Selling to startups in a post-ZIRP economy

Background

Up until mid-2022, most startups were operating under some basic principles based on the economic conditions of the previous fifteen years of ZIRP (Zero Interest Rate Policy).

These were basically:

• Interest rates are low
• VC market is hot
• Grow at all costs because you can always raise again

The amount of capital you were burning didn't really matter, because as long as you were growing and/or could generate enough excitement you could raise follow-on capital.

This all changed in 2022.

Covid, the Ukraine war, inflation and high interest rates meant that the VC market suddenly contracted sharply, and a huge number of startups operating under the assumption that follow-on funding would always be available were now in serious trouble.

So the aim of the game went from growth to survival at all costs.

From growth at all costs, to survival at all costs

Startups had to quickly shift into survival mode which meant focusing on one overarching goal:

Get to cashflow positivity and do it quickly.

Mass layoffs and aggressive cost cutting followed, and once the dust had settled your average startup was worried about only two things:

• Increasing revenue
• Decreasing net burn

So what does this mean for companies trying to sell to startups?

Selling to startups post-ZIRP

Your product has to be increasing revenue or decreasing burn

If you're pitching your product to a startup, it has to obviously result in increased revenue or meaningfully decreased burn.

If the decision maker can't see how either of these would happen in the short term, it's going to be a very difficult sell.

Especially if you're claiming to reduce costs, it can't be by $100 p/m. The burn reduction has to meaningfully impact runway and/or margins.

Some examples of where this is compelling:

• I can subsequently reduce my headcount
• I can subsequently cancel a contractor engagement
• I save a substantial amount of time so can focus on product and customers

Startups are focussing on a maximum of 3 core problems at a time

This is true of startups generally, but it's especially true post-ZIRP. If your product isn't solving one of these problems I'm focussed on then I'm unlikely to be interested.

You can succeed here by looking at a company from the outside and being able to estimate the kinds of problems they're having right now.

For example, if a company has raised $4m two years ago, had 20 headcount but now have 8 then they're probably not growing as fast as they need to raise their next round and might be considering a pivot.

How does your product help solve a burning problem in this scenario?

Short sales cycles = short buying window

Selling to startups generally has the benefit of a short sales cycle due to the speed at which startups move and the organisation being relatively flat.

However, this also means that the time between problem awareness and buying is very short which further emphasises why it's important to be able to gauge what problems a startup is trying to solve from the outside.

Stop sending awful cold emails

If you're sending cold emails to founders/operators that are a page long, filled with buzzword garbage and no identifiable reference to a problem I have then it's going straight in the bin.

Here's a simple framework to get the attention of a founder/early-stage operator:

• 3-5 sentences long (maximum)
• Personalised with company and the problem you think I have
• Tell me how you solve it
• Tell me a quantifiable benefit
• Soft call to action (no requests for a 30 min call upfront)

Here's a basic example:

"Hey <name>,

I saw <company> got into YC recently? Congrats!

Given you're UK based I'm assuming you've just completed the Delaware flip? We did this at my last company and the ongoing admin was a huge distraction.

I built Yucca to help founders get a single view of their finances, updated in real-time, and can save you up to two days of month in finance admin effort.

Keen to try it out? Here's my cal if you'd like to chat: <cal.com link>

Best,

Simon"