Startups often get quizzed by potential investors about the selling process – questions like – “Who is the decision maker for your products”, “How do you locate them?”, “What is the length of the sales cycle” “Where do you get your leads and how much does each lead cost” and so on.
While this might appear as being a bit too onerous, there is a sound (at least from an investor standpoint) reason for doing this. The investor is trying to determine if the startup has mastered the art and science of making a sales deal, and has the organizational structure and discipline to replicate this model to thousands of such deals. In other words, they have a proven repeatable sales cycle.
Having a repeatable sales model is one good indicator of startup maturity because it often implies that they have gotten some key data points right. These startups can exude more confidence about their predictability of their business model – as an investors it’s really encouraging to hear something like this:
“We sell to VP of Marketing at SMEs globally. We attract them through Google Adwords with an effective CPL of $100. A typical sales cycle is 3 months and we compete against Company A and B in 90% of the deals. We beat A on price and B on easier customization of features and integrations with existing systems. Lifetime value of customer is $600”
It’s encouraging because it’s easier to see how a startup like this would ingest a funding round to get a predictable number of leads, and by extension customers. While not perfect, having a repeatable sales model is far better than building a product that is searching for a market, of having to navigate org structures to locate decision makers, of having revenue lumped at different times in the year, and other uncertainties.