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Why Did We Partner With PARC…And What Is The Big Deal?

Earlier today (Wed, Apr 2), we shared an announcement about an exciting partnership with PARC. Press releases offer limited room for elaboration, so we thought we’d share our perspective in a blog post. So here goes.

If you’re an entrepreneur, you know the odds are stacked against you…1:10 by most anecdotal accounts. If you are working on an idea, chances are, someone else in some other part of the world is working on the same or an adjacent idea. And if you were to assume that the other team is at least as smart and as driven as you are, they’re likely to pivot and iterate until both of you arrive at similar product/market concepts.

Having established the above, your challenge is to execute flawlessly and incredibly fast. How exactly do you do that? We believe that’s where startup accelerators are amazingly efficient. Surrounding entrepreneurs with seasoned mentors, an intense focus on customer development, the ability of the partners themselves to support the companies, providing stage-appropriate resources, and creating urgency with a fixed-length program help startups minimize mistakes and operate efficiently.

Back to PARC

Before we go too far, for the uninitiated, here’s a subset of the pioneering technologies PARC has invented since its founding in 1970 – mouse, Ethernet, laser printing, graphical user interface, object-oriented programming, WYSIYG text editor etc. etc. This short YouTube video contains an interview with Steve Jobs and his reaction at seeing the mouse on his visit to PARC in 1979. The short of it is, PARC is focused on “out there” research in many areas, including ubiquitous computing, big data, content-centric networking, contextual intelligence, design and digital manufacturing and many others. Convinced about the coolness quotient yet?

PARC is now very focused on bringing its groundbreaking innovations to the startup community. After a long and intense due diligence process with startup-focused organizations across the world, PARC made a decision that 9Mile Labs would be one of the organizations they would partner with. The PARC team liked the 9Mile Labs focus on B2B companies, they enjoyed the continuity of deep mentor engagement during the program and they liked how the 9Mile Labs team is committed to a community-focused approach to supporting entrepreneurs. Finally, the PARC team felt that the structured curriculum and engagement built upon a strong foundation of the 9Mile Success Framework (more on that in another blog post) offered a great mechanism for programmatic engagement with the startups.

In fact, the interaction between PARC and 9Mile Labs was so positive early on that despite no formal agreement, PARC visited 9Mile Labs during the first program in 2013, spoke to a subset of the companies here and decided to support Comr.se, one of the very promising Cohort I companies. Over the past few months, PARC has dramatically accelerated development of Comr.se’s data analytics infrastructure with PARC’s outsourced data foundry services.  The engagement compresses Comr.se’s development and go-to-market timeframes by 12-18 months at a fraction of the traditional cost, thereby providing them with an amazing competitive advantage.

And This Is Why It’s a Big Deal!

The collaboration between PARC and 9Mile Labs creates unique combinations of disruptive technologies and startups that has not occurred at scale previously. PARC serves to accelerate startups in 3 distinct ways. First, PARC can efficiently offer the broad and deep base of technical expertise with PARC researchers and technologists to help startups in the form of technical mentoring. Second, PARC can draw upon its vast stable of existing technologies and IP that can provide startups a great head-start, as in the case of Comr.se. Third, PARC provides a world-class infrastructure for rapid prototyping – specifically their foundry services for software and cloud technology startups – that obviates the need for startups to expend their scarce time and resources building this infrastructure.

Now let’s combine all of the above with the fact that the focus of PARC’s research and client interactions is innately and historically enterprise and B2B. Hopefully, it begins to become apparent why the collaboration between PARC and 9Mile Labs ought to be great news for budding B2B entrepreneurs.

To be sure, not all startups will be either ready, able or suitable to engage with PARC. But for many startups, this support could spell the difference between success and failure. And that, quite simply, is what we’re trying to do at 9Mile Labs. We want to systematically reduce risks and improve the odds that startups face as they build their businesses.

How is a B2B startup different from a B2C startup (Part 1)?

We get asked about this all the time. Why and how is a B2B startup so different from a B2C company? While there are many differences, what stands out is the way in which B2B companies do marketing and sales to acquire customers. There’s no intent to imply that one is harder or simpler than the other, they’re just different. Let’s walk through a couple of examples to think through this.

B2C Example

Imagine the last time you purchased a $0.99 app. It probably took a herculean effort for the app developer to reach you through SEO, SEM, Facebook, TV/radio advertising, app review in a publication, app store, or one of the other myriad options. But once you discovered the app, read the description and browsed some reviews, you were able to make the decision about your purchase.

B2B Example

Now let’s examine a scenario where Acme Medical – a 20,000-person medical devices company – is ready to replace their existing open source CRM system with a new solution. NexGen CRM is a startup building the next generation CRM system. This potentially annual $200k+ deal could completely change the Series B funding conversations for NexGen. Here’s what happens in this sales cycle

Awareness: Someone at Acme, most likely an IT manager (say Jill), is assigned responsibility for the search. This is not trivial; Jill’s neck (and the CIO’s) is on the line if Acme picks the wrong product. To create a comprehensive consideration list, Jill casts a wide net including performing web searches, consulting with her industry peers, attending trade shows and reading industry publications. NexGen wants to show up where Jill is looking for her solution.

Education: Acme needs to ensure that it provides adequate stage-appropriate and role-specific assets to educate Jill. These include white papers, data sheets, explainer videos, customer testimonials, case studies, live webinars and competitive information to ensure that Jill doesn’t just understand NexGen’s product, she also understands why it’s better than the competition.

Consideration: Once Jill downloads a white paper or attends a live webinar, she enters the sales funnel for NexGen. She invites the NexGen sales team for a show-and-tell with IT. Before the face-to-face meeting happens, the NexGen sales lead asks Jill to answer few questions about her environment over the phone or over email so they can prepare for the critical first meeting.

When the NexGen sales team shows up, it includes the NexGen CEO (it’s a big freakin’ deal), a sales lead and a sales engineer (likely a developer) who can answer Jill’s initial questions about integration with her current tools, usability, data migration, deployment timeframes and pricing.

Engagement: Once Jill is satisfied with the first meeting, she must now invite other Acme stakeholders from sales operations, marketing, possibly finance and other departments to a follow-on meeting. The NexGen sales team must also start reaching out to the Acme stakeholders.

A general guideline is that a direct sales engagement must run at 3 levels – technical, business and executive. In addition, you also need to cultivate a champion who is espousing your cause inside Acme and forewarning about impending objections and roadblocks.

The sales lead must understand the motives and objectives of the influencers and decision-makers in this purchase process. This involves researching the organization, understanding the power centers, figuring out budgetary priorities, and understanding the key strategic initiatives at Acme.

Purchase: While this stage may seem like a no-brainer after everything that’s happened prior, it is not so. Decisions get overturned because the CEO of Acme happened to be college buddies with the CEO of a NexGen competitor, Acme may have a poor quarter, or macroeconomic conditions may change…the list goes on.

But What About…

Couple of things to call out here. First, we discussed the example of a direct sale with a large deal size that can take 6-12 months, sometimes longer if you’re dealing with a government agency. While the level of engagement and sales cycle will depend on the deal size, it is useful to understand all the levers you can turn in order to achieve desired outcomes.

Second, we haven’t even touched upon the channel sales model. In general, it is challenging for startups to execute a successful channel strategy. As a startup, you need to generate the demand yourself so the channel can fulfill it. Unless the channel partners see a clear and direct path to revenue, they’ll be happy to sign agreements but won’t do much with it. By definition, early on, a majority of your sales will end up being direct sales.

So Let’s Summarize the Differences

Sales Cycle: Yes, sales cycles are longer in B2B. Also, in B2C, marketing equals sales for the most part. In B2B, marketing is only the leading edge of a potentially longer sales cycle.

Purchasing Decision: In B2C, the purchasing decision is shorter and may be impulse and emotionally driven. Not so in a B2B situation where the purchasing decision must align with budgets, strategic priorities, technological platforms and many other considerations

Deal Size: Deal sizes are typically larger in B2B than B2C, which leads to higher level of due diligence. Of course, B2C businesses deal in much larger number of users than their B2B counterparts.

Switching Costs: One reason the due diligence is longer is that switching costs are much higher in a B2B environment vs a B2C setup. Integration with existing tools, training costs, data migration and deployment costs lead to a cautious and deliberate decision-making process.

Customer Segmentation: In B2C marketing, your messaging is focused on a persona, say females between 18 and 35 years old. In B2B, you must first understand and then target both generic segments (such as Technology Decision Makers, Business Decision Makers and others) and vertical- or domain-specific roles, such as the EDI Analyst within a healthcare insurance organization. One other thought, when you’re selling in B2B, you’re selling to experts; not so in a B2C sale.

Education & Awareness-building: Because of the need for targeting experts within many different roles in a business, the messaging contained within the marketing assets needs to be stage-appropriate and tailored to the roles you’re pitching to. Hence the need for specialized assets such as white papers, technical documentation, data sheets, case studies, ROI documentation and others in a B2B sales cycle.

Revenue vs. Traffic: Here’s another generalization. In B2C, you can run a business for a long time as long as you’re growing traffic, downloads and active users. In B2B, you cannot afford to be generous for too long for one simple reason – business users don’t attach value to freebies. If an organization believes that your product solves a real problem, they will willingly pay for it (probably a discount will help with the decision) and then will likely assign a resource (or part of a resource) to extract value from their purchase. If no one is accountable to make your product successful, it will likely sit on the shelf.

I’d love to hear your thoughts and feedback on this post.

Sell it Before You Build It.

If you want to have paying customers, and increase your chances of funding you must, “Sell it before you build it.”

That was the title of my recent talk at 9Milelabs, a Seattle-based accelerator that provides mentors and other resources to startup companies looking to get off the ground. The key message of the talk was this: by interviewing 100s of prospects in your proposed market, you can segment the target market, identify must-have versus nice-to-have features, and secure buyers for your product before you’ve written a single line of code.

This process is called “Market Validation.” We adopted market validation while building GoToMeeting, AppFolio, and now SecureDocs, a virtual data room used for both startup fundraising and mature companies going through M&A or IPO.

Most people think of GoToMeeting as the 800 pound gorilla of web meeting solutions. When we launched GoToMeeting, success was a long shot. There were 100+ other collaboration solutions already on the market from companies like Webex, Microsoft, IBM, and Lotus. As a new entrant, the small guy, market validation provided a roadmap on how to compete with the big guys.

Here are some specific examples of how GoToMeeting benefitted from market validation: By segmenting a specific part of the market (SMB), we were able to do away with 80% of product “requirements,” the majority of which were only applicable to enterprise companies. Instead of planning based on what we thought we knew about the web-collaboration space, we actually talked to hundreds of people- all potential customers- and in the end decreased the work we needed to do by months. SMBs didn’t care about 87 different features. They only cared about 3 things: Ease of use, price point, and sharing their screens as quickly as possible. Instead of 87 features, we focused on a download that was 200K or less, a UI with an oversized play button, and an all-you-can-meet pricing strategy. We also validated the business model to make sure that the proposed price point would allow us to acquire customers both online and through sales.

By spending the time up front, we avoided wasting time building a product the market didn’t want and we had customers willing to pay for the product when it was done. Take these lessons and apply them to your business. Get out there and validate!

For added incentive, consider this: early-stage companies with paying customers are much more unique and attractive to VCs, who review hundreds of “promising” companies every year. Sell it before you build it and you are much more likely to be rewarded in your business and fundraising efforts!

About the author:

Albert Oaten is a serial entrepreneur, investor, and VP of Market Development at SecureDocs, Inc., a partner of 9Mile Labs, offering free virtual data rooms to all 9Mile Lab companies raising their first round of funding.

Are you ready for an accelerator?

Last Friday we attended the GeekWire Startup Day at the Showbox in Seattle. It was well-attended, well-executed and vibrant event featuring a broad range of local speakers working to help area entrepreneurs at all stages. Kudos to our friends at GeekWire for an outstanding event.

Thanks to Sanjay, 9Mile Labs had a booth front and center near the entrance. Thanks to Kevin, we also had perhaps the hottest ticket in town – Seahawks tickets which we gave out in pairs to a couple of lucky winners of our drawings. The best part for us though was the steady stream of traffic and the frequency and depth of conversation with entrepreneurs. Applications for Cohort II are up again following the event and we have a lot of follow up conversations we are looking forward to this week.

Many entrepreneurs sought us out with specific questions about the program and their own readiness to participate. A few other folks were not too familiar with 9Mile Labs or how an accelerator works. We thought we’d focus this post on helping answer two frequently asked questions from this event and other early engagements with new startup founders.

 

What is an accelerator and how is it different from an incubator?

At 9Mile Labs, we have a few unique things going for us. In addition to being focused on B2B (or B2B2C) and mobile/wireless technologies, we are also one of the only accelerators we know of that sits inside an incubator.

An incubator like SURF and the HUB in Seattle rent desk space, provide access to conference rooms, printers, internet access, and miscellaneous other shared resources for a monthly fee. Often subsidized by sponsorship dollars, incubators provide space for one or more people in a small business to get started in the heart of the city for a substantially reduced per seat rate over trying to lease your own space. Moreover, because incubators house many early stage small businesses side-by-side in a relatively open floor plan, the opportunities for cross-pollination of cool ideas and meeting like-minded co-founders or team members for your startup are pretty good. Incubators like SURF also provide a place where more experienced entrepreneurs interested can share their experiences through hosted events and professional services firms (like legal and accounting firms) can promote and socialize their offerings to startups.

We think incubators are such an important and valuable part of the startup ecosystem that we are proud denizens of the SURF Incubator ourselves. Several of the 9Mile Labs Cohort I companies were resident in SURF prior to our launch of the program and several more have remained in the facility following program completion. It’s great to see folks like AMP, CadenceMD, and Ombitron continue to grow in the space and watch the interaction with others at earlier stages who are co-located there too.

Accelerators like 9Mile Labs and TechStars offer investment, structured programs, mentorship, and extensive resources focused on helping early stage startup companies speed up their development. While we are a young organization, we pride ourselves at 9Mile Labs on being differentiated through our expertise in B2B and commercial software along with the strength of our mentors.

At 9Mile Labs our practical workshop based program is four months long. In it, you will focus on finding and articulating the core pain/benefit in your vision that makes customers want it as well as the value exchange point that helps you determine how much they are willing to pay for it. While resident in the program you will refine your go-to-market plans and revenue model while developing and executing on a commercially viable sales strategy to get meaningful customer traction. We help you develop and refine your product and services, build your team, understand the competition, and describe your addressable market and potential exit opportunities long term. Of course, we also help you develop your investor pitch and introduce you to angels and VCs in the Pacific Northwest and as appropriate from around the world.

All companies selected for 9Mile Labs Cohort II will receive $35,000 in funding from 9Mile Labs, space for up to three people in our facility for the duration of the program, access to hundreds of thousands of dollars in direct or discounted goods and services from our professional services and technology partners in addition to the core experience of the program itself.

 

So, is an accelerator right for you?

Possibly. Like most accelerators, our program is intense and requires you to put in extra effort to learn from the experts on site and rapidly flesh out your business strategy to speed up your execution.

You must be committed to the program and that starts with being committed to your business. You cannot participate in the 9Mile Labs accelerator part-time. We don’t believe you can truly understand your customer and break out as a business without the founders being fully committed. If you are just now thinking about leaving your day job to pursue your dream, you are probably too early for an accelerator. On the other hand, if you have been noodling on that great new idea for a while and are ready to fully dive in, an accelerator can add tremendous value in helping you flesh out the idea, develop a complete strategy, and guide you through early execution as you build some stage-appropriate fundamentals for your business.

The ideal company will consist of founders who know each other and are committed to the dream, have a foundational understanding of their customer and the potential value of the solution to those customers, and initial designs, specs or a prototype of their product by the start of the program.

We find entrepreneurs often mistakenly assume that companies with an existing product in market who have been around for 2 or more years aren’t candidates for an accelerator. While perhaps these aren’t the norm, if you took an initial product to market, know in your heart you are on to something big but it isn’t taking off quite like you hoped, then chances are help revisiting first principles and filling in the gaps in your business through a structured program and expert mentorship is exactly what you need. For entrepreneurs in this category, we find the biggest challenge is their willingness to fully embrace the entire shared learning experience an accelerator offers. If you approach an accelerator merely as a way to get help with your investor pitch and raise money for a seed round, then you aren’t right for the program. While we absolutely facilitate this, your dream is far bigger than it’s early stage ambitions alone and we want to help you establish a built-to-last foundation through a program that will benefit you now and prepare you for Series A funding and beyond. We won’t expose you to everything you need to know for the life of your business by any means but we will make sure you have depth in your business and opportunity that runs substantially deeper than any five minute pitch.

9Mile Labs Cohort I companies ran the gambit starting with founders who had a great idea and just quite their day jobs in the weeks prior to the start of the program all the way to the serial entrepreneurs with an early version of their product already in market. We tailor the program engagement and mentors to meet folks where they are and help push them make rapid and stage-appropriate progress in just a few months. It was a joy to see Patrick Henley, Founder and CEO from AMP, win the People’s Choice Award at the GeekWire Startup Day event. It was even more fun to hear him enthusiastically share the news that he’s adding new customers at a faster pace than anticipated since the official release of his solution in August during the waning weeks of his tenure in the 9Mile Labs program.

If you are committed to your dream, really ready to take the plunge, and want to get after it, come see us at 9Mile Labs. Applications remain open for Cohort II through November 11, 2013. We are hosting Open Coffee meet ups in Seattle, Bellevue, Portland, and Vancouver, BC in the next week. We will also host two evening mixers in the next two weeks where area entrepreneurs can mix it up with 9Mile Labs mentors and area investors.

We encourage you to come join us for coffee or a mixer in the next two weeks. We’ll be glad to tell you more about 9Mile Labs and help you answer the question yourself, “Are you ready for an accelerator?”

Check out the 9Mile Labs events listing on the front page of the web site for details on all our upcoming events. We look forward to engaging with you.

 

 

 

 

9Mile Labs Open Coffee

One of the best parts of running an accelerator is getting to hear so many cool ideas from so many passionate entrepreneurs. With graduation day in the rear view mirror and the 9Mile Labs Cohort I companies on to the next phase in their respective journeys, we are now on the lookout for the next collection of smart people with great ideas looking for help making their dreams come true.

Applications are open for 9Mile Labs Cohort II and we want to hear from you.

We are hosting open office hours twice a week for the next several weeks. This Tuesday 1p-4p we’ll be on the Eastside at Tully’s on Main Street in Bellevue and on Thursday 9a-12p we’ll be at the Grand Central Bakery on Eastlake in Seattle. No pre-scheduling required. Just show up, spot a 9Mile Labs t-shirt, and join us in a conversation. Dates/times and locations of all future Open Coffees will be published on our website.

We’d love to answer your questions about 9Mile Labs, discuss whether participating in an accelerator is right for you, and hear how your cool new idea is going to change the world. Not working on anything in particular right now? That’s ok too. We welcome conversations with entrepreneurs, investors, and anyone interested in the Pacific Northwest startup scene. We welcome your input and have all kinds of thoughts on how anyone can get more engaged in helping build a world-class startup ecosystem right here at home.

Great coffee, great ideas, great people. Sounds like a really good time “Seattle-style” to me.

- Tom.

 

P.S. – Be sure to check www.9MileLabs.com each week. We may move the Open Coffees around a bit as we combine our search for the next great startup with our perpetual quest for the best coffee.