The online accounting service unveiled a $12-million series B financing round that includes The Social+Capital Partnership, as well as existing investors Charles River Ventures and OMERS. The deal takes place only eight months after the Toronto-based company raised $5-million

In a blog post, Wave CEO Kirk Simpson said: “We’re very proud of what we’ve accomplished at Wave since we launched at the end of 2010. We’ve had nearly a quarter of a million small businesses sign up, with tens of thousands of new businesses joining every month. But our goals are even bigger than this. There are even more features in Wave Accounting and Wave Payroll that we plan on developing, as well as other complementary tools we intend to release.”

Wave’s rise is impressive given how quickly the service has been embraced and the number of users it has attracted. The company was one of my first start-up consulting clients, and Simpson and I had lively discussions over Wave’s business model, its messaging and how it was going to be positioned in a competitive marketplace.

In hindsight, Wave has succeeded because it hit the market with a compelling and disruptive service – free online accounting – that resonated with small business owners looking for an alternative to Quicken or Excel spreadsheets. While I wasn’t a big fan of free, Simpson believed that Wave could monetize user’s data to create a viable business model.

The company’s ability to raise $18.5-million in financing, which includes an original seed round, is significant because it demonstrates that Canadian start-ups can attract the growth capital that is required to become a major player or, at least, drive to become a major player.

OMERS’ ability to provide and participate in series A and B round can’t be under-estimated given this is where the Canadian venture capital ecosystem needs to become more robust.

It means having strong messaging about what the product does, the value propositions and benefits, and then making sure enough people become aware of it through different marketing and sales channels. There’s a lot of moving parts to win over a customer.

The problem for many companies, including startups, is their marketing efforts stop once the user is registered and/or the sale is completed. All the marketing work to get someone to learn about and embrace a product is seen as work done in the past.

The reality is, however, their marketing and sales efforts have to continue to convince customers they have made the right choice and, as important, give them new and different ways to leverage the product’s benefits. Pre-sales marketing drives awareness and conversion; the post-sales marketing keeps them happy and in the fold.

So how do startups keep customers/users happy? It starts immediately after someone buys a product or signs up to use the service. The confirmation email that is sent should do more than simply welcome someone aboard; it needs to provide them with ways to get into and enjoy the product, and keep on selling them on its benefits.

Afterward, the same approach needs to be taken. Rather than leave consumers to their own devices, a startup has to keep them engaged on a regular basis. It could be  newsletters that offer tips, news and value-added content. It could be Webinars, case studies, whitepapers, videos, stellar customer service, or emails asking for their thoughts and advice. Whatever the marketing “weapons”, they need to consistently used.

The goal is not to overwhelm customers with information but offer them a steady flow of different content that they can pick from depending on their needs. Some customers may want to be left alone until they need support, while other customers want to be pampered post-sale and, in the process, may become brand evangelists.

Regardless of the approach, a startup’s sales and marketing efforts need to continue throughout the consumer life-cycle. This is basic blocking and tackling activity that applies  to most brands, but it’s particularly relevant to startups that battle so hard to capture someone’s attention that not doing whatever it takes to keep them aboard is like cutting themselves off at the knees.

What are your thoughts? What are some of the things startups need to do post-sales or post-registration to keep consumers engaged and sticking around?

While social media has become more entrenched as a marketing and sales tool, the common denominator is the importance of storytelling, regardless of whether those stories are told – be it Websites, social media, videos, brochures, case studies and white papers.

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In my opinion, too many startups are afraid to sell their products. They’re afraid there’s too much competition, they’re afraid not enough consumers will be willing to pay for it,  and they’re afraid of not getting the traction to attract investors or an acquirer.

Instead, they take the easy way out by offering their product for free and, even worse, they have no clue about how they will drive revenue. Honestly, it’s a cop-out and shows little confidence in the value of their product or the product’s ability to solve a big enough problem that a consumer would be willing for it.

As a result, you get a startup that may have a popular product but the only financial salvation is being acquired. The problem is it’s like buying a lottery ticket so the odds of “winning” are slim. As much as Instamatic got a lot of attention, it’s a fluke or the equivalent of getting hit by lightning.

Some startups try to hide their fear of selling by embracing a “freemium” model, which often means that if someone really, really wants to pay for it, the startup will take their money. In most cases, however, the free version  is so robust and feature-rich, there’s no reason to upgrade to the premium version.

Yes, there are exceptions to the rules such as DropBox, Skype and Freshbooks but freemium is a difficult game to play, particularly for anyone looking to build a solid business.

What I like to see are startups that develop a product that addresses a point of pain, engages or entertains but has enough value to justify selling. It’s a simple proposition: the product does something consumers need so it’s worth buying.

I’m not sure why so many startups shy away from selling their products but I think one of the big reasons may be that initial sales can be challenging. It’s tough to convince the first group of consumers to pay because no one likes to be first and there is a digital culture that most products are free, so why would anyone have to pay for a product.

To sell, it requires a startup to have confidence in their product and take a leap of faith that consumers are willing and happy to open their wallets. While it’s easier to avoid the entire situation by just giving away a product, it’s a huge hurdle in the development of a real business that drives revenue and profits.

My advice to startups: don’t be afraid to sell. If what you’re offering is not being bought, it probably doesn’t have enough value, which means you need to figure out a way to build more value into the product as opposed to simply adding more features.

So it is always surprising (and disappointing) when a startup does a bad job of story telling, particularly if they have a good product or service. Without a good story, many people may never discover the service because the initial impression is it is not compelling, interesting or useful.

The thing about good stories is they’re told in multiple places such as a Website, video, social media, elevator pitch, product demo and sales/marketing presentations. The story is the same across the board, although it’s told in a slightly different way depending on the platform or medium.

Why are stories so important? In a world in which people are time-strapped, multi-tasking and not willing to invest much time in anything, the ability to quickly capture someone’s attention is more important than ever. At the same time, there is so much competition that it’s impossible to rise above the crowd without a good story.

So, how are good stories created?

Perhaps the biggest consideration is the need to look from the outside in. Many startups suffer from a lack of perspective because they’re so close to their product or service. As a result, it is difficult to create a story that resonates with target audiences.

To develop good stories, a startup needs to talk to potential and existing customers, it has to look at how rivals tell their stories, and it may have to bring in outside help to get a different view of what they do and why anyone would be interested.

Another important exercise is boiling down a story to something basic and easy to understand. It’s like gutting the inside of a house, which creates a clean slate. For a startup, the creating a simple story starts with “We make X so [customers] can Y (e.g. save time, reduce costs, etc.).

Once this simple statement is created, the story can then be bolstered by talking about what the company does is unique or different, and the benefits it delivers to users.

It seems like a straightforward process but it can take time to create good stories, and it can be a two steps forward, one step back exercise. One of the big hurdles is it can be uncomfortable for startups to embrace a story that’s different from what the one they’ve been telling for a while.

At the end of the day, however, it’s worth the time and effort because a good story helps to provide a startup with a clear mandate and mission. By having everyone “singing off the same page in the hymn book”, it becomes a lot easier to tell the world what a startup does and what anyone would care.

]]> http://www.markevanstech.com/2012/05/08/whats-your-story-morning-glory/feed/ 0 http://www.markevanstech.com/2012/05/07/shapshot-of-a-vc-deal-sweet-tooth-rewards/ http://www.markevanstech.com/2012/05/07/shapshot-of-a-vc-deal-sweet-tooth-rewards/#comments Mon, 07 May 2012 11:16:06 +0000 Mark Evans http://www.markevanstech.com/?p=8578 Continue reading →]]> Who: Sweet Tooth Rewards, which provides e-commerce retailers with a system to create points-driven loyalty programs to reward customers. The Waterloo, Ont.-based company, which was started in 2009, has 1,500 customers.

How Much: $2.25-million from OMERS, MaRS Investment Accelerator Fund, Points International, and “other sources”. OMERS, which raised an $180-million venture capital fund last October, has now invested in three Canadian startups: Sweet Tooth, Wave Accounting and HootSuite, as well as Extreme Startups.

The Quote: “As online shopping continues to grow, the Internet has become  retailer’s new battleground for customer loyalty and retention. There are thousands of competitors for every eCommerce dollar, so when a customer makes a purchase online it is imperative that the customer is retained and engaged – or their next purchase might be with the competition.” Jay El-Kaake, Sweet Tooth founder and CEO. (Source: press release)

What’s interesting, however, is the importance many startups place on blogger and media coverage. If only they could get TechCrunch, GigaOm, the New York Times, CNet, et al to provide even modest coverage, it would a cause for celebration, ignite a flurry of social media activity and attract a wave of new users or customers…or, at least, that’s the idea.

But here’s the thing: blogger/coverage is the cherry on top of the sundae. It’s tasty, flashy and a nice-to-have but, in the scheme of things, it’s not that important.

Seriously? Yes, seriously.

Attracting blogger and media coverage is a bonus and often an anomaly that comes and goes. It makes you the belle of the ball for a day (or an hour) and it can generate a lot of attention, but it can disappear into the background pretty quickly too.

Sure, there is value in getting blog and media coverage. It can get a startup more users, make it more appealing to potential employees and investors, and provide some validation the product or service being offered has some value or interest.

But if I had a choice between blogger/media coverage and sales traction, I’d pick sales traction every day of the week, even if meant never having a blog post or article appear. Sales pay the bills and get investors interested in taking a deeper dive; blogger/media is a frill, a nice one albeit, but a frill nonetheless.

Don’t get me wrong, the stories written by hard-working bloggers and reporters are great when they happen but it shouldn’t be a huge priority and it should not consume a lot of a startup’s resources.

The reality about blog/media coverage is it’s a crapshoot and as much as art than science. You can create well-crafted pitches that include relevant and topical themes but it doesn’t guarantee a blogger or reporter will give you the time of day.

Coverage happens due to relationships (the key value PR agencies provide), it happens when a pitch hits a blogger’s inbox when they’re desperate for a story idea, it can be sparked by random conversation at a conference, or a quirky or different pitches that, for some reason, resonates.

The bottom line is enjoy the coverage when or if it happens but don’t spend too much time or energy worrying about it. Instead, focus on the task at hand: developing a great product or service that drives sales. What you might discover is sales and success will get the blogger/media as a nice and well-deserved dividend.

Who:

How much: $15.9-million from new investor, Tandem Expansion Fund, along with existing investors,  BDC IT Venture Fund, Walsingham Partners Fund, and several private investors. The money raised will be used to accelerate Blueprint’s growth by expanding sales, marketing and channel partner presence and capacity in the U.S., Europe and Asia-Pacific.

The Quote: “We are delighted to have led this financing and believe Blueprint is well on its way to becoming the global standard in the burgeoning requirements definition and management software category within the Global 2000,” says Alex Moorhead, managing partner at Tandem Expansion Fund. “We are impressed with the market and customer demand, along with the ROI Blueprint customers have experienced. We are confident in the Blueprint team’s ability to scale the business in realizing its full potential.”

(Source: press release)

While are times when raising money makes complete sense, there are also occasions when the interest or lust about venture capital is unhealthy because it is seen as a sign that a startup has made it. The reality is it’s a key step along the way as opposed to being a major victory.

As I meet and work with more startups, it is fascinating to see how much entrepreneurs talk about venture capital so I thought it might be helpful to go through the five “W’s” and the “How”.

Why: It may seem like a straightforward question but startups need to ask themselves why they want to raise capital. Do they need to drive product development, build out a sales and marketing team, make a strategic acquisition, or move fast to keep ahead of growing competition. By answering this questions, startups can give themselves a solid foundation to start the fund-raising process because they know what they need it for.

When: This can be a difficult question because timing can be everything, and there are many different scenarios that would make it the right time to attract investors. For some startups, it can happen early to validate an idea or build a prototype. For other startups, venture capital is needed when a product has been developed and there are a handful of customers. With solid traction, a startup may believe the time has come to to press down on the accelerator.

Who: This is probably one of the most important considerations because there are different kinds of investors. Some are passive, some are strategic, some are hands on, some have extensive networks that can be tapped, some have the ability to handle or participate in follow on rounds, some can be patience and some impatient. At the end of the day, the money may be the same but finding right cultural and personality fit may be just as important.

Where: In an ideal world, Canadian startups could be financed domestically but given the not-ready-for-primetime landscape, startups need to look at other markets such as the U.S. and Europe. TeamBuy, for example, tapped European investors after finding little interest from Canadian VCs. An important thing to keep in mind is it can be challenging to have an investors who is more than several hours away by plane given it can make getting together time-consuming and less frequently.

What: So what is the money for? Closely related to “Why”, the what is crucial because startups need a clear idea of how to get the most out of the money they raise. One of the challenges after raising money is it can seem like it will last forever when, in fact, it can quickly disappear if you’re not careful. In particular, startups need to be careful about spending money on unnecessary frills. Instead, they need to spend on high-priority ideas that will drive growth and revenue.

How: This is also a key consideration. A startup could seek external help to go through the process, it could rely on its advisory board, or use an investment firm. For some startups, it may mean the founders are spending a lot of time on the road meeting investors and doing presentation. As I mentioned earlier, the process of raising capital can be distracting, which is why the how is so important.

More: ZurBlog has a post about the questions that startups looking for seed capital need to ask.