Classically, I've put two folks on new sales initiatives whenever possible. As a sales leader and executive I wanted to be able to test strategies, tactics and messaging, understanding when something might have been a flawed approach versus poor execution.
A friend of mine recently told me I was wrong and that I should have applied the Rule of Three. Why should you staff three people on a new sales project?
This friend, who has built a company of 500+ sellers generating $100M+ in revenue (and has also launched and sold two other startups), clearly knows his stuff. His concept of the Rule of Three is pretty simple but profound (like all great tips are):
Three sellers avoids "groupthink" and let's you best test a new initiative.
What do we mean by this? Well, two folks working together, in my friend's experience, often leads one strong willed person to influence the other more malleable seller. Two people end up operating much more like one, limiting true comparative testing.
When you have three sellers, ideally with very different backgrounds and experiences, it's harder for groupthink to develop. If two people go down a path that doesn't seem to make sense, the third will often push back and take a different approach.
So, while two sellers are better than one to test a market, I'd encourage you to apply the Rule of Three whenever you can to new sales initiatives. Of course, startups often have limited budgets and need to sell with the CEO and any/all other hands before hiring a first seller to begin. Accordingly, this model isn't always possible in all situations. But if you can afford it, I'd say go for it!
Joust is an addictive and innovative social competition platform. Embedded into sites like ESPN's X Games, and offered via a standalone digital experience, Joust connects users with content and their friends through fun challenges, contests, polls, surveys, predictions and competitions about virtually anything.
For example, checkout the Winter X Games on-air video highlight reel. Very cool to hear athletes and ESPN personalities getting in to Joust.
We're proud and honored to have made an investment in Joust. A key aspect of our investment thesis is the Joust team, including revenue & market guru Amos Schwartzfarb (BlackLocus, Business.com, Yahoo!, etc.) and established entrepreneur Tim Gray (IdeaLab, WeddingChannel, etc.).
Amos, Tim and their organization are smart, experienced, and dialed-in. They think really big, plus they are pragmatic, understanding key levers to utilize at different growth stages. And they're good guys who are a ton of fun to work with to boot.
Further, based on growth trajectories that we've seen at companies like Pluck and CoveritLive, we're believers in the power of embedded, branded media experiences and the acceleration potential of social, especially in high-passion segments like sports.
While there are many ways for folks to challenge one another and/or participate more closely in events that they care about, we think that Joust has breakout potential. Thanks to Tim, Amos and the team for the opportunity to offer a small bit of capital and relational fuel to Joust!
We all love shoot-the-moon and swing-for-the-fences strategic moves in technology. But as emerging companies are pursuing early inorganic growth initiatives, we often advise them to think small to begin. Why should an emerging company pursue small acquisitions?
Capital is Expensive: for privately held firms, acquisitions are often heavily skewed to cash. Until public markets provide transparent valuations on equity, cash-centric deals are often required buy attractive targets. And cash is dear in a new and rapidly growing enterprise!
Risks are Lower: integrating a 5-10 person team is a very different exercise than integrating a 50-100 person organization. Fewer moving parts and the opportunity to build on a small, focused crew improves chances for increasing, rather than declining, momentum.
Returns Can Be Attractive: a mid-seven figure or low eight figure deal can offer dramatic returns based on revenue and/or EBITDA multiples in relatively short periods of time. While larger deals can look good on the income statement out of the gate, they often don't provide comparable paybacks.
For example, while we made several solid acquisitions at Demand Media under Shawn Colo's M&A leadership, many of us are quite proud of our CoveritLive deal. There, we first invested in CoveritLive while they were pre-revenue and early in market. This investment gave us an opportunity to get to know the team, better understand their product, and help them begin to monetize.
A year in, we bought the company at a reasonable multiple that enabled a positive outcome for the founding team and their investors. Further, Demand Media -- as a much larger company -- was able to accelerate explosive, and profitable, revenue growth while retaining the core people and customers that made the company great.
As you're pondering impact-deals for your emerging software company, don't miss out on thinking small, especially in the beginning.
Our blog covers topics that impact personal evolution, leadership development, well-being, and company growth.
Steve Semelsberger is the Founder of Alder Growth Partners.