One of my summer jobs during college was pure cold calling. I walked uninvited into businesses, selling knockoff designer perfumes and colognes at heavily discounted prices. Success, we were told, was nothing more than a numbers game. Hit as many places as you can, and the odds are that one out of 20 businesses will yield a sale. And if one person in an office buys, others probably will, too.
Not my most profitable summer. We cannibalized our own market before the end of June. The entrepreneur who owned the perfume business got stuck with an inventory he couldn’t move and, by July, employees who didn’t bother showing up.
Sadly, this sales approach is not that different from what many companies do today. I see it time and again: More briefcase-carrying salespeople equals more sales. Entrepreneurs use the same logic when shopping for investors: Reach out to a lot of VCs and you’re bound to get at least one response, right?
Too bad it doesn’t work.
Here’s the reality we have to face: Prospective customers and investors are looking for reasons to reject your company. It does not really matter how great your product or service is. VCs and customers have their own numbers games, and their numbers games are always going to trump yours.
Cynthia Ringo, managing partner of DBL Investors, estimates that 1,000 deals come into her firm each year. She and her colleagues might meet with 100 of these companies and invest in four. Not one of those deals comes from a cold call. If someone is not referred in by a trusted source in her network, the likelihood that she would take a meeting is approximately zero. She’s not alone. Ringo asked other VCs how many deals they do from cold calls. The answer: zero. Not one person had done a deal based on a cold call.
How can you never make a cold call again?
- Be practical and be realistic. Look at what you are trying to accomplish, and don’t get stuck in how everyone else is trying to do it. Do you think hiring a bunch of salespeople is going to get you to your revenue targets? Good sales rarely come from quantity. Besides, can you really afford an army of salespeople? What are you trying to achieve? A big sales force or a big revenue target? Be smart: Focus on the outcome you need to attain.
- Do your homework. Are you 100% confident that you understand what your target firms do and don’t do? Who is already in their portfolio? Which vendors already have exclusive contracts with them? Don’t risk your relationships by being less than über-prepared.
- Be resourceful. Don’t dial for dollars. Once you have identified firms or sectors, start looking for your points of contact who are active in those firms or sectors. Reach out and see if those people know someone in the firm. If they don’t know someone, do they know someone who might? It’s a lot of work with very few shortcuts, but there are some helpful tools. LinkedIn might give you a leg up, but there are other resources. Look on Twitter and on blogs to see who is writing about your topic and might be an influential connection. Chances are you know someone who knows someone who can introduce you to industry insiders.
- Make it easy and make it fast. Successful VCs like Ringo say entrepreneurs can help themselves if they realize that investors’ and customers’ scarcest resource is time. Make it easy for your connections to introduce you into their networks. Write out crisp pitch points for each target profile. Write out a few short, well-composed, targeted summaries of why these folks would want to talk to you, and package them into an email. And be realistic. If your offering doesn’t fit into your chosen VC’s portfolio, or if you do not have a clear value proposition for your target’s industry, you’re wasting time.
Are you going to play the numbers game? Will that help you achieve your goals? It’s up to you.