Many technology startups are founded by engineers.
But, they seem to quickly run out of steam if there is no management team –
including marketing, sales and finance. Investors look for a good balance of
innovation, planning, drive and experience.
Creeping elegance
Engineer founders are notorious for becoming so
enamored of their products, that they keep developing increasingly better
features, without first selling the more-than-adequate initial products. It’s
called “creeping elegance”. I know; I used to practice it. I’m an engineer, so I
write from experience.
As an angel investor, I have seen small
engineering companies go off the cliff into bankruptcy, simply because the
founder was spending all the money on tweaking the product, rather than selling
it. And it’s usually a product that the engineer “thinks” the customer should
have, not what customers have actually asked for. The company publishes an
expensive brochure, which describes in great detail all the wonderful features –
in language that most customers don’t even understand.
I have seen too many software company founders
give me long demonstrations, from which it is hard to escape. Clearly this guy
developed the software and knows how to hit Control-C, Alt N and Shift-G when
needed. And, if I didn’t make excuses to exit, the demo would have lasted a long
time, treating me to endless, “amazing” features.
Good products must include only the features that
customers want, not endless tweaks that delight the engineer and confuse
everyone else.
Marketing & Sales – FABS & FUDS
This is where good Marketing comes in – finding
customers, and filling their needs. It’s important to have things that have been
specifically requested by customers – not just features that are imagined by
engineers. Good marketers keep examining the FABS – features, advantages,
benefits.
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Features: Specifications,
characteristics, size, shape, packaging, etc.
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Advantages: Improvements over alternative
ways of doing the same function.
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Benefits: In consumer markets style and
fashion may be benefits. But, in the business world there is only one central
benefit – saving money. That does not mean just product price. Benefits
include features and advantages that save money over other ways of doing the
same functions.
Good marketing recognizes that features and
advantages that provide no benefit should not be included as “standard
features”. They might be included as options, at additional cost; let the
customer decide whether it’s an additional benefit.
Next, equally important, is Sales – approaching
target customers and convincing them to buy the product over many other choices.
Good Marketing is relatively useless without Sales drive. Marketing may identify
the type of customer – Sales has to find the customer, demonstrate the products,
overcome objections and book sales. And that’s not easy – a sale is not a sale
till the customer is satisfied, pays the invoice and buys again.
Good Sales people use the FABS to sell.
Not-so-good sales techniques include negative selling – called FUDS:
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Fear: Inserting false urgency – “Without
this product, you’ll be falling behind.” “Buy now or you’ll lose the discount”
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Uncertainty: Bringing up FABS that are
beyond the customers understanding.
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Doubt: Criticizing the competitor’s FABS;
giving the customer negative feelings about not buying.
Just a touch of FUDS may be in order, before
losing a customer. It’s fine to show product comparisons against competitive
products, but it must be factual. Outright negative selling makes customers
uncomfortable. Good salesmanship should clearly understand the difference.
Teamwork wins every time
When I invest in a startup, the first thing I ask
is – where is the team? I look for a balance between all the key functions. If
there is no team, I quickly look for an exit. If there IS a team, I look for
teamwork – people that complement each other, and are not dominated by one
function to the detriment of the others.
If the founder is an engineer, I quickly turn my
attention to the Marketing chief and ask, “Who needs this?” I look for a
reasonable analysis of the markets and competitors. Is the market big enough or
just a small, specialized niche with limited potential? There must be a sensible
view of market-size and growth-rate. And I look for a dynamic and enthusiastic
Sales driver who has broad experience with generating bookings.
What about the product price? If it’s the
cheapest, I get suspicious. Often the pricing is artificially set to be lower
than anyone else – which is NOT reasonable. I look for the REAL advantages, to
find out whether customers would buy this product even if it was twice the
price.
And then I look for some financial savvy. Up to
date measurements are important. A long time ago, as a budding entrepreneur, I
went to see Bill Hewlett, the engineer-founder of HP, who told me, “Understand
the numbers; if you can’t measure, you can’t control.”
In an engineering startup, the financial person
can be part-time; a good CFO can come later, when strong growth is under way. I
look for the books to be kept up to date, not months behind. The founding team
should have the ability to execute for the first few years – that’s when most
startups fail.
More on the topic of developing engineering
leadership in future AutomationTechie.com articles. Stay tuned…
Related links:
***
Jim Pinto is an industry analyst and
commentator, writer, technology entrepreneur, investor and futurist. You can
email him at:
jim@jimpinto.com. Or look at his poems, prognostications and predictions
on his website:
http://www.JimPinto.com
. Read extracts from his new book, “Automation Unplugged” at:
http://www.jimpinto.com/writings/unplugged.html
