Our focus on asset and wealth tech means we spend a lot of time with technical founders who have built pioneering solutions and are ready to scale their sales capabilities. We invited our Venture Partner, Eamon O’Dwyer, to address our portfolio founders on some of the most common pitfalls that can inhibit scaling B2B sales.
9 of the most common barriers to sales in fintechs
Specifically 'Product & Tech led' Founders
Series A 'Kool-aid'
Mistaking sales traction with sales scalability
KPIs: Company v Sales
Sales approach and Sales KPIs don't align to business model
MQL v SQL
Independent... but intertwined... and not linearly...
The blind leading the...
Unexperienced FTEs hiring and designing sales functions
Hiring for culture
Without performance there is no culture...
Living off hope...
Lack of numerical analysis, simulations and wargaming
Scorched earth sales
Sales without sales quality false summit/tragedy
NPD & new segments
Product and Market expansion pre scalable MQL and SQL function
The fintech sector harbours a high proportion of technical founders who know how to build products and can often make early sales due to their passion, deep domain expertise and ‘black book’ connections. Commercialising a product and scaling sales beyond the initial few sales requires the founders to productise IP, and in tandem realise that building an effective B2B sales organisation and driving scalable sales is just as challenging as building a good product.
Too many tech and product led founders are inclined to want to ‘buy sales leadership and salespeople off-the-shelf’, make it someone else’s responsibility and expect immediate traction (while they spend more time on product, tech, and evangelism). Such actions are usually followed with lack of delivery against unrealistic targets, lack of ‘momentum and trajectory’ and frustration for the founders. Treat building a sales operation and organisation as carefully as you would building a product. It might not have as much innovation and IP involved but it is critical, is complex, requires ‘heavy lifting’ and is typically the area where founders have the least expertise.
Drinking your own Series A ‘Kool-Aid’
It is easy to mistake early sales (pre series A) with sales scalability. Typically, most early sales are to ‘connected’ or ‘friendly clients’. This is an important stage in the lifecycle and is an important part of the ‘Series A IM’. Unless you know you have an enormous / infinite source of connected clients it's not proof of sales scalability though. Neither is the fact that investors go along with your Series A forecast. Series A decks are almost always ‘optimistic happy path’ views of what could happen. They rarely if ever represent what does happen.
Just because you’ve made early sales and investors have handed over cash for your Series A try not to drink your own Series A ‘Kool-Aid’. Building out your product and sales takes time. Assume hitting your Series A numbers and timeline will be a huge challenge and remember you’re on the clock before you need more investment.
KPIs: Company v Sales
Too often there is lack of alignment between a company’s business model and their sales targets and KPIs, and as a result the sales operation and organisation (and the lack of alignment can go either or both directions…). For example:
a) If you’re aiming for a B2B SaaS business model with high volume relatively low ACVs (sub $100k pa) you should be veering towards a particular type of sales organisation and targets. If you are aiming for Enterprise SaaS with large ACVs ($500k+ pa) you’ll need a completely different sales organisation approach, targets, and staff.
b) Just because you want to have a ‘recurring revenue’ business model does not mean you have actually have one. If you have a recurring revenue business model make sure the sales organisation and targets reflect it. If you have a product or service that does not fit the recurring revenue business model don’t try to force it into one by giving your sales teams SaaS type sales targets.
MQL v SQL
B2B marketing and B2B sales must be considered both as closely intertwined and independent (and non-linear) for them to work optimally. There is no substitute to continuously evolving your understanding and metrics for every possible route through the client purchasing journey (your pipeline). If you focus on objective and subjective measures (including volume, velocity, value and attribution alongside capacity, capability and performance) you’ll be well on your way to understanding what it will take to scale your sales operation and your client sales in a sustainable and efficient manner.
The blind leading the…
Too often you see brilliant tech and product led founders and executives with little or no structured sales experience (or experience of building a sales organisation in a short runway, high growth start-up) designing and hiring their sales organisation with little to no expert support. The odds of getting a good outcome in this scenario are remarkably low. At best the learning curve will be longer, more frustrating, and more expensive than it needed to be.
Find people who have ‘done it before’ (ideally multiple times) to advise and support.
Hiring for culture
Yes, culture is extraordinarily important for high growth start-ups. However, if you don’t make sales, you won’t have a business. **Too many founders set enormously high or specific hurdles for ‘cultural fit’ over ‘been there, done it before, motivated to do it again’ ‘performance fit’. **Find the right balance but always remember that ‘no sales equals no business’.
Living off hope…
Assuming you’re tracking the ‘sales pipeline’ extrapolate its volume, value and velocity performance through forecasting, simulations, and wargames regularly. If the outcomes of your forecasts or simulations do not match or exceed your targets, then decide what you are going to change. Do not simply hope that the pipeline will start performing better.
Where you don’t have enough data in the pipeline consider whether the assumptions you are using are based on ‘hope’ or based on numbers achieved by similar company types at a similar company lifecycle stage. There are few things worse that looking back from a bad position to find out you are in a bad position because of hopeful assumptions that should have / could have been realistic assumptions that could have been acted on.
Scorched earth sales
Sales without sales quality = false summit / tragedy (especially for recurring revenue business models).
It’s common to over-promise to win sales, and its right to sell features and functionality that you will have by the time the sales happens rather than those you have today. However, if you incentivise and accept sales ‘at any cost’ you are likely to be storing up huge problems for your business model and reputation. Too often (especially in B2B SaaS) you see enterprise SaaS sales essentially turn into bespoke technical implementations, integrations, and builds. This erodes the ‘multi-tenant’ business model and ‘ever improving unit economics of the SaaS business model that will be hard to re-establish ahead of your next funding round. Justifying it as ‘accelerated development’ (client paid for developments that were on your roadmap anyway) will only stretch so far (not least with clients who will likely want exclusivity if they feel they have paid for the feature(s)). You are also unlikely (as a scaling start-up) have the depth of resource that a traditional systems integrator has, and you won’t be able to charge their day rates. Finally, hard to source and retain engineering staff typically want to spend their time on the ‘core technology and product’ as opposed to bespoke integrations and implementations.
Find the right balance between winning sales at any costs and proving out / protecting your business model. Monitor and measure sales quality and make sure you don’t allow sales staff to ‘over-promise’ to clients, and most of all don’t celebrate sales without checking sales quality first or you will implicitly compound and encourage the behaviour.
NPD & new segments
Gravitating to what they you know and like is not unusual. Product and tech led founders typically gravitate towards building new products and expanding into new segments at a very early stage of the company based on my observations. It’s as if they are thinking ‘the first product and segment has had a great reception – we can repeat that so let’s quickly replicate it and ‘hyperscale’ as quickly as possible before someone else copies us or takes market share we could acquire. Unfortunately, all too often while the first product and segment has had a great reception and raised funds from investors it is far from ‘proven’ or scalable. Jumping into new products and new segments before proving the first product segment exponentially increases risks and workload, especially when there is minimal adjacency between both new and existing products and segments. E.g. Enterprise SaaS product A rarely translates well into SME product B, and the sales organisation and capabilities required to sell Enterprise SaaS are fundamentally different to SME SaaS sales. What looks like seemingly rational move to take a product into a new segment in reality means running two different business models in parallel, with both businesses competing for the scarce resources of the company.
Pick the right time to go into new products and segments, recognise it creates exponentially more work rather than less work per product / segment, recognise that you will need to manage and prioritise resources and conflicts between products and segments, be honest about what synergies you expect in terms of economies of efficiency, scale, or performance, and if possible, test your assumptions before committing.