Personal experience: how to restart in the Silicon Valley business incubator after a failure
Inspired by the successful experience of the call-back callback system (callback order service through the company's website) in Russia, entrepreneurs Dmitry Kozhevnikov and Denis Rodionov launched a similar system, Bounce Help, in the USA. But the product refused to buy. The guys were trained in the accelerator Alchemist Accelerator in Silicon Valley, were able to change the business model and make a profit, writes Inc.
Dmitry Kozhevnikov and Denis Rodionov, before launching a common project, had time to try themselves in different businesses. Dmitriy created an online yoga school, sold Chinese gyro-scooters on the Internet and organized trips to Alaska for wealthy tourists. After the institute, Denis set up a product development company for Russian sites and was a co-owner of the travel portal. They think that all this experience has helped them bring out their service. SalesRep on the American market.
The guys met in 2015, when Dmitry Kozhevnikov, who had received an entrepreneur degree in the USA by that time, wrote in Facebookthat is looking for a programmer for your project. Denis responded to the announcement, and then entered the share as a co-owner. It was a system call-back, which allows customers to leave their phone on the site and receive a call back from the company, rather than dialing the phone itself. In Russia, the system worked, and in the States nobody used it.
The first version, developed by friends, was called Bounce Help, - Dmitry invested the accumulated $ 30 thousand into it. But the business did not go: entrepreneurs expected to earn $ 5-10 thousand per month, but did not understand who their customers were and how they would use the development.
To sell the service, Kozhevnikov hired a manager through an ad on the portal Craigslist (agreed on a salary in $ 1,5 thousand for the first time). Then a whole sales force of 20 specialists came up. Although more 200 clients installed a trial version on 30 days, almost none of them paid further. Online stores complained that there were really a lot of calls thanks to the system, but all this was not to the sales department, but complaints to the support service. It was unclear why companies pay $ 2 for dissatisfied customers. Small customers of the service had no more than 2 system calls per month. As a result, the friends fired all salespeople and began to look for customers through friends. Then they decided to go through a business incubator: there was a feeling that something was going wrong in the company and that it was necessary to pump.
Came to the accelerator: understand that the product must be changed
We chose accelerators according to recommendations of friends who had already been trained, and compared: And Combinator gives more money - $ 120 thousand, and Alchemist Accelerator - $ 60 thousand. YC takes the 7% of the company, and "Alchemist" - 5%. In Alchemist, the training is not 3 of the month, but 6. In YC, it is necessary, as in the army, to run and fuss, so it is impossible to understand the process properly and go deeper into it. Program participants in the "Alchemist" 18, and in YC - 120 on the stream. We were bribed by the “Alchemist” individual approach, and with Ravi (Stanford University professor Ravi Belani, co-founder of the accelerator) it was easier to write off. We recorded a video with a presentation for three minutes and sent it to Alchemist. A week later, a letter came with an offer to meet.
We moved to Silicon Valley, began to attend classes, establish connections and receive feedback. Now there are thousands of people in the network of 15 accelerator contacts - for example, you can directly access any partner from Sequoia Capital or CEO of a large company. And the accelerator will introduce you.
In the accelerator, we realized that in order to sell your product, you must clearly articulate what kind of customer need you are helping to solve. Now, when communicating with potential clients, the first 15-20 minutes we ask questions, what they do, what important indicators they have, and so on. It is assumed that the answers will lead them to understand that our product is important to them now.
Changed product: sales conversions increased by 500%
The problem with our first product was that we brought it from Russia. And in the US, he did not work. We had to identify a local problem: in the USA it is difficult to reach the client, even if he left the application on the company's website. Usually you get on Voice Mail, people either work, or drive a car, or are busy at the moment.
The new product was called SalesRep, and it helps to establish communication with new customers. We have done automation, and when a client picks up the phone, he hears: “So-and-so speaks to you, now we will connect you to something.” If the automat responds on the client side, then we leave a message.
People do not understand that they speak with a robot and react better to his messages, listening to them to the end. We recorded real people, added noise, so recognizing that you are not talking with a living person, but with a gun, you can only if you talk for a long time. The call center operator frees 30-40% of the time, because it does not spend on dialing, and increases its effectiveness by 30-40%. We calculated this by the example of more than 1 thousand calls.
If a person says: “You got it, do not call,” we no longer call. We ask if the customer can speak. If yes, then send to the manager, if not, then send SMS with options for time. So we do not annoy those who do not want to do business with the company and improve communication with potential customers - we seek contact.
After changing the product, we began to sell much easier. Previously, 10 started to pay one potential customer, and now at least five. ROI on our product is now near 10-x.
Showed a new product to investors: received $ 50 th.
Venture funds were interested in us with a new product, but we were not ready — even now we were not ready — for their investments, $ 1-2 million. We had bids from 50 investors, we met with 30 of them. First we need to prove that the product works in large corporations. We attracted $ 50 thousand for a small percentage (less than 1%) from one angel.
With investors, as with women: if you run after them, you are not interested in them. In "The Alchemist" teach psychology of communication with investors, explain step by step how to build relationships. The ideologist of the Internet of Things and Cloud Computing, Timati Chow, one of the mentors of the accelerator, said that it’s better for us not to meet with investors, because we need to prove our efficiency at a large company. Therefore, we say that we are not looking for money, but a partner. At the same time, everything is fine with us, right now we are at zero and we have enough time to find it.
You have to understand that for an investor in the Valley, investing in $ 50 thousand in your startup is like buying a shiny car, an expensive car. For him, the main thing is to receive positive emotions from the purchase. And the funds are invested in you, but then they ride you like on a horse. They will check everything. It's easier with angels: you need to meet a couple of times. If they ask due diligence (detailed verification of the company's activities, - Inc.), then you say to them: “We are not at that level (we don’t have a large accounting department at 1 thousand customers and a few dozen employees)”, - and you just show them your account. If they like a person and have $ 50 thousand, which they are willing to lose, then they agree to invest.
Changed sales method: increased check in 10 times
We started to take money for connection, service and for all services, without leaving a free period for customers. As a result, if we sold the previous product on average for $ 150, now the average check is $ 1,5 thousand. - $ 2 thousand. We began to sell 10 times more efficiently: the check is higher, and the time and cost are equal.
We sold our first product mainly by phone, and now with the help of email newsletters and conferences. In October, were at the 4 conferences. In March we won the qualification on Leadscon in Las Vegas, after him 20 new customers came to us.
Now we need to prove on large numbers that the product works, using the example of a large company with 100 thousand calls per day. For example, we communicate with one large financial institution. She has about 500 thousand applications for loans. And it can get a big contract.
Plans: 60 customers and $ 1 million in revenue
By the beginning of next year, we plan to enter the revenue of $ 1 million and consider offers from investors. To do this, we need to expand our sales department from 3 to 7-10 people and, due to their work, increase the number of customers to 60.
To increase revenue, we will look for clients among insurers and credit organizations - these are companies that receive thousands of applications per minute. We expect to attract them by improving the product. Now we are very seriously working on the functionality and artificial intelligence inside our system.
We are not planning to move to new markets or new segments. We need to be fixed on the current one.
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