Sean Sheppard came on the show to talk about the new role of a Market maker; He talks about his thesis for investment and has some amazing advice for entrepreneurs to think about how to determine the “product market” fit;
Recording Transcript of this episode: Sean Sheppard | GrowthX:
07:13 Awesome. So let’s jump right into it. So tell us about growth hacks, how much money you make, guess how much money do you pump into other startups, don’t, don’t tell me the story.
07:23 Sure. I mean, we started about seven years ago. Bunch of entrepreneurs turned investors turn frustrated investors, because our companies weren’t succeeding and we found out why they weren’t succeeding and it had nothing to do with their products their tech
07:34 And everything to do with markets and people, and so we focused our investment on technical product focus founders.
07:43 With big market opportunities, primarily in B2B SAS that didn’t know what they didn’t know about market development. We built a accelerator program focused on taking companies.
07:52 Out of traditional accelerators, where they are focused on developing products and raising money and get them focused on developing markets and making money to invest at the seed stage typically write checks around 100 as part of a seed round and then our bespoke accelerator program takes a select few of those companies and put some market development team to work on helping those companies find product market fit, using our proprietary proprietary methodology called an XP or Mark acceleration program that I built based on my own experience as a five time founder with three exits and always being a selling founder. I like to make john on the tech founder like to make the joke. I can’t even spell HTML when it gets when do you can spend, do they are of course. Yeah. Well, said well said. I’m going to use that
08:44 Sean, how many so these hundred thousand dollar checks. How many have you written the last year. And you know what’s exciting.
08:51 Last year,
08:52 And quite. Not very many. We’re down to writing about, you know, 15 checks, a year, we started about six eight companies. Um, are our
09:02 You know, our LPS are also most we don’t do any institutional money. Our LPS are also entrepreneurs who get a problem and see the value in our approach.
09:11 Our fun matter models. A little different, as well. We get to use fund capital to help our companies grow in exchange for additional equity, so that the startups don’t have to put any cash out for those services.
09:25And but we got across two funds, we’ve got about 46 companies.
09:29 Okay. Right now.
09:32 And and the focus now again is the B2B SAS with $10 billion tams and I’m where they’ve got early customers early revenue we see a path to product market fit, we can really
09:44 Truly accelerate care. So give us give us some quick hacks and tips. Man give us. I mean, I don’t. I know I’m not paying you for your consulting time but just give us give us give our readers, at least a taste of what they can get if they were part of growth X, I guess.
09:58 Well, I think so. And actually, your readers can go to growth x.com and now they can download the content themselves directly and use it.
10:05 We’ve put all the tools and resources online for entrepreneurs and now we actually licensed other accelerators and economic development organizations and funds.
10:15 So that they can use our, our framework to help find product market fit. So there’s really three key things that we’re looking for.
10:22 Or an entrepreneur needs to be looking for when they’re ready to take a product to market. The first is, they need to be willing and open to find the truth.
10:31 About where their product might fit in the market. If it doesn’t all and what to do about it you know as well as I do 50% of successful funding companies pivot, at least once a third pivot, at least twice. I’m not a math major but more more pivot than don’t
10:45 So you need to be prepared for that. The second thing is you need to create a functional learning organization on the team that’s responsible
10:51 For pursuing that truth. And by that I mean you need to have somebody who owns market development alongside someone who owns product development. We don’t like to invest in solo founders, for that very reason.
11:03 We like teams and we like teams that have market development expertise and product development expertise so they can focus on accelerating that path to the truth and get there quickly and be open to solving real problems instead of pushing the product.
11:18 Because we have limited time, money and resources to learn. We all know that staying on the field is half the half the battle. Yeah.
11:24 And then the third is, can you find a profitable business model. And by the way, you don’t have to be profitable immediately, but if you can show a path and that path always starts with learning not learning leads to revenue and then hopefully to the right revenue.
11:38 And you start to see patterns emerge.
11:41 But hopefully with one specific use case with one specific customer profile to start. I don’t like to see him spread spread too thinly
11:50 If I could give a piece of advice to everyone. Now, after having done this myself so many times I’d spend more time with fewer customers going deeper to try and solve more valuable problems because the risk, then, is in the market side right
12:03 Not the product and it questions you have to answer once you do that is, is there a market large enough similar people with the same use case, you can solve this for and if your
12:13 Question that
12:14 Do it a question. Quick question that you when you look at investments, do you can have like segmented out
12:19 It’s like
12:19 Well, these guys are solving a very specific problem that I think is going to eat, then the second question is the Pam really one is solving the problem for a particular person for a particular persona for a particular
12:31 Kind of marketing and then
12:32 And then you do you separate those things out and say, like, are they solving the problem correctly and then maybe they have the time. Maybe they don’t have the time. That could be a separate kind of conversation or
12:41 Yeah, yeah. I mean, if you look at the reasons why most of these companies fail right according to CB Insights 70% of seed stage fund.
12:48 funded companies fail at the top 10 reasons have to do with markets and people not products in tech
12:53 We very much focus on that. So is it novel. And are you solving something that’s very unique. Are you well positioned to assume market leadership with the problem that you’re solving, and if not market leadership an exit into a market leader who needs to fill the gap so
13:12 I’ve got, I’ve got a couple quick questions for you because I really liked the way you’re talking about this job, what market development for the edification of our bootcamp folks can you distinguish between market development and marketing.
13:23 Very much so much market development is a holistic approach to finding product market fit competencies everything from sales.
13:35 Operations and what I like to call chief learning officer. Yeah. So some, some would call it one of my mentors, Mark, Leslie.
13:44 Called it the Renaissance man or the Renaissance wreck.
13:47 You, you have a mindset that embraces ambiguity you communicate well across functional teams, you’re focused on customers and their problems and translating that into real solutions that are scalable you drive the process between the customer and the product team.
14:02 In corporates, they call it a commercialization officer, but but you wear many hats and and you and you and you love the stage. It’s about stage relevance.
14:12I love it.
14:13 There’s a very big difference between do it. I call it. This is what I call it the dynamic is like this when you’re when you’re a startup. You’re a stranger, with a strange offering going to a strange place trying to talk to other strangers and asking them to do strange things with you.
14:29Which is very different dynamic than when you’re doing something in a mature market immature cup.
14:32 Sounds like dating, doesn’t it.
14:35 It’s very much like dating. It’s very much like it’s like marriage.
14:38 I mean, finding a good partner to work with, I call them joint development.
14:42 Partners. Right.
14:43 And that’s why I say you don’t sell the early customers you recruit them. Yeah, so
14:47 So you talked about. I want to tell you one thing. JOHN because, you know, I hear you and I, I do think this is a very interesting perspective. But you talk about $10 billion tans, and then you talk about very unique.
14:59 Right. And how did those things fit because, I mean, at the end of the day, there’s only n number of
15:05$10 billion 10 markets and so many things have been tried. I mean, as an example of a CAN I CHARGE both been involved in in some in some large tech companies, right.
15:15 You know, not, not one of them is that unique. I mean, some of them are dogs. Some are the dogs all have different fleas, you know, some are some are different. What
15:25 Was the Wall Street reference to Michael call but. So tell me about the stuff you just avoid that, you know, it can be unique, by definition, there’s just too much out there.
15:35 Yeah, I mean well to address your question number one. That’s why really write a few checks, a year.
15:40 There aren’t many that meet that Venn diagram.
15:44 You know, and, and the third piece of that diagram is the people you know it’s all about the team right product team marketing model and then what’s the exit strategy and if the exit strategy delivers the return, we need to deliver to our investors and then it then it fit.
16:01 So for example, I would say, Now is there anything unique about a selection science product, for example.
16:11 No there’s not. But when when the founding team is the former CEO of PeopleSoft and the former CTO of to Leo right
16:21 And that, that changes stakes absolutely right. And that’s one of our companies that technology, which we’re very proud of and they went and spent
16:29 A ton of their own money to acquire some IO data to do AI and ML to figure out a better way of attaining quota.
16:38 For enterprise sales people. Now that was their first use case. Okay. And that’s what I mean about your identified use case. And it can be applied across a different a different spectrum. But when you have that network and you have that experience in that background. That there’s something unique in that
16:53 Well, you know, there’s we have we have something you might, you might want to put a check in. There’s two two guys, they do a podcast great team and
17:03 You know, we’re ready.
17:07 So let me tell you some about podcasts right people. One of the big questions I get asked all the time. It’s like, you know, what’s
17:12 What you know what makes something unique, or when one thing that makes it unique. Or when is is capitalizing on an emerging channel.
17:19 So my one of my partners will bunker and founded what became match.com he figured out how to leverage and exploit affiliate marketing before most people in the didn’t communicate it right. As a result, with only $90,000 in investment.
17:33 He was able to crush the original match com guys who raised 12 million bucks. And then eventually acquired the brand.
17:41 Right match and changed one and only.com to match and right now podcast is one of those emerging channels like a with Joe Rogan just got licenses deal with Spotify for hundred million I hopefully about ready to put personal money into
17:55 A podcast has been around for nine years. It’s getting a million and a half downloads a month with 800,000 subscribers and all it is is is academics interviewing other academics about academic books.
18:07 Yeah, but guess what,
18:10 That’s what
18:11 It started
18:12 At nine unique channels on the deal where I mean they could they’re talking about Buddhism or they’re talking about, you know, metallurgy.
18:20 Okay, but people watch it. They listened to it and they haven’t really monetize it. And it’s exploding.
18:27 So when I my own hearts. I’m
18:29 Just not giving
18:30 Love right
18:32 Yeah, yeah, I’m coming back, going back to, like, I really like how you kind of
18:38 Have this concept of market development as opposed to calling it marketing and sales and there’s like basically chief Commercial Officer chief revenue officer is kind of the, the Eco valid.
18:47 At a the first time I’ve ever among somebody. I mean, when I when I hear chief revenue officer, I’m thinking large company at least making you know what is 510 million bucks realistically money.
18:56 One of the smaller scale you apply that same model at a very small scale and grow and starting up somebody needs to own market development, which is sales and marketing effectively brass tacks is like your own sales and marketing island product and
19:09 You know, but you have to have a, you have to have that dotted line to product because if
19:12 You’re not solving a customer’s problem with the product, you’re not going to be around very long. Got it. Otherwise, you’re a service business and that’s okay. But that’s not venture capable
19:21 Right, we know the venture model. And that’s key for that’s key for founders and startups to know I spent half my time telling companies, they have a great business model, but they’re not venture capable because they don’t meet the bottle of venture
19:32 Yeah and there’s nothing wrong with that.
19:34 And that’s what, that’s a good point. That’s a great point to talk about, like, there’s nothing wrong with that, right, like you got to figure out, like, and Romy we’ve talked about it, like, look, you know, running chatter, Fred, you know, friend, Chad running a
19:44 You know,
19:44 A $10 million consulting services business dropping 2 MILLION BUCKS TO THE BOTTOM LINE. And yeah, it’s a great business. I mean, you cannot fit that into other models right into a venture model. You don’t fit that definitely not going to fit that into the venture model.
19:58You know your ego will be probably a role, I’m
20:00 On a larger deal. Listen, I would agree. This is a great point because, I mean, the force field around kind of the whole
20:07 Venture Silicon Valley for spiel that makes everyone feel like they’ve got to comply with a very strict particular methodology or a strict way of looking at things.
20:16 Tends to I think bully people into often making the wrong decisions are under business or who they get funding from. I mean, they make you it’s a perfect example you’ve
20:26 People have come to you by 810 times and you’ve rejected them all not not sort of summarily but but just because it didn’t work for you, right. So, because
20:33 I don’t want to work for them. Maybe
20:35 That’s the reason that separation. I don’t
20:37 Think if they had any idea what working with you would like to avoid but
20:43 Never know.
20:43 Yeah, so
20:45 I went
20:45 Back I make I make a terrible employee i’d FIRE MYSELF. Yeah.
20:51 Sean, I want to come back to, like, kind of, do you have any kind of true. I mean, obviously you guys have done this product marketing kind of product development product, product, I guess.
21:00 Market development, a bunch of times. Are there, like, you know,
21:04 A couple of key kind of like hacks that you can tell us like hey look, you know, focus on SEO and just do demand gen very quickly and do sales on that SEO.
21:12 Or do you can run an ad campaign run sales on against that ad campaign or other hacks that you can tell somebody who’s listening in and saying like, okay, I’m making maybe like half a million bucks 300 grand
21:22 And and I want to kind of do some kind of like, you know, outbound can do something over here from a sales perspective, I got some random customers. Now what do I do, how do I kind of internalize that a little bit. Do you have any hacks for us.
21:34 Yeah, I mean, well, I always go back to the fundamentals of the milestone driven approach towards market development that we that we created the first thing is understanding what resources you have the extra few today, what resources.
21:45 You need today that you don’t have and what resources, you’re going to need tomorrow what the compelling events are created that need so that you create the right kind of market milestone. We all know product milestones yet, but we don’t know market milestones.
21:56 The concept of resilience, the same really
21:59 In you in. You can’t, you know, the journey of 1000 miles begins with a single step.
22:05 So start with that then get really deep into understanding who your what I call Mr. Right now customer is not your VISTA right
22:14 Which one is giving you the highest chance of winning with the least amount of effort and resources and the greatest amount of return either on learning or revenue today and hit that hammer hard
22:26 And figure I really love.
22:28 Every song. I’d really love like learning and revenue you put learning in there, not just revenue.
22:33 You put learning and whatever it is, and I know you did it very purposefully right because you are making a point that
22:39 People are blinded to, like, look, I’m gonna make this money. But, you know, you’re also saying like, look, if you can figure out you can learn something through this process invest in that model invest in that thing, right, does that that’s that will
22:51 Absolutely be alerted all not a know it all. And that learning will lead to the revenue and then hopefully as you continue as a continuous learning organization that call that a functional learning organization, this becomes your culture.
23:03 And that’s how you innovate and stay in front. I wrote an article called the lasting mover advantage.
23:09 Which is about. Don’t try to be first, but try to last.
23:12 And so what are the great companies that last do and do really, really well. Right. Google wasn’t the first search engine Facebook wasn’t the first social network Amazon was that the first e commerce company.
23:23 Netflix wasn’t the first one of the stream videos online. But what makes them unique it’s their ability to identify use case own it’s it’s create
23:33 Data from that that drives the customers thoughts and actions and now you own the use case and their behavior.
23:39 And then because you can only behavior. You can own the relationship because in today’s market people only thing that really creates differentiation and technology is bouncing ships people giving you the opportunity to continue to solve problems for them because every new set of
23:55 Solutions creates a whole new set of challenges and
23:58 Are you there with them. Are you out in front of that.
24:00 Are you a part of that process.
24:02 Are you driving their behavior and is the relationship you fell into the trust that would create it give you that opportunity time
24:09 AND TIME AGAIN.
24:10 You want to know why asap and IBM and Oracle and all those guys are on the top of the ladder because they own those relationships.
24:18 Yeah, Sean. My last question for you is,
24:22 Data versus intuition data versus wisdom when you meet these calls for these companies. How much of this is data driven and how much is just wisdom and intuition.
24:33 Well, like I say that the difference between intelligence and wisdom is this is intelligence. Plus experience is wisdom.
24:42 So having some knowledge and understanding the dynamic of what’s worked in the past and what hasn’t really being focused on the dynamic of the relationship and the humans involved our entire framework is is ha ha ha B2B or B to C.
24:54 Yes, it’s human to human and that learning framework creates an opportunity for you to do that. So it is so you let the data in with the wisdom, create the insights that drive the action.
25:08 I like it.
25:08 That’s a great, that’s a great kind of way to end the podcast. That’s great. I’m gonna slice that out and send out to everybody. So Sean. Thanks again for joining us. We keep it short and quick and we will send you a link to this right after we get a draft copy of it. Okay.
25:25 Awesome. Guys, this was a
25:26 Huge range.
25:28 Up here.
25:29 Loving it up here in Montana.
25:33 Really into sorry boys.
25:35 Thank you guys.
25:36 Thank you. All right.
25:37 Cheers. Cheers.