GrowthX - Product Market Fit - The new role of a Market Maker

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:

  • Vivek Bhaskaran 07:13Awesome. 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.

  • Sean Sheppard 07:23Sure. 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

  • 07:34And everything to do with markets and people, and so we focused our investment on technical product focus founders.

  • 07:43With 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.

  • 07:52Out of traditional accelerators, where they are focused on developing products and raising money and get them focused on developing markets and making money.

  • 08:03To 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.

  • 08:14And 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

  • 08:25based 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

  • 08:35It gets when do you can spend, do they are of

  • 08:38Course. Yeah. Well, said well said. I'm going to use that

  • Romi Mahajan 08:44Sean, how many so these hundred thousand dollar checks. How many have you written the last year. And you know what's exciting.

  • 08:51Last year,

  • Sean Sheppard 08:52And 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

  • 09:02You 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.

  • 09:11Our 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

  • 09:26Across two funds, we've got

  • 09:28About 46 companies.

  • Romi Mahajan 09:29Okay.

  • 09:30Right now.

  • Sean Sheppard 09:32And 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

  • Vivek Bhaskaran 09:44Truly 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.

  • Sean Sheppard 09:58Well, 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.

  • 10:05We've put all the tools and resources online for entrepreneurs and now we actually licensed other accelerators and economic development organizations and funds.

  • 10:15So 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.

  • 10:22Or 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.

  • 10:31About 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

  • 10:45So 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

  • 10:51For 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.

  • 11:03We 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.

  • 11:18Because we have limited time, money and resources to learn. We all know that staying on the field is half the half the battle. Yeah.

  • 11:24And 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.

  • 11:38And you

  • 11:39Start to see patterns emerge.

  • 11:41But hopefully with one specific use case with one specific customer profile to start. I don't like to see him spread spread too thinly

  • 11:50If 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

  • 12:02The market side right

  • 12:03Not 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

  • Vivek Bhaskaran 12:13Question that

  • 12:14Do do it a question. Quick question that you when you look at investments, do you can have like segmented out

  • Romi Mahajan 12:19It's like

  • Vivek Bhaskaran 12:19Well, 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

  • Sean Sheppard 12:31Kind of marketing and then

  • Vivek Bhaskaran 12:32And 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

  • Sean Sheppard 12:41Yeah, 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.

  • 12:48funded companies fail at the top 10 reasons have to do with markets and people not products in tech

  • 12:53We 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

  • Romi Mahajan 13:12I'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.

  • Sean Sheppard 13:23Very much so much market development is a holistic approach to finding product market fit competencies everything from sales.

  • 13:33Marketing

  • 13:35Operations and what I like to call chief learning officer. Yeah. So some, some would call it one of my mentors, Mark, Leslie.

  • 13:44Called it the Renaissance man or the Renaissance wreck.

  • 13:47You, 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.

  • 14:02In 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.

  • Romi Mahajan 14:12I love it.

  • Sean Sheppard 14:13There'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.

  • Romi Mahajan 14:28Yeah.

  • Sean Sheppard 14:29Which is very different dynamic than when you're doing something in a

  • 14:31mature market immature cup.

  • Romi Mahajan 14:32Sounds like dating, doesn't it.

  • Sean Sheppard 14:35It's very much like dating. It's very much like it's like marriage.

  • 14:38I mean, finding a good partner to work with, I call them joint development.

  • 14:42Partners. Right.

  • 14:43And that's why I say you don't sell the early customers you recruit them. Yeah, so

  • Romi Mahajan 14:47So 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.

  • 14:59Right. 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.

  • 15:15You 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

  • 15:25Was 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.

  • Sean Sheppard 15:35Yeah, I mean well to address your question number one. That's why really write a few checks, a year.

  • Romi Mahajan 15:40Yeah.

  • Sean Sheppard 15:40There aren't many that meet that Venn diagram.

  • 15:44You 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.

  • 16:01So for example, I would say, Now is there anything unique about

  • 16:06A selection science product, for example.

  • 16:11No there's not. But when when the founding team is the former CEO of PeopleSoft and the former CTO of to Leo right

  • 16:21And 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

  • 16:29A ton of their own money to acquire some IO data to do AI and ML to figure out a better way of attaining quota.

  • 16:38For 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.

  • 16:50That there's something unique in that

  • Romi Mahajan 16:53Well, 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

  • 17:03You know, we're ready.

  • 17:04Anytime.

  • Sean Sheppard 17:07So 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

  • 17:12What you know what makes something unique, or when one thing that makes it unique. Or when is is capitalizing on an emerging channel.

  • 17:19So 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.

  • 17:33He was able to crush the original match com guys who raised 12 million bucks. And then eventually acquired the brand.

  • 17:41Right 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

  • 17:55A 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.

  • 18:07Yeah, but guess what,

  • Romi Mahajan 18:10That's what

  • Vivek Bhaskaran 18:11It started

  • Sean Sheppard 18:12At nine unique channels on the deal where I mean they could they're talking about Buddhism or they're talking about, you know, metallurgy.

  • 18:20Okay, but people watch it. They listened to it and they haven't really monetize it. And it's exploding.

  • Romi Mahajan 18:27So when I my own hearts. I'm

  • 18:29Just not giving

  • 18:30Love right

  • Vivek Bhaskaran 18:32Yeah, yeah, I'm coming back, going back to, like, I really like how you kind of

  • 18:38Have 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.

  • 18:47At 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.

  • 18:56One 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

  • Sean Sheppard 19:09You know, but you have to have a, you have to have that dotted line to product because if

  • 19:12You'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

  • 19:21Right, 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

  • 19:32Yeah and there's nothing wrong with that.

  • Vivek Bhaskaran 19:34And 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

  • 19:44You know,

  • 19:44A $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

  • Romi Mahajan 20:00On a

  • 20:00On a larger deal. Listen, I would agree. This is a great point because, I mean, the force field around kind of the whole

  • 20:07Venture 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.

  • 20:16Tends 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

  • 20:26People 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

  • Vivek Bhaskaran 20:33I don't want to work for them. Maybe

  • Romi Mahajan 20:35That's the reason that separation. I don't

  • 20:37Think if they had any idea what working with you would like to avoid but

  • 20:41Probably

  • Romi Mahajan 20:43Never know.

  • 20:43Yeah, so

  • Vivek Bhaskaran 20:45I went

  • Sean Sheppard 20:45Back I make I make a terrible employee i'd FIRE MYSELF. Yeah.

  • Vivek Bhaskaran 20:51Sean, 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.

  • 21:00Market development, a bunch of times. Are there, like, you know,

  • 21:04A 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.

  • 21:12Or 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

  • 21:22And 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.

  • Sean Sheppard 21:34Yeah, 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.

  • 21:45You 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.

  • Romi Mahajan 21:56The concept of resilience, the

  • 21:57Same really

  • Sean Sheppard 21:59In you in. You can't, you know, the journey of 1000 miles begins with a single step.

  • 22:05So start with that then get really deep into understanding who your what I call Mr. Right now customer is not your VISTA right

  • 22:14Which 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

  • Vivek Bhaskaran 22:26And figure I really love.

  • 22:28Every song. I'd really love like learning and revenue you put learning in there, not just revenue.

  • 22:33You put learning and whatever it is, and I know you did it very purposefully right because you are making a point that

  • 22:39People 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

  • Sean Sheppard 22:51Absolutely 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.

  • 23:03And that's how you innovate and stay in front. I wrote an article called the lasting mover advantage.

  • 23:09Which is about. Don't try to be first, but try to last.

  • 23:12And 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.

  • 23:23Netflix 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

  • 23:33Data from that that drives the customers thoughts and actions and now you own the use case and their behavior.

  • 23:39And 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

  • Romi Mahajan 23:55Solutions creates a whole new set of challenges and

  • Sean Sheppard 23:58Are you there with them. Are you out in front of that.

  • 24:00Are you a part of that process.

  • 24:02Are you driving their behavior and is the relationship you fell into the trust that would create it give you that opportunity time

  • 24:09AND TIME AGAIN.

  • 24:10You 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.

  • Romi Mahajan 24:18Yeah, Sean. My last question for you is,

  • 24:22Data 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.

  • Sean Sheppard 24:33Well, like I say that the difference between intelligence and wisdom is this is intelligence. Plus experience is wisdom.

  • 24:42So 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.

  • 24:54Yes, 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.

  • Romi Mahajan 25:08I like it.

  • Vivek Bhaskaran 25:08That'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.

  • Sean Sheppard 25:25Awesome. Guys, this was a

  • Romi Mahajan 25:26Huge range.

  • Sean Sheppard 25:28Up here.

  • 25:29Loving it up here in Montana.

  • 25:31Sorry.

  • Romi Mahajan 25:33Sean

  • Sean Sheppard 25:33Really into sorry boys.

  • Vivek Bhaskaran 25:35Thank you guys.

  • Romi Mahajan 25:36Thank you. All right.

  • Vivek Bhaskaran 25:37Cheers. Cheers.


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