Cold Outbound is Under-Appreciated

Lenny Rachitsky’s newsletter is a must read for startup founders, operators and investors with his most recent 7 part series on how to kickstart and scale a B2B business being the latest testament of that.

Amongst others, part IV covers a topic that comes up a lot in my conversations with our (pre-seed) founders is:

‍How to win your first 10 B2B customers.

The #1 way startups get their first 10 customers is via reaching out to their friends and former colleagues (i.e. network) according to Lenny’s research for the series.

That’s how most founders I work with look to get their first few customers too.

While it may work well for some, it leads many others down the wrong path with lots of time and money wasted along the way.

That’s why I’m a strong proponent of doing what is the 2nd most common approach to get to the first 10 B2B customers in parallel from the start: Establishing customer relationships via could outbound outreach.

David Hsu, Founder and CEO of Retool summarizes my thinking well in Lenny’s newsletter:

“We realized when you sell to YC batch-mates, or people that you have some relationship with, it’s very easy to delude yourself into thinking that you have product-market fit, because everyone is always kind of interested. It’s like, ‘Oh yeah, that sounds cool. Let me try it out.’ But no one is actually willing to put money down.

I’ve seen this happen too many times:

Many young startups use their existing networks / relationships to get in touch with potential early customers without thoroughly vetting / challenging whether the problem they think they’re solving is large and urgent at the potential customer, whether these individuals are even the right customer / ICP and / or even have the budget to purchase a solution like the one the startup aims to sell.

As humans, we don’t like to say “no”. Especially if we have a connection to the other person. That’s why many friends and former colleagues will work with you, test your solution and even provide feedback.

However, few will end up paying for your solution thus often wasting your time. On top, as they are often not the right customer for your solution, their feedback may also lead you down a costly and time consuming wrong path.

Why do many founders fall into this trap?

Because early startups are desperate for customers, it’s often easier to talk to people we already share a history with and putting yourself out there / selling is hard as it comes with a lot of rejections / “no’s”. Especially if you’re doing something novel and haven’t really nailed your value proposition or ICP yet.

Thus, approaching initial sales via your network seem like the most straightforward path with the least amount rejections. Especially if you already have large networks in an industry.

In Lenny’s newsletter, David then goes on as following:

So I realized the best signal of this being real is to do cold outbound sales. It’s just much purer, basically: just pure outbound with your pitch and the value prop, with no other incentives attached. So at Retool, we started doing sales early on. You cannot fool yourself and be deceived anymore. You can get an accurate grasp of reality. That’s actually how we landed DoorDash, as customer number five.”

I couldn’t have said it better myself.

Outbound sales forces you to be much more thoughtful about your ICP, iterate on your messaging, provides a great feedback loop, is a muscle you will have to develop sooner or later anyways, and much more.

Or as David put it: It’s just much purer, basically: just pure outbound with your pitch and the value prop, with no other incentives attached.

All that said, I’m not advocating for not going through your network to get to customers at all.

Rather, the two main messages I’m trying to get across when I talking to our founders about this topic are:

1. When going through your network, be cautious in terms of how you interpret signals / be really thoughtful re who is and is not the right customer for you. Positive responses often won’t lead to a sale. As much as you’d like to believe it.
2. Supplement network driven sales with outbound sales from the start as it will - on top of the benefits stated above - provide many valuable learnings applicable to network driven sales too. As hard and frustrating as it is - it will eventually pay off many times over. And when starting with outbound sales, make sure to set clear goals around consistency, regularly review your learnings and test / iterate a lot.

How to best go about cold outbound outreach is the topic for another post.

Cheers,

Pascal

‍