What to do with your startup’s first $30,300

Your startup company just got funded. You made it, right? Well, the work is only starting, and the first order of business is to determine where to spend money first, so you get the most bang for those bucks that were so hard to get. Should you hire developers, invest in a really nicely designed website, or get that espresso machine?

I'm not going to argue with the espresso machine, and that's the $300 in the $30,300. However, I feel strongly about the remaining $30,000 or thereabouts. You should spend them on Rosemary.

A mutual friend introduced me to Rosemary when I did my first company, mumbling something along the lines of "strategic positioning of your company could probably help you".

"Strategic what?" I'm an engineer, and as such, very skeptical of terms like that. That's the domain of those "marketing consultants", isn't it, who, apart from producing large and frequent invoices, mostly produce large and frequent mumbo-jumbo that will make no difference whatsoever except taking a lot of your time and goodwill and confusing the heck out of your team?

Rosemary disabused me of that notion very quickly. What became clear to me very soon was this: the reason I had grown up with the idea that much of that "mumbo-jumbo marketing stuff" was useless was that the so-called marketing consultants I had worked with before were just that: so-called. In the hands of someone like Rosemary, who actually knows what she is doing, I discovered a marvelous body of insight and the ideal framework to discover where my company knew what it was doing, and where it wasn't. I felt like getting that great pair of new glasses — without having known that the world could look so sharp. Incidentally, the first time I felt like that about something related to marketing was when I started reading Geoffrey Moore's books (Crossing the Chasm etc.). I don't think it is an accident that Geoffrey Moore and Rosemary were colleagues at the same tech marketing consulting firm (McKenna) for years.

So what is Rosemary's "strategic market positioning" all about? To be sure, I still don't like the term. She has her own methodology, developed over a long career in high-tech marketing with lots of successful, and unsuccessful, large and small technology companies in Silicon Valley in most major technology markets. It involves asking you, and your customers, a lot of tough questions, processing that information according to her framework, and interactively playing it back to you in a form that illustrates clearly whether or not your customers really have a reason to think you have a competitive advantage and why, whom you should partner with and why, and where the holes are in your plan and why.

The "and why" part is the really, really valuable one. If you are in any way like me, you usually have a good gut feeling about what your company should be doing, and you will win almost any discussion with anyone who dares to think otherwise. At least you think so. That's not surprising: you are the original visionary, they guy or gal who spent more time on the subject than anyone, and you are the prime mover behind the company, so you should. Just sometimes, at night, there is little nagging voice asking you whether you really know what you are doing. But no one can challenge you — unless they are called Rosemary and have a framework for doing so. If you are intellectually honest, you will actually enjoy the challenge. I certainly do, although the process can be quite ego-bruising if there is a gap between your theory and practice — and there will be, trust me.

She usually teams up with a partner on projects in order to not miss anything, such as during the often heated discussions. I have worked with both of her partners Liz Arrington and Patti Burke, both accomplished early-stage tech marketers in their own right and good and fun people to work with. Together, they form a team called MarketFocus, which is affiliated with Sevin Rosen Funds, a venture capital firm famous for investing in Compaq at the very beginning, for example.

After reading up on the market as much as they can, after interviewing management and whoever is really close to the company, she and her partner come up with a "discussion guide" that reflects the major assumptions of the company about the shape and form of the opportunity today and tomorrow. While Rosemary takes the lead, this is generally an interactive process between her, her partner and management with a flurry of e-mail back and forth and occasional teleconferences. While neither Rosemary, Patti nor Liz is a technologist per se, they do tend to get even complex, novel pieces of technology pretty quickly. And usually explain better than the technologist can what the complex piece of technology means for the market and a potential buyer.

Then, Rosemary and her partner will interview as many people as she can outside of your company who have a view on either your company or its products directly, or who are just generally knowledgeable about your market. That might include customers, prospects, partners, industry analysts, investors, potential hires, you name it. The more, and the more varied, the better. Particularly those prospects to whom you pitched but who declined to buy — if there is anything wrong with your plan, they are the ones who will know it. Surprisingly, they are usually able to get an hour or two of almost anyone's time. They guarantee confidentiality and will never attribute a quote to a particular interviewee when reporting back to the company. That way, you will learn what people say behind your back, and that's a good thing even if you don't always like what you hear.

Then comes the major work. Rosemary and her partner will process all the collected tidbits, and put together a company-specific "play book" with something in the neighborhood of 100 work sheets. My last one had 150, although a portion of them was educational in character for the engineers among us, like myself. The work sheets form the basis for the three or so work sessions.

Where the message is clear, she and her partner fills out the corresponding work sheet and "just" asks management to commit to what they say. That often sounds a lot easier than it is: getting your VP Sales to commit to not go after customers in 90% of what he thought were potential markets is one of the really hard ones, for example. But absolutely necessary.

Others are fill-in-the-blank that require input from, and often extended discussion with the management team — and expose the embarrassing situation that on half of the subjects, your management team will not agree. As the entrepreneur and CEO, you will be horrified — I was, at least the first time. "How often do I need to explain this before they get it?" But there may be good reasons for why not all members of your team agree, and this process will uncover those.

Again other work sheets are different views on the same information from different angles. Each one of those slides is being discussed with management and often revised between work sessions as new information and insights are being uncovered by the team. The sessions are intense, and in my case have taken longer than 8 hours in one stretch. Where there are blank or muddled spots on the map, Rosemary will force management to decide one way or the other. She will not take "don't know" for an answer, and I grant you, she will last longer in those sessions than you do!

Two major results come out of it: Firstly, a one-or-two sentence positioning sentence. That doesn't sound like much, but it is the hardest one sentence that you will ever write related to your startup. While you might never publish that positioning sentence, it captures what your company does, why it is important, who wants to buy from the company
and why. And why they will not buy from any of your competitors. If you have that, and everyone on your team has committed to it, every one of your sales people whom you are going to hire will know, at least on a high level, how to win a deal against a competitor. Your developers will know which features are more important and why. You will know what to put on that website before you commission the designers. And you don't need to throw away their designs because the audience turned out to be different than you expected originally.

The second output is the full play book of work sheets. It captures your full line of thought. And a few months later, when the inevitable changes in strategy have to occur in your nascent company, you can easily go back to how you arrived at your conclusions and determine which of your assumptions have to change, which ones don't, and what impact that has to what you need and need not to do.

In other words, the "strategic positioning" of a startup should really be called "the plan". That's what Rosemary helps you develop and that's really what you need. Not your advertising material, otherwise known as "the business plan for the VCs". But the plan that allows you to be confident about how to go and build that business of yours that wants to be great. Neither Rosemary nor Liz or Patti will tell you when you will hit profitability, or things like that. That's still your responsibility. But you will know for sure whether you have something here that will ever work. And why.

I've gone through this recently with Rosemary and Liz Arrington in my second company. The first time, I initiated the project with her (and her partner Patti Burke) about half a year after the initial funding event, over the objections of my board. That was a mistake: I should have spent my first $30,000 on it, not the last. I have to say, how an investor could be against the Rosemary project is still beyond me. In my view, spending these $30,000 causes the single most significant impact of any $30,000 you will ever spend after an initial funding event. It can very easily save you, and your investors, 100 times that amount. (Think of your favorite clueless, unsuccessful startup that never really sold anything after years of trying and having spent millions upon millions. Add Rosemary to the mix up-front and it's most likely going to have cost only $30,000. Because she will tell you if you don't have something to stand on even if the PowerPoint presentation sounded sooo good)

For my part, I have learned: the second time around, I spent the $30,000 even before getting that espresso machine. And I really do like espresso.

Rosemary Remacle has extensive experience with large companies such as Intel, Memorex, PriceWaterhouse, and many, many startups. You can reach her at Mktfocus.net.

Johannes Ernst is CEO of NetMesh Inc. (formerly R-Objects Inc.).