Michael Eisenberg is a well known VC partner (Benchmark Capital) and an avid blogger. In one of his recent posts, Michael refers to 8 different approaches to raising a start-up company, in the midst of an economic crisis. The full blog entry can be found at his blog, however, after reading it myself, I would like to comment on it. The below section will also be commented to Michael’s blog for reference:
“Everyone in the company is a salesman – Your R&D team should be selling too”
This is an interesting approach, however, R&D people are R&D people because usually they don’t do sales well. Actually, most of the R&D people I know are the worst sales people I’ve ever met. To be honest, in my previous position, our R&D Manager basically screwed a 500,000$ deal that we worked on for 6 months, because I said something in the form of: “It’s possible to do, however, I can’t really say what would be required to do so.” – R&D people can easily sell products that are closed, not products that are under development. As start-ups are constantly in the development phase – this is a BAD idea.
“Hire sales people on commission only”
YES! This is a great idea, although, it means that you’ll need a hell of a lot more sales people to manage. When a sales person works on commissions only, it means that while he’s selling your stuff, he’s selling other stuff too. It requires a certain degree of finesse and agility to be able to manage such a team, but the general idea is good, actually it’s GREAT!
Michael’s idea of a virtual company isn’t new, dozens of companies around the world utilize this methodology. However, this methodology sometimes requires quite some resources. For example, according to Michael, the utilization of sites like oDesk and rent-a-coder may assist in your quest to lower general spending. That is true, however, it automatically poses a problem. Let us imagine that I develop a service that is made of 3 distinct areas of expertise. I hire all coders from oDesk, now, I need to remotely co-ordinate them all, so that the code I’ll get is manageable and well documented. If not, the end result will a running service that becomes stagnant, as no one can go into the code and continue its development (seen it happen to 2 of my customers, both start-ups).
“Choose Self-PR over paid search”
Hmmm… I can’t really comment on that, as I practice it – and can honestly say, it’s very hard.
“Focus on product”
Killer applications in the web are a must, if it’s not a killer – your service is dead in the water. Killer services like PokeTalk have a great potential to become the next big thing, but they highly rely on the company’s ability to market the product correctly within the available channels.
“New distribution channels”
Michael talks about the creation of affiliate programs – that’s not as simple as it sounds. Many companies made a shitload of money out of building distribution channels and affiliate program management systems – affiliates are a wonderful idea as long as you are capable of managing these in a proper manner (See my comment about commission only sales people).
All in all, Michael surely has some valid points, however, these require delicate work and proper management in order to work right – if executed improperly, will not only end in failure, may also send you down debt country.