“With any sale, whether you’re selling a software product or a potential LP, it is important to remember that people buy based off emotion rather than logic,” says Matthew Green, CRO of Sales Assembly.
Drawing on parallels between raising money for a fund and doing sales for a startup, Matt argues that both investors and customers initially spend with their emotion, and find reasons to back it up with logic afterwards.
Having said that, Matt strongly encourages everyone, providers and VC Funds alike, to build and manage a robust customer relationship management (CRM) system, which he talked about in Diffuse’s latest ConZoom, a virtual event that is part networking (you’ll meet at least a half dozen high calibre startup players) and part purposeful (you’ll “ConZoom” new ideas). (If you are keen to attend the next ConZoom, email us at [email protected])
Matt Green co-runs Sales Assembly in 2017, where they help high-growth tech and SaaS companies scale their businesses within a peer community exclusively built for sales leaders and their teams. He also co-founded VentureSCALE, a sales and revenue-focused accelerator for early-stage, venture-backed B2B technology companies.
The Parallels Between Sales and Fundraising
“As a young person, I had to go out to wealthy people and basically convince them to give me their money to manage their investments on their behalf. What I learned is that while it is about having a process, it is also about understanding that with any sale — whether you’re selling a software product or selling a potential LP — people buy based off of emotion rather than logic,” Matt shared.
Matt pulls from his experience in private wealth management with JP Morgan, where he worked his way up to VP of Investments and served in that post for 3 years. He argues that with any purchase, emotions come first before logic, and so it is essential to “craft the narrative to that end from a sales perspective.”
And that theory applies to fundraising as well. Sharing some observations in working with smaller VCs, Matt said that smaller VCs use the same approach in fundraising as other companies would with sales.
“We know a lot of folks that are in the process of raising, let’s say, their first or their second fund. And some common threads that we’ve noticed there, as far as how these earlier stage VCs have been successful, is they do treat this like they would selling a software, [or] selling any other product, and approaching the problem like that with a very ironed out system in place.”
The Human Component to Sales
People tend to find reasons to back a purchase up with logic afterwards. Matt references a book entitled “The Transparency Sale” where the author, Todd Caponi, shared an interesting story that exemplifies that:
Todd always throws out this example: he showed up at his house one day, and his neighbour who was in his late 40s, early 50s has a brand new Corvette in the driveway. So he goes over and says ‘hey, what’s with the new ride? That looks great,’ and the man said ‘yeah, you know, every day when I’m pulling onto the 90, my old car wasn’t accelerating that great. I need the pickups you know, I got to keep up with traffic, bla bla bla…’”
“And Todd’s like, ‘but a Volkswagen is going to give you the same acceleration speed, the same pickup to get on the 90.’ And the man in response said, ‘yeah, but it’s a Corvette. It’s much better than a Volkswagen in every way.’ And that’s just the way that all of our brains think,” Matt shared.
That is the knowledge that people looking to get an investment or who want to sell something need to be armed with — “to speak to more of those logical pieces, the logical side of the argument,” Matt said.
However, the level in which investors tend to act on their emotion differs on a case to case basis, according to Matt. When asked if his theory applies equally across the board, he said that might not be the case. The amount of emotion that comes into play for an LP to write a $5 million check, for instance, might not exactly be the same for someone to write a $50 million check.
“I would venture to say that there is going to be some level of variants, right? It is sort of a sliding scale as opposed to a light switch flipping on and off — emotional or not emotional. Part of this is informed by my own personal experience, but I would say that going to a family office, or some other heavy hitter that is going to write a substantial check, [is similar] compared to [going to] some of the smaller folks. There is still going to be that emotional component.”
Building a Robust CRM
Having a robust CRM system in place will take your organization to great heights, and the first step to doing that is by digging deeper into your conversations with potential investors or customers.
“It is important to keep in mind that when building and maintaining a potential investor or potential LP list, you do have to treat it like any other sales organization. And what I mean by that is not only should you take note and keep organized with respect to who you spoke to, and when you spoke with them, but dig a little bit deeper. What did you speak with them about? What was their feedback? Do you have what we would call a drip marketing campaign in place?”
Another way that organizations can rapidly develop their CRM is by taking into account the time in between these sales talks, and reviewing previous conversations to know which next steps to take to draw a fuller, more well-rounded sales cycle.
“If these conversations are going to last weeks or months in order to get one of these potential LPs over the finish line, what are you doing throughout that time to not only stay top of mind, but also to stay relevant? And even in some cases, how are you looking for ways to add value to them, and whatever business they’re doing that’s outside of their company? Knowing these helps because they just might become a part of a fund that you’re looking to gather.”
Matt’s company, VentureScale, teaches CEOs and founders how to build an effective sales infrastructure within their business. Through a six month program, which includes a combination of classroom instruction and one on one work with around 100 mentors, they help founders build a sustainable and scalable sales infrastructure, build and manage a sales team, develop a CRM system, and much more.
Interested in knowing how you can boost your sales? Get in touch with Matt and other experts like him and join our ecosystem. If you are keen to attend the next ConZoom, email us at [email protected]