September 29, 2023

October 27, 2023

Cold Outbound is Under-Appreciated

To get to their initial B2B customers, most founders first tap into their network. That works well for some, but leads many others down a wrong path. Cold outbound is an under-appreciated alternative.

pascal's notes

Lenny Rachitsky’s newsletter is a must read for startup founders, operators and investors with his most recent 7 part series on how to kickstart and scale a B2B business being the latest testament of that.

Amongst others, part IV covers a topic that comes up a lot in my conversations with our (pre-seed) founders is:

How to win your first 10 B2B customers.

The #1 way startups get their first 10 customers is via reaching out to their friends and former colleagues (i.e. network) according to Lenny’s research for the series.

That’s how most founders I work with look to get their first few customers too.

While it may work well for some, it leads many others down the wrong path with lots of time and money wasted along the way.

That’s why I’m a strong proponent of doing what is the 2nd most common approach to get to the first 10 B2B customers in parallel from the start: Establishing customer relationships via could outbound outreach.

David Hsu, Founder and CEO of Retool summarizes my thinking well in Lenny’s newsletter:

“We realized when you sell to YC batch-mates, or people that you have some relationship with, it’s very easy to delude yourself into thinking that you have product-market fit, because everyone is always kind of interested. It’s like, ‘Oh yeah, that sounds cool. Let me try it out.’ But no one is actually willing to put money down.

I’ve seen this happen too many times:

Many young startups use their existing networks / relationships to get in touch with potential early customers without thoroughly vetting / challenging whether the problem they think they’re solving is large and urgent at the potential customer, whether these individuals are even the right customer / ICP and / or even have the budget to purchase a solution like the one the startup aims to sell.

As humans, we don’t like to say “no”. Especially if we have a connection to the other person. That’s why many friends and former colleagues will work with you, test your solution and even provide feedback.

However, few will end up paying for your solution thus often wasting your time. On top, as they are often not the right customer for your solution, their feedback may also lead you down a costly and time consuming wrong path.

Why do many founders fall into this trap?

Because early startups are desperate for customers, it’s often easier to talk to people we already share a history with and putting yourself out there / selling is hard as it comes with a lot of rejections / “no’s”. Especially if you’re doing something novel and haven’t really nailed your value proposition or ICP yet.

Thus, approaching initial sales via your network seem like the most straightforward path with the least amount rejections. Especially if you already have large networks in an industry.

In Lenny’s newsletter, David then goes on as following:

So I realized the best signal of this being real is to do cold outbound sales. It’s just much purer, basically: just pure outbound with your pitch and the value prop, with no other incentives attached. So at Retool, we started doing sales early on. You cannot fool yourself and be deceived anymore. You can get an accurate grasp of reality. That’s actually how we landed DoorDash, as customer number five.”

I couldn’t have said it better myself.

Outbound sales forces you to be much more thoughtful about your ICP, iterate on your messaging, provides a great feedback loop, is a muscle you will have to develop sooner or later anyways, and much more.

Or as David put it: It’s just much purer, basically: just pure outbound with your pitch and the value prop, with no other incentives attached.

All that said, I’m not advocating for not going through your network to get to customers at all.

Rather, the two main messages I’m trying to get across when I talking to our founders about this topic are:

  1. When going through your network, be cautious in terms of how you interpret signals / be really thoughtful re who is and is not the right customer for you. Positive responses often won’t lead to a sale. As much as you’d like to believe it.
  2. Supplement network driven sales with outbound sales from the start as it will - on top of the benefits stated above - provide many valuable learnings applicable to network driven sales too. As hard and frustrating as it is - it will eventually pay off many times over. And when starting with outbound sales, make sure to set clear goals around consistency, regularly review your learnings and test / iterate a lot.

How to best go about cold outbound outreach is the topic for another post.



Featured Resources

June 6, 2023

June 7, 2023

Introducing 🧨
We're thrilled to announce the launch of our open source VC database -
company news

April 26, 2023

April 26, 2023

focal is live 👋
We just launched our firm's new name and bold brand: focal
company news

October 19, 2023

October 27, 2023

What it takes to raise capital in 2023
The fundraising environment remains tricky to navigate for startups. Frameworks, like Point 9’s renowned SaaS funding napkins, offer a good a good temperature check on the early stage funding market.
pascal's notes

September 21, 2023

October 27, 2023

The Relationship Between Risk and Return
Howard Marks' latest memo dives in on risk / return in the world of investing. Lots of frameworks and lessons from the piece can also be applied to business building.
pascal's notes

September 18, 2023

October 27, 2023

Supercharge your Fundraise with an Investment Memo
A pitch (intro) deck is a great tool to get into the initial fundraising meeting. From there, a long form written text document is a much more powerful tool to move the process along.
pascal's notes

July 13, 2023

July 20, 2023

🧱#8: The VC Rebrand Guide
Rebranding and revamping your website is no easy task. We lay out step-by-step how we did it for focal, all the way to launch.
brick by brick

April 12, 2023

April 25, 2023

🧱#7: Navigating Year-End
Now that the busy year-end season is (mostly) behind us, we look back at the operational lessons we've learned in the last six months.
brick by brick

March 20, 2023

April 25, 2023

🧱#6: On Point Offsite
In January, we had a week-long team offsite across Virginia & Miami. While the primary draw was to see each other, reconnect, & align, we also got a ton of work done. Here's what we learned.
brick by brick
No items found.

November 21, 2023

November 21, 2023

5YF Episode #3: ASAPP CEO Gustavo Sapoznik
100x worker performance, predictive call centers, and the future of delighting customers w/ ASAPP CEO Gustavo Sapoznik
5 year frontier

November 8, 2023

November 8, 2023

5YF Episode #2: Zipline CEO Keller Rinaudo Cliffton
Drone networks, Earth’s autonomous logistics system, disrupting eCommerce giants, and the future of delivery w/ Zipline CEO Keller Rinaudo Cliffton
5 year frontier

October 24, 2023

October 26, 2023

5YF Episode #1: Sweetgreen CEO Jonathan Neman
Robotic restaurants, vertical farming, drone delivery, and the future of healthy eating w/ Sweetgreen CEO Jonathan Neman
5 year frontier