Understanding the Startup Journey

Steve LudwigValue Creation JourneyLeave a Comment

image showing the stages of growth from startup, through developing the playbook, to scaleup

When you are on a journey, it’s always helpful to have a map.

It’s no different for B2B tech startups. 

Through our experience, research, and interviews with leaders in the startup space, we have developed an easy way to understand the growth cycle of startups.

There are three distinct phases for B2B tech startups, with each phase requiring a specific approach to sales to ensure success. We have found that failure to understand this cycle has been the undoing of many excellent businesses. 

Phase 1: Startup with Founder-led Sales

Phase 2: Develop with Pathfinder Sales

Phase 3: Scaleup with Playbook Sales

image showing the stages of growth from startup, through developing the playbook, to scaleup

Phase 1: Startup with Founder-led Sales

In the Startup Phase with Founder-led sales, startups are aiming at achieving Product Market Fit (PMF). 

What is PMF? This is achieved when you have identified a problem in the marketplace, your solution, you know whom you are solving it for, your minimum viable product (MVP) works, and the founder(s) have landed a few paying customers.

Studies have shown that less than 20% of B2B tech startups successfully transition from Startup to the Scaleup Phase. In fact, even fewer achieve Product Market Fit (PMF) in the first place.

In our experience founders fail to achieve PMF because they don’t do enough market validation before they build their MVP. They might end up with a decent product targeted at the wrong market or a poor product missing the opportunity in a good market. 

This lack of market validation leads to a lack of focus and a shotgun sales approach, which typically has limited success. 

Phase 2: Develop with Pathfinder Sales

The second major challenge occurs once the startup has achieved PMF. 

This Develop Phase is not a simple stepping stone from Startup to Scaleup – it’s more of a chasm, one many startups fail to navigate. Many founders fail to recognize that this stage even exists, and it proves to be disastrous.

A chasm might be the wrong metaphor to describe the transition from Startup to Scaleup. In reality, for most, it’s a jungle where wrong turns can turn into a total loss of bearings and falling into a pit of quicksand.

The goal of the Develop stage is to create a predictable, repeatable, scalable and profitable Sales process, otherwise known as a Playbook. It’s this Playbook that allows you to scale by ‘simply’ adding appropriate headcount into the business.

However, in achieving Product Market Fit did you create a Playbook for a repeatable sales process? Did you run many marketing campaigns to test what worked best? 

Of course not. You didn’t have the time or capacity. 

You won a few early deals to prove somebody would pay. That was it. You’ve yet to prove that many will pay or that non-founders can sell.

In the Develop Phase, a startup needs to hire its first salesperson that has a very particular set of skills, including the ability to build and develop a Playbook for a scalable sales process. That salesperson is a Pathfinder. 

A Pathfinder salesperson clears a path through the jungle for others to follow.

Playbook vs. Pathfinder Sales

To get to the Scaleup Phase, a startup needs to develop their own predictable, repeatable, scalable, and profitable sales process. This includes buyer personas, marketing and sales materials, creating awareness, a lead funnel, and closing deals that lead to profitable revenue. This is the Playbook. 

However, you need a Pathfinder to build that Playbook in the Develop Phase. 

Proving Product Market Fit is tough, developing your Playbook is just as hard. Indeed, there is no cookie-cutter solution. Getting to Scaleup really is a jungle that needs hacking through (otherwise known as experimentation – embracing failure) and that requires a Pathfinder.

Our research estimates that over 90 percent of salespeople are most comfortable working with a Playbook. Since you don’t have a Playbook in the Develop Phase the vast majority of salespeople will be unsuccessful in this role. 

Given how expensive salespeople are today, hiring the wrong one can lead to a devastating cash burn with little in the way of results.

Extensive research by The Right Five has identified the unique characteristics of Pathfinder salespeople both in terms of vocational skills as well as mindset. These include:

  • A strong ability to deal with ambiguity. The first Sales hire role is one without a Playbook and, by definition, such an early startup lacks the support (e.g. lead generation) of other later stage companies.
  • A willingness and excitement around building the processes and procedures necessary for a successful Sales operation as an organization scales.
  • A curiosity that allows for creative solutions.
  • A hunger motivated by something quite different to most other Sales types.

Finding Your Pathfinder

We’ve noted how difficult it is to find Pathfinders. That’s why we have developed The Right Five, to find you five Pathfinder salespeople so you can pick the one that is the best fit for your startup. 

The Right Five has developed a simple process that delivers:

  • A quick and painless hiring process: The Right Five automates the candidate assessment/scoring/communication leaving you simply with the selection of those Pathfinders you want to interview.
  • Fast on-ramping: Because your first Sales hire needs to be a Pathfinder (the clue is in the name) their need for on-ramping is minimal.
  • Reduced risk: The Right Five reduces the risk for you because our online assessment/rules engine identifies Pathfinders, i.e the candidates who will be successful as the first Sales hire.

Want to find out more? Watch this five-minute overview and demo of The Right Five or send us a note and we will set up a meeting.

What happens to your Pathfinder once they get you to Scaleup?

Phase 3: Scaleup with Playbook Sales

This is where you can hire your traditional VP Sales to build out the Playbook Sales organization. Just as most salespeople are unsuited to the role of a Pathfinder, most Pathfinders are unsuitable for a role in Playbook sales.

They’re built differently.

Hoping your Pathfinder can scale your sales organization is just as bad as trying to have a Playbook salesperson be a Pathfinder.

Recognise this and carve out a different role for them, or let them go with their pockets full of share options. After all, without them you’d be sinking in that jungle quicksand right about now.

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