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5 Questions VCs Should Ask Entrepreneurs About Inbound Marketing

By John McTigueFeb 5, 2015

questions-vcs-should-ask-about-inbound

If you follow TechCrunch like I do, you get the impression thousands of SaaS startups are getting funded every day. There is so much buzz around the software/app industry in particular, it makes you want to keep your Beats Headphones on loud to drown out the noise. The truth is 99.5 percent of startups don't get funded, and VCs have gotten pickier in recent years. Post-startup companies do a little better, but the average age of a company at VC funding is 4 years. VCs do a lot more due diligence these days, and they scrutinize everything from your balance sheet to your PTO policy.

If you're a venture capitalist, I'm not telling you something you don't already know, but how do you decide which companies to invest in? What questions are you asking to evaluate fledgling companies?

In a recent post, Arianne Cohen explores some of the most asked questions.

Dan Borok, from Millennium Technology Value Partners, says "...Research, research, research. We conduct many months of primary research to identify where value will be created and which companies are best positioned to benefit."

David Cremin, from DFJ Frontier looks for something else. "I fund a startup when I see the kind of passion from its founders that enables forward momentum."

Alison Wagonfeld, from Emergence Capital Partners, looks inward. "I ask myself, ‘How will I feel in a year if I pass on this opportunity?'"

These are all important factors in pre-funding evaluation, but are these VCs asking the nuts-and-bolts questions that go to the viability of a company and its products? Here are five questions I would ask.

What's Your Marketing Plan?

First, do you have a strong product/market fit? It's not enough to have a great product. What's really important is the value perceived by your customers. Why do they want your product? Is it a must-have or merely a gimmic? Show me your plan for identifying likely buyers and how to get their attention, attract them to your website and sign up for a free trial.

You must create demand for your product, and that's done with marketing. The problem is, if you simply "spray and pray" advertising over every imaginable channel, your likelihood of creating demand is low. A much more effective marketing strategy is inbound marketing.

A combination of buyer discovery (interviews, surveys, etc.), content creation and distribution, social media promotion and sharing, and search engine optimization, inbound marketing seeks to earn the interest and sustained attention of likely buyers with blog posts, videos, photos and social media updates that appeal to them and prompt them to share your content with their friends and co-workers. Content gets distributed via your website, email, social networks, content networks and by word of mouth (a.k.a texting). Unlike a one-off advertisement, inbound marketing content persists and grows over time, which greatly increases the likelihood of your brand being found online. It's also the key to high visibility in the search engines these days.

During the buyer discovery process, you get to know your most likely buyers and build up "buyer personas" that become the focus of your content strategy and targeted campaigns. The key to inbound marketing is giving your buyers what they want, not asking directly for a sale. Supplying them with valuable information and, at the same time, introducing them to your people allows potential buyers to get to know you and build a relationship they can trust. The goal of inbound marketing isn't simply to convert visitors into customers. The real value comes in increasing customer lifetime value over time supported by product enhancements and great communication.

What's Your Business Development Plan?

Once you get people interested enough to sign up for a free trial or demonstration, the battle is only one third over. Your challenge now is to convert them into paying customers. In the past, this was always done by your Sales Team. They would call leads, qualify them and attempt to close the sale.

Today, however, approximately 90 percent of a purchase decision is made prior to the first sales call. Potential buyers are doing their homework online, comparing products, seeking reviews and asking their cohorts for advice in online forums, social networks and chat sessions. This means Sales and Marketing must work closely together, aligning their messages and focusing on helping buyers rather than trying to persuade them. The entire lead lifecycle, from first visit to purchase, must be carefully monitored and optimized with the right message at the right time. Your plan should provide details for all of these necessary steps.

How Will You Retain Customers?

The final leg in the buyer journey should be an endless one. You want to keep your customers and increase LTV over time, not only with retention, but also by upselling them and expanding account licenses. Smart companies align Sales, Marketing and Customer Service to make sure customers get all of the information they need to be successful and are never frustrated in getting the answers they need. This part of the journey starts with the first visit, ensuring your website and customer service channels are easy to use, responsive and always available. The best companies mix both online support content with live training and user events to keep customers engaged and using your product to its utmost potential. What's in your Customer Service Plan?

How Will You Annihilate the Competition?

There are few truly original ideas and widgets out there these days, so you'd better be prepared to face some stiff competition. What is your unique value proposition? What are your specific differentiators, and how can you prove them? Do you have case studies and video testimonials that genuinely show your leadership in your space? Are your real leaders known, and are they active in social media and the blogosphere? What are you doing to show how your company—and its valuable employees—is the best solution for the challenges your buyers have now and in the future? If you can't answer these questions, there's a long and painful road ahead.

How Will You Measure Success?

Assuming you have a detailed and achievable Sales, Marketing and Support Plan, and you have figured out how to forge ahead of the competition, how will you know when you have arrived at the goal line? Well, one obvious answer is Sales. How much revenue has executing your Plan brought in month-over-month and year-over-year? But those metrics look backward. How can you predict and plan ahead for future success?

This is done with sales and marketing technology platforms that measure every interaction between visitors, leads and customers with your website, content and people and set up automated processes to engage your buyers and notify your Sales and Support Teams. But that's not enough. You must set long-term goals and benchmarks in order to evaluate progress and make the necessary adjustments to continuously improve. Got a Plan for that?

I think it's a great idea to get to know your prospective funding partners well before you even talk about next steps. During that time you want to understand everything about the people, the product and the market. But there are certain basic questions that need to be answered in detail if you expect to see a pot of gold at the end of the rainbow. Without a solid Sales-Marketing-Support Plan in place, you're depending on a friendly Leprechaun to show up.

 

Additional Topics: Tech Marketing
The Author

John McTigue

With over 30 years of business and marketing experience, John loves to blog about ideas and trends that challenge inbound marketers and sales and marketing executives. John has a unique way of blending truth with sarcasm and passion with wit. You can connect with John via LinkedIn, Twitter and Google Plus.
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