Startup Learns a Hard Lesson: When To Turn Away Customers
It's really hard to turn down money, Seattle startup founder Manny Medina says. But that's what his company, Outreach, had to do as it started rapidly growing.
The company, which creates cloud-based software to automate and prioritize salespeople's interactions with contacts, found that accepting any customer with a credit card was dividing Outreach's attention.
"We had all types of customers who were all over the place," Medina said. "The question becomes, what do you focus on?"
Outreach has grown from a staff of six at the beginning of 2015 to 134 today and surpassed $10 million in revenue last year. The company, which is a little over 2 years old, has already had to learn to roll with the challenges of being one of the area's fastest-growing cloud-software startups while navigating an ever-adapting industry.
Medina and his three co-founders were running another business -- GroupTalent, which helped companies hire software developers -- when they stumbled upon the idea for Outreach. Customers were telling Medina what they liked most about GroupTalent was the knack it had for getting job candidates to respond to calls and emails. So the team switched its focus from the faltering GroupTalent to technology that would form the basis of Outreach.
"Nobody responds to cold pitches," Medina said, calling attention to a major problem for salespeople. They set about to find a way to make it easier to reach out to potential customers.
Software from tech giants such as Salesforce and Microsoft helps sales employees keep track of clients and find new leads. But there are still big gaps to fill.
"(Salespeople) want to be able to see a list of calls and contacts they need to make that day," said Kate Leggett, an analyst at research firm Forrester. "They want work to be pushed to them and to have a prescriptive tool that tells them what to do."
A whole system of technologies has popped up to complement traditional sales software, often known as CRM, or customer relationship management. Outreach fits into a division called "sales acceleration tools," said Tad Travis, a Gartner analyst.
Outreach keeps track of salespeople's interactions with customers and prospective customers and automates suggested follow-up responses, so workers can spend more time making sales and less time writing emails. The software takes in information from various sources about contacts and prioritizes tasks for account managers so they don't have to spend time figuring out whom to reach out to next and the best way to contact them.
In its early days, Outreach was selling to anyone who was interested. But that meant that the small team wasn't sure which features to work on or what problems to solve -- different types and sizes of businesses had different requests.
At the urging of mentors, Medina started turning down smaller customers and focusing on sales teams of more than 20 people.
One such customer is Zillow's mortgage-sales team, which has about 50 people who use Outreach. Nick Fitzer, director of mortgage sales at Zillow, was searching for a way to make it easier to follow up with leads.
"We are calling lenders, loan officers. There are hundreds of thousands of them out there," he said. "We started to see this inefficiency where those multiple follow-up attempts were just not happening as consistently as you'd like them to."
He chose Outreach's software partly because of its integration with Salesforce, which the mortgage-sales team "lives and breathes in." Fitzer estimates Outreach frees an hour for each employee every day, which can mean hundreds of thousands of dollars in new sales.
As Outreach has grown, it has seen smaller competitors fall away, but for every one that closes, another pops up, Medina said. The company is always trying to stay a step ahead of the next rival.
"It's a land grab right now," Medina said.
More than a dozen companies of various sizes are creating sales-acceleration tools, Gartner analyst Travis said, and about 300 companies make sales technologies of all different types.
Outreach's tools are likely most useful for sales representatives within technology companies that tend to sell via phone calls and emails rather than meeting with customers outside the office, he said.
"Outreach is going after some very specific use cases that match up with inside sales representatives," he said. "I think it's too early to say if it will fit with outside representatives."
Still, Outreach now has more than 1,100 customers -- despite turning away some smaller ones -- and has raised $30 million to date from investors including Trinity Ventures and Microsoft Ventures. And Medina, focusing on expanding Outreach's capabilities, is hiring a machine-learning team for Outreach to learn information about contacts over time.