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New Zealand-based cloud software specialist Xero gets a sideways glance from some industry commentators because the company burns cash.
Apimize co-founder Ed Robinson says selling in a large market like the United States is not like selling in New Zealand. Sales people in Australia and New Zealand are generalists because our markets are small.
In the US, salespeople specialise. They work narrow niches. A sales person there might only deal with, say, network security software for large financial services companies.
It’s a graphic illustration of the scale required. On the other hand, the scale of the opportunity is also huge. Robinson has been there. After building scale and selling to Silicon Valley, his Wellington-based business was snapped up by Riverbed for US$30 million in 2011.
Robinson relocated to California. This week he was back in New Zealand to share the lessons he learned at the IITP 2013 Conference in Tauranga.
Sales are key
Sales are key to going global. It sounds obvious, but Robinson says things only took off when he moved from a technical role into sales. He says a company should aim to invest in the time taken to learn how to achieve repeatable sales while finding the first 100 customers. This process should take about six months. Once you’ve found 100 customers you can move to scale your business.
His advice is to start by identifying a single customer vertical market where customers face the same problem. Preferably you should target enterprise customers – that’s where there’s money although it can be difficult getting through their formal processes to the point where you get paid.
You should be able to respond to all customers with the same value proposition and deliver the same solution. Once you’ve settled on the right formula you can start repeating the sale as if you are following a script.
Fixing on a price strategy
Finding a price strategy is important. Robinson says there are six possibilities. Traditionally packaged software has been the most popular. The pay per use model works well if you’re selling content. He says you need to charge the same as others in the market if you take this approach.
Subscription software is replacing packaged software. The good side of the model is that you get recurring, predictable revenue and you start each month with as much revenue as the one before. Customers expect to pay relatively small amounts, go past $10 a month and consumers will resist. Enterprise customers are OK with subscriptions but prefer to pay annually – mainly because they face relatively high costs when making payments.
There’s no much control with the advertising model because it puts you at the mercy of the companies selling the ads. If Google changes its rates for Adwords, your income will change. With Freemium you should expect about one percent of users to pay for your product.
Offering a free product is only a temporary strategy and it requires deep pockets.
The trouble with marketplaces
Robinson says he is wary of marketplaces – like the Apple App Store or Google Play. He says they mainly exist for the benefit of the parent product. The companies running them need them to build their own momentum.
He has praise for the Kiwi Landing Pad in San Francisco and says many of the New Zealanders in the US are only too happy to help others succeed. Connections like this are important in the US, especially in Silicon Valley where success often depends on making contact with the right people