Welcome to Episode 7 of the Sales Influencer Series. Ambition COO Brian Trautschold hosts Jon Bradford, who brings decades of venture capital experience and a European flavor to this episode. Jon is a startup and venture capital lifer who's logged over 2 decades of experience working with startups in leadership roles at VC firms, accelerators and as an entrepreneur himself. He's also given some great interviews that demystify the process of getting into an accelerator.
Jon joins us today to discuss several major topics in the world of SaaS and startups, including the importance of geography and the most pivotal keys to making the leap from seed round to Series A. Special thanks to Jon for appearing. Check out the transcript of his interview with Ambition COO Brian Trautschold below.
Ep 7: Major Trends in Startups and SaaS
Brian: You're an investor and a mentor to hundreds of startups.
Jon: I have technically invested in over 500 businesses in the last 5 years.
Brian: That's amazing. What are your thoughts on the current startup environment today?
Jon: I actually think it's too easy (laughs).
So I think there's a grumpy part of me which is sometimes startups who have not seen what the environment looked like three or four years ago, don't appreciate how easy it is to raise money, and I think ... I think when you know hard it is to raise money, or have an appreciation of how hard it is to raise money, I think you spend it much more sensibly.
I think you just become more conscious ... when more money becomes available and it becomes easier, I think one loses a discipline. So I think ... I tend to be the grumpy old man in the room when I'm mentoring people, and a lot of it's to do with that part which is having an appreciation of what money and money's worth, if that makes sense.
Brian: Yeah, I couldn't agree more.
Jon: And the closer to the West Coast you become ... I think, the more that becomes a bigger problem.
BrIan: That was my next question, do you think there's a geographical philosophy ... like, philosophy change from whether it's East Coast, San Francisco Bay area, LA, London, other cities? Do you think that maybe lack of frugality or inherent willingness to spend money faster or maybe less frugally changes from ecosystem to ecosystem?
Jon: Yeah, I think it used to be easy ... I used to talk about it as West Coast, there was San Francisco, there's New York, there was London, to make life easier, and I used to always say that what was happening in the Valley would happen in New York 18 months later, would happen in London 18 months later, there is a delay and marketing kind of flows in the same way.
So if you want to know what the New York market should look like, it probably will what the Bay Area was 18 months earlier, the time frames are collapsing quickly. The other weird one, I don't know if it's a real thing, have you ever heard of the McDonald Index?
Brian: Yes, yep.
Jon: That is you go around the world to figure out how much a McDonald's burger is compared to the rest of the global population. I think one of the things which I think is very distracting, particularly when a startup is not in the Valley -- is the value of a million dollars in the Valley is very different from a million dollars in Chattanooga, from New York to London, wherever.
I think sometimes people get caught up in the glitz of "We just raised a million dollars!", yeah, but that's about true to four engineers in the valley, yeah. How long is that going to last you? But headlines are driven by the media, the media is very West Coast centric so it all becomes a little bit, there's the...it tends to come a little bit insular, which I think people...I think people should be much more conscious of.
Brian: Yeah, I mean I see this same thing all the time. I mean, you're here. In Chattanooga, there are start-ups that have raised a lot of money from other markets -- and a weird thing that we'll hear sometimes is, "You're not hiring fast enough."
And to be outside of that mindset of, specifically, the Bay Area, people looked at us and they're like "You guys are going too slow." Based on the metric of how many people we have on our team, which to us felt really weird versus other things to measure us by.
Jon: Yeah, I think the trends I see is I think enterprise is a hugely interesting space.
I think ... there's a wonderful story, I don't know if you've ever heard this, and I tell this to a few people, but in fact if you imagine the Internet is same as a child, you'll appreciate this going forward.
So it was born in 1991, from 1991 to 2000 it learns to stand-up and then fall down, it thinks it is bigger than it really is, no you're not type of ... it's kind of ... there's a bit of a growing up and it's just learning to control yourself ...
Jon: ...and so 2000 will be a child which is about nine years old which is at the point where they think they can do everything but they really can't.
Then you have 2000 to 2010, which I describe as the teenage years, yeah, it's all about me, me me me, very B2C, it's all about... getting everything for free.
And then we're just about 2015, the 2010 to 2020 period I talk about, you're leaving college and you're starting a job ... the Internet is now moving toward a B2B, this stuff is real, you have to pay for it, it's actually part of your living, it's part of your business.
Interestingly, I also think like B2B is actually reflecting on what happened in B2C over the last 10 years. So philosophically, design elements are being coming from B2C, but it's all real business that pays real money for real product. And enterprise is coming along the line, but it's taken 20 years of Internet to get to that point. And it's boring until they decided that Slack was the most interesting business in the world.
Brian: Now it's the best thing you can do, as long as you grow some crazy amount of thousand percent month to month…
Jon: Yeah, but there's a part of me that I see a lot of enterprise businesses which are growing...they're growing at 15% month by month, they got good strong MRR, they are businesses that could be a hundred million dollar revenue business over time.
But it's slow, and it's boring. I remember Travis showing the Ambition deck to somebody and he says "This deck's amazing." And Travis said, "Why is that?" And the VC replied, "I don't recognize any of the customers, this is real business." If the bubble bursts and the world ends tomorrow, Ambition won’t.
Brian: No, our customers would be completely unaffected by the ... VC bubble or funding bubble, whatever you want to call it. I agree.
Jon: Four of our programs are international, and the number of programs that we run with corporates are growing quickly, so I wouldn’t be surprised to see us getting increasingly more international and working with amazing corporates ... there are certain verticals that we get really excited about and they're real businesses. So if you went forward a few years from now, it wouldn't be surprised me if we were twice as big as we are today.
Brian: Wow. That’s huge.
Jon: We've added other bits, and that's not to say that the Valley isn't as important as it was, but we strongly believe -- and I actually strongly believe this as well -- the value of the network now is critical to your business.
Sometimes the value of the network has to be relying on San Francisco, yep, and that could be to do with investors. That could be to do with many different things, but there are many other businesses that actually don't require access to that part of the network, also imagine that actually half of those are not going to be in the US.
That also demonstrates that you can start a business anywhere … if you think of every geographical location as a node, today the Valley is a super node, yeah? Chattanooga is a smaller note, New York's a bigger node.
And what I see happening is, I think -- it used to be the single biggest ecosystem in the country was the Valley, and then...
Brian: The user-based network or a different network of customers.
Jon: Yeah ... entrepreneurship is a global phenomenon, your network is lighting up all over the world, they are much small dots, they're not big, but the combination of all of these things happening basically means you suddenly will look at a map and go ... used to be just this one dot on one side of the West Coast and a little dot on the East Coast.
The whole world is now lighting up with stuff, and everybody deserves and should be connected to other parts of the system, they need to make themselves an attractive node on that network alongside other Tier-one locations and that takes energy and effort but it can be done.
And actually the other argument you have is -- you know we talk about doing a start-up, now it takes less money to do it faster. There is a line I like to use which is actually starting an ecosystem now it takes less time with less money.
Think of a startup as a micro unit and an ecosystem as a macro unit, that doesn't mean the valley is not getting bigger faster as well, but it has constraints and it's cost is actually going to start becoming very prohibitive, like physical space is also going to yet become prohibitive so we live like this digital world, we live ... the businesses where our people businesses and that actually will create real issues in the valley in the longer term.
Brian: Let's talk specifically seed-stage companies, accelerator or no accelerator, what do they need to be doing in your opinion to make the leap to a Series A or to a VC large-scale investment fundable company?
Jon: I think there are two parts, I think that the first thing I find is a lack of real insight or thought around customer development. I've just finished my selection process yesterday and with one of the teams, we said said "Look,this guy hasn't got any product, he hasn't got a team..." but you know what, he's gone out and he's actually pre-sold the first six clients, done everything we've asked people to do, he just hasn't had time to build a team, he hasn't had time to build a product, we actually got a list of people who want this thing that he described to them …
I think that proving the voices in your head are actually real ... and actually turning it into a real valuable product, and actually a product that customers want. I actually think the biggest challenge is actually not...there's challenge raising the money but there's actually a bigger challenge well actually after you've raised the money of how to use.
Brian: Yeah, efficiently and maximize it.
Jon: Correct, because the money that you save, you are frugal and you're kind of scrappy and then one day somebody dropped 10 times more money and you're over-step and you go "Oh! Christmas!"
Brian: You win the lottery and you go buy every stupid thing you could, right?
Jon: And so ... actually, I think one of the biggest inherent challenges that really good entrepreneurs actually face is -- how do you cope with more money in a good and meaningful value-added way when you're used to seeing so many teams blowing up after a series A because they just go crazy and insane.
Or actually they hire lots of people, there's no...there's no discipline and it's a complete different skill set, I call it the "start-ups, grow-ups and finish-ups", so they start as a start up, they end up as a grow-up, but this is a real business guys; and then at the end, how do we actually make money for people?
How do we maximize the value? The 'Finish up' skill sets. And the skill sets that you need as a start-up are different from those you need as a grow-up, and very different from those you need as a finish up.
The Sales Influencer Series Library
To check out further episodes and see why CloserIQ has ranked the Sales Influencer Series as one of the very best sales podcasts of 2016, just click on the links below.
Episode 1. John Barrows
Episode 2. Lori Richardson
Episode 3. Max Altschuler
Episode 4. Matt Heinz
Episode 5. Mark Leslie
Episode 6. Kyle Porter
Episode 7. Jon Bradford
Episode 8. Eks Anderson
Episode 9. Matt Hottle
Episode 10. Heather Morgan
Episode 11. Ilan Ferdman
Episode 12. Ryan Jenkins
Episode 13. Tamara Schenk
Episode 14. Mike Weinberg
Episode 15. Scott Britton
Episode 16. Mark Kosoglow
Episode 17. Dionne Mischler
Episode 18. Ken Barton
Episode 19. Kevin Karner
Episode 20. Jill Rowley
Episode 21. Brandon Redlinger
Episode 22. Will Wickey
Episode 23. Drew Woodcock
Episode 24. Dail Wilson
Episode 25. Nathan Sexton
Episode 26. Tucker Max
Episode 27. Bruce Tulgan
Episode 28. Dallas Hogensen
Episode 29. Morgan J. Ingram