A Product Market Fit Show | Startup Podcast for Founders
00:36:02 · Rafael Broshi, Pablo Srugo
[00:36:02] S0: Yeah, always when you're in the extremes, everything doesn't matter, right? If you want to raise an A and you have a billion dollars in ARR, and you're growing five hundred percent. It's fine, you don't need a story. You don't need to meet anyone. You're going to get money. If you have $0, you're not going to get money. If you're in the few million dollars, that I get. VC space is business on steroids. I tell it to my parents that have businesses. This is nowhere like building a business. Maybe it's like that in the future, right? But it's extremely different. The KPIs are different. Working with VCs is different, and at the end of the day, a VC that invests in you and the seed round. All they need to really think about is will there be an investor that leads the A round, right? And the A round for B, and the B for C. Obviously building a business, it's important, we all know that. But it's gambling, right? It's building and putting money in a direction, and building a team of fifty people. Where your business warrants a team of five people and when you get there, building a team of five hundred. [00:37:01] S2: Needs to be somebody else to get to the next stage, that's right.
00:37:03 · Rafael Broshi
[00:37:03] S0: Exactly, this is just the way it is. So it's very reasonable for a VC to only want to back the number one in a category. No one wants to back number three, no one and I think in a competitive space. The story is extremely important, and the story is not enough to say AI for customer support. Because there are a lot of those, but then you're competing with all of the best players in the world and then you're seeing a player that has raised $500 million and you raised seven and you're competing. You're still competing because they said, well, they took over the market, and things like, well, this is a $200 billion market and they have $75 million of ARR. It's not really taking the market, but those things don't really help, right? You need to explain why you're going to be the number one or front runner in a specific box in the market and why. So I think that's the important part, and the more competitive your market is, the more you need to crystallize the story. And it's very easy to say, well, I don't want to do that just for investors, but it's not. Every time I see that and I say that, I say, well, look, if you cannot crystallize it for your investors, you won't be able to crystallize it for customers. And VCs are not necessarily forward indicators of the market, but they are some derivative of what your customers are seeing. Because if everyone wants to buy you, you're going to be number one. If you are saying you have an amazing product, but your growth rate is not good. It means that customers are not buying you and it means there's something wrong. So before starting Notch, I was two years at a hedge fund. All I did was analyze companies, and when you're at a hedge fund and you don't speak to the companies. Public companies that you invest in, at the end of the day, what do you look at? You look at growth rate and you look at market share. If I'm looking at a large company and I see their growth rate is above the market and they have pricing power. They raise their prices by five percent a year, I don't need to know much else in terms of what is their position in the market. They have a great product, people like them, they have pricing power, it means everything. The smaller the company is, the less signals you have, the stronger your story needs to be.
00:39:15 · Rafael Broshi, Pablo Srugo
So it's always a blend between KPIs and story, and the more competitive the market is, the more fine tuned your story needs to be on how you're going to win at something. That's what everyone wants to bet on. [00:39:28] S2: Yeah, you need to find that kind of sweet spot between, because obviously if you narrow it too much, then you're like, oh, but then that's too small of a market. It's too niche. So you've got to find that sweet spot where the opportunity is still big. You could still create a five to ten billion dollar company. But you're clearly going all in in a certain direction, in a certain position that nobody else is really going all in on. That doesn't mean they don't compete. They compete there, but it's like, hey, they're actually spending seventy percent of their time doing this stuff and I'm spending a hundred percent of my time doing this thing. So we'll cross over, but frankly, we'll probably beat them most of the time in this place. Because we're all in on this place, you know, something like that.
00:40:03 · Rafael Broshi
[00:40:03] S0: And I also think about it a bit differently in the sense of, I do think that every time I go on a call with the VC. That VC probably wants me to be the best founder that they've ever met. I mean, that's their job. They want to invest. When I interview people, if I interview six people a day. I don't go in saying, oh, this guy, I'm sure he's not going to be good, right? The guy goes into my interview, all I want right now is for this person to blow me away. That's all I want. So that's what VCs want as well, right? They meet startups. They want to say, oh my God, this guy's the best founder with the best story I've ever met. This is the craziest company, is going to be worth trillions of dollars, right? You just have to give them a reason why this is the case and if you cannot give them a reason why this is the case, then you should not be surprised why they don't want to invest in you. That's all. Now, if you're a good enough grade, then you're not going to get money from Sequoia. You're going to get money from others. Maybe you are that good, but maybe right now you had a bad round. Maybe you were scaling the business, right? Maybe you did a lot of other things while other people grabbed the market. No one knows what's gonna happen in two years, right? Some companies struggle in their A, some companies struggle in their B, some companies struggle in their C. Most companies struggle somewhere, most companies, right? So it shouldn't bother you, right? You have to raise, otherwise you're gonna die. But if you're raising, you need to do, I would say, the minimum amount between perfecting the raise versus perfecting what you believe is the right strategy for the company. Hopefully those two align, but sometimes they don't completely.
00:41:48 · Pablo Srugo
[00:41:48] S2: So let's spend the last few minutes just going very tactical. You've been selling to Enterprise for a few years now and I mean, nothing is easy. But I think especially when it's a small startup selling to a large enterprise, there's always something about that that is especially hard. Tell me a little bit, maybe some lessons learned, some tactics that founders can really use when they're selling enterprise. Maybe let's start at the top. The first part being you've got to get in the room. I mean, you've got to actually get somebody to listen to you, to hear you. Which you can't do through Google AdWords or Facebook ads or the sort of things that might work in SMB or mid market. How do you get the right people in the room to begin with?
00:42:24 · Rafael Broshi
[00:42:24] S0: First of all, there is no formula for that. At the end of the day, it's all about connection and relationship. And the higher up you manage to build a relationship with, the better this is going to be. Now, you cannot just work the CEO. The CEO of a larger company, he might be the decision maker. He might weigh things your way, but he's not gonna get you to the POC if you don't do a good job with innovation. OK, so you have to work both ways, bottom up and up down. And up down, that's using all of your relations. Just hustle, hustle, hustle, hustle. That's all it is. Use all of your investors, use all of your employees, use your father, use your mother, use your brothers, use your sisters, use everyone you know. Everyone wants to help you. Everyone wants to help. If you're gonna ask help, everyone's gonna say yes. I really, I've never had anyone say no to me. I had people say, well, I don't know this guy. I'm not sure, maybe you can speak to this guy. Just ask, if you don't know him, who do you know, is there anyone else that can help me? A lot of people think that they need to come in a superior place asking for help and not really saying, hey, I really need your help, right? I need to close a sale there and I'm really looking for some from the company. Can you help me? It's much more sincere and people wanna see this kind of vulnerability. Everyone has it, I think, and again, I'm trying to be there. But I think the best founders that I see out there are those ones that, they don't care to put themselves out there. So that's one, in terms of coming from below. If you start talking to someone in the working level or talks with you in the first calls and you throw out too much that you came in through the CEO. This will not end well for you. You have to respect every person you talk to and you have to give them what they want and not what you have. It is fine to say, I don't have this, but listen to them and it's extremely hard, right? You want to sell what you have, but it is not how people buy. OK, and usually you might say, and I see this a lot where you say, well, but I'm talking to a company. An enterprise, and they don't have a pain point. I said, OK, great. If they don't have a pain point, you have nothing to sell. It doesn't matter what you're going to give them. It's fine, so just use the conversation to ask questions.