We talked last week about the importance of truly understanding your marketing activation, channels, and spend very early on in the life of your business. At Bowery Capital, we place a focus through our investment process on truly understanding where a founder is going to spend time and capital around this effort. Something else that continues to be overlooked in our opinion is the customer success vector of an early stage (usually seed) pitch. From the customer standpoint, it is easy to onboard and offboard and pricing remains the most flexible it has ever been. You are not buying “shelfware” any more and it does not take three months to unwind out of a software or hardware purchase. As a result, founders need to place an intense focus on customer success beginning as early as customer number one. Here are four quick tips for discussing customer success with prospective investors.
1. Think Through Your Metrics That Define Great Usage. One of the questions we commonly ask founders is what is the key metric that you think defines great usage? A lot of the founders we meet have not thought through this in a serious way and as a result fumble the answer. Think through some of the product differences and more narrowly the features that are going to really change the game for your company. What do they (or will they) love the most? What are the biggest issues and pain points today? How disruptive would it be to the customer if we took our product away from them? Having answers for these things will help in discussing customer success with prospective investors.
2. What Are Your Leading Indicators? We owe a lot of credit to the Chairman of the Bowery Capital Revenue Council Mark Roberge for this one. He’s helped a ton of our companies in discussing customer success with prospective investors. Considering and thinking through what the leading customer success indicators will be when you achieve some measure of scale is really important. If you don’t know when to step on the gas and falsely believe you have your customer success blueprints correct, your company will likely be pitching vanity metrics and have a high degree of churn. Think through what these indicators will be and weave them through your pitch. The best founders are the ones who take a focused and somewhat deliberate approach to finding customer success and fight the urge to chase growth prematurely.
3. Know Your Customer Success Tech Stack. Moving away from the metrics for a minute, founders should also spend time thinking through and having a response for what technology you are going to use to really track these metrics and understand what is going on internally. This could be simple (i.e. spreadsheets) all the way up to complex (i.e. buying a CSM platform). Being able to talk about the technology tooling that will drive things like customer communication, customer onboarding, value realization, and other elements is going to not only be key to your success but it is going to make your life a heck of a lot easier. Place some focus on this and perhaps have a slide that showcases exactly what you are going to buy or build.
4. Be Able To Talk Through Your Product Hooks. Some of the best companies in the software ecosystem like Slack, Zendesk, and Dropbox have customer success literally embedded or engineered into their product. Being able to talk through what features and components of your product are going to make the customer’s life easier or more productive is a great way to helping an investor understand why you of all the companies out there will succeed. Another key consideration is integrations and partnerships that you might be able to forge out of the gate to give you a leg up (and thus increasing usage or productivity). Figure out the product hooks that are going to entice someone to buy and stay.
While investors tend to focus on early customer traction and building immediate scale, it is equally important to truly gather enough evidence and support to showcase that you not only have this early customer traction vector figured out but also the retention and customer success vector figured out. In doing so, your efforts will put the company on a much better heading and the results will be increased satisfaction, loyalty, and revenue.
If you liked “Discussing Customer Success With Prospective Investors” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog.
This week Oleg Campbell, Founder and CEO of Reply.io, joins the Bowery Capital Startup Sales Podcast to discuss "Evolving Your Sales Tech Stack."