same thing on the reverse. "Okay, so this opinion, how do we know it's there?" Ultimately, I want to see the connection back in the trait. So like okay, this analyst said, "I don't really like where you're going because you're going to have a 12-month sale cycle." Or, "These big corporations, you're going after Fortune 100s, and they're going to take forever to sell, and we know that." Well, I marry that back and say, "Okay, well, how important was the length of sale cycle? Oh, we said it was really important because we don't have a lot of funding, and we don't have more key clients," and so then I can marry that information together. But to your point is, I think it's just as risky when folks are influenced by what the last person said. Really all you can try to do is build that sort of empirical, data-driven objective culture in it, that people have to fight to show why that aspect is important.Mike Kelly:          Awesome. Give me one more [inaudible 00:46:45]. So when you guys are evaluating a company or working with an existing company trying to assess fit, what's another thing that you might see that could be a red flag that would either be offputting or would cause you to dig deeper?Eric Baum:           It's very interesting, and this might be unique for us but as I mentioned, most of the work we do is equity for services. Again, we kind of tie it ... One thing I should mention is we believe we're founder-friendly. It's important, where the few folks that are in their camp, investors and different stakeholders often have competing interests and conflicts. As such, we also put our equity at risk. So when we take equity we say, "Hey, we're business owners, too. It's really scary to give a piece of your company if you don't know you're going to get the value. You might think we're great, and so we're going to put it ... It's going to invest over the lifetime of the project, and if either side is not getting the value you can cancel them. We don't want to earn equity for not creating the value. That's not our model."Eric Baum:           And so the reason I say this is that a tell for us is sort of equity negotiations, or the negotiations. We really kind of figure out, what is sort of the right kind of ROI for us based on value. Interesting enough, when you're talking to companies there's conversations that aren't about, "Well, you know, it should be 3% or 7%." It's more about the value. "Okay, hey, if I can create value, if the pie is bigger, I get it." There's founders that get that. They're not really ... They don't get this ego of, "I'm not going to give X percent or Y percent." They're thinking about, "Well, what are these activities? How do they tie to value? How does it get there?"Eric Baum:           Then there's founders that you talk to that they could love you. It's like, "I want to be at this percent or that percent," and they don't get the sense that, "Okay." They're not asking the questions, "Well, if I give equity, how do I know that I'm getting value back, and how do I measure that and those kind of pieces?" So for us negotiation, or even that conversation, because negotiation is happening and we know we want to work with them, but sometimes we're just having this kind of structural in the beginning. That's actually a big tell. We're looking for folks that want to drive value, right? That's going to be a tell on everything they do. Are they going to look at partnerships? Are they going to look at potential customers on, "I want to control as much as possible," or, "How do I generate the most value for the equity I have?" So I think people's perspective on that piece is a tell for us.Eric Baum:           And then the one tell, or I guess it's not a tell but one kind of lesson learned I've seen is, one question I ask a lot of companies is, "Who's your next hire?" Okay, and it's a very interesting one, that I've been kind of telling this story for a couple years. Generally what happens is, I'd say 95% of the time the answer is a technology, a CTO, another developer, something in the technology realm. And while that's extremely important, what I look to hear is oftentimes from my perspective, most companies I sit, that next hire early on I would argue is a salesperson. Because you can have the best product, as you know, and the best thing, but if you don't have the capability to drive sales it's not going to matter.Eric Baum:           And again, you don't need to have ... I tell people, it doesn't have to be a chief sales officer that's 50 years in. What you really want is something simple. Whatever industry you're in, someone who has experience selling into that industry. Because a lot of times we have technology companies that have people doing sales, that let's say they're selling into restaurants. They've never worked in the restaurant industry. They don't understand how to call on restaurants and how that piece works. So kind of the tell for me a little bit too is kind of their view on the organizational design or how they see building out their team.Eric Baum:           Because by human nature, we tend to want to surround ourselves or pivot around our strength. So if we're a visionary, big-picture person we kind of want to hire, even if we don't say it, big-picture people. But really, we need that execution person. If we're a technology person, that's what we're comfortable and we've developed a product, we feel really comfortable to continue to add technology folks, right? We don't know a lot of about sales. It's scary. That seems, the next step we just want to keep iterating on the product, so really getting that balance is sometimes a tell to me.Mike Kelly:          Awesome. I don't think you mentioned this during your intro for Solidea, and if you did I apologize I missed it. But I believe you guys have a bit of a Midwest focus with the companies that you work with. Is that correct?Eric Baum:           It is, and thanks for bringing that up. I was trying to kind of be brief on sort of the Solidea side of the pitch, but I think I probably neglected a couple key informations there. So yeah, for Solidea we have a kind of a viewpoint, now five or six years ago or more, that innovation was starting to change and evolve, and then a lot of innovation was moving away from the typical coasts like New York, Silicon Valley and the West Coast Silicon Valley, and that we really thought innovation and a lot of early-stage companies were going to come out of the Midwest and the Southeast, and for a variety of reasons.Eric Baum:           One, just a lot of great access to talent and education. As the cost of setting up a business go down, it's much more cost effective. Also most people, their customer bases, most customers and most companies or even a majority of them are throughout the country, in the Midwest and Southeast. And in addition, we thought there was going to be a lot of smaller cities that were going to try to reinvest themselves through entrepreneurism, so kind of those private public partnerships. So you think about like Detroit, Michigan, where they're trying to revitalize that area by drawing a lot of private startups in. So we've been involved in, we have a lot of focus in Indianapolis and Michigan, in Detroit, Charlotte from fintech.Eric Baum:           It's on the West Coast, but it's in Los Angeles, which wasn't always seen as sort of a big startup hub. That was San Francisco, but they're starting to get some momentum, too. We like that, because think in these areas, the Midwest and Southeast, these founding teams have to be more boostrapping. They have to be more economic efficient. Like Mike has been living, and a lot of folks probably on the podcast, there's less sophisticated angel networks and it's harder to raise big rounds, and you have to go further along with less capital but in many ways, it creates the right behaviors and the right economic efficiencies to create that. So yeah, we think that's going to be the drivers, and that's what we're seeing, just a lot of great companies coming out of those areas.Mike Kelly:          Awesome. I wanted you to hit that. I think that's an important part of at least the relationship I know we've been able to build with you. So I just wanted to end on, I think I've collaborated with you guys now on something like four companies. If you'll let me, I'd love to do it on a fifth someday. You guys are amazing. I can't speak highly enough about the work that you and your team do, and I do it often. If anybody would like to get in touch with you, how should they best do that?Eric Baum:           Great, you know I definitely appreciate it and I do want to put that, especially for folks listening. We've just got the most admiration and respect for Mike for developer town, for the collaborations we've had with portfolio companies. Really one of our favorite folks and organizations to work with, and has been a great source of introduction to companies. That's something I should have mentioned as well is, because we are a cost center, because we put ... Our staff is extremely expensive and we put all the risk in the equity, we have to be highly selective. So most of our portfolio companies really do come from, we really don't look at folks that aren't coming from a trusted source, whether a VC partner that we work with. A lot of our companies come from some of the relationships we have with big VCs that say, "Oh, we really like this company but they're a little too early for us. We think they would really benefit from your help."Eric Baum:           It becomes a win/win. We know that they've got some tie-ins to those capital sources. We know they're there and they also hear from folks that they respect that make some other changes. So I would say, anyone feel free to reach out to me. You can either reach out directly through Mike and he'll make a connection. Mike, if you want to pass along contact information you can always send me an email. I'll give you my Gmail because it's shorter, Ebaum, E-B-A-U-M, or go to the Solidea website and reach out. But we're always happy to talk to folks and make ourselves available.Mike Kelly:          Thank you so much for taking the time. I know we ran way over, but I really appreciate it.Eric Baum:           Oh, no problem. Really enjoyed it. Great as always speaking with you, and apologizes in advance for, I tend to have long answers but as you can see it's just an exciting space, so always happy to chat about it.Mike Kelly:          Thanks, Eric.Eric Baum:           Yeah, thanks, Mike.


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Dec 29th, 2017
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Sep 16th, 2019
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