E-Commerce secrets to scale

040 - The Difference Between Pre-Startups & Startups with Tara Spalding

040 – The Difference Between Pre-Startups & Startups with Tara Spalding

E-Commerce Secrets To Scale is a marketing and entrepreneurship podcast that revolves around hearing the stories and strategies of successful entrepreneurs and e-commerce professionals to uncover scaling secrets that will impact your online store.

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Tanner:

This week on the show, Tara Spalding, Managing Director at BoomStartup joins me to talk about the transition from a pre-startup to a startup, as well as some really awesome stories about her experience working in Silicon valley.

Welcome to the show Tara. I’m super excited to have you. Go ahead and introduce yourself to the audience.

Tara:

Hey Tanner, my name is Tara Spalding. It’s a pleasure to meet you and being here on your show. I’m the managing director at BoomStartup Accelerator, which is an online accelerator, but it’s located here in Utah.

All of this in fact is just been a steppingstone to the next piece of my career.

Tanner:

Awesome. So how did you, how did your career get started? Can you kind of tell us your story?

Tara:

Yeah, absolutely. My career started actually a while ago I went to work for a winery straight out of college and spent some time in field sales, as well as marketing. I got the opportunity to go to headquarters and at that point of time I actually saw some communication problems. One of which was that we had inefficiencies and ordering point of sale when we were in the sales field compared to what the headquarters was actually assigning. And there was always a discrepancy because if you didn’t have the right product display, for example, like Thanksgiving, then you’re not going to have the opportunity to sell a whole bunch of wine. And that often was dictated to the signs. So I decided to learn how to code and I created the company’s first intranet site and it was kind of a skunkworks project, but it was super fun. And this experience absolutely got me hooked into technology and coding. And then more importantly, it was very, very rewarding because I solved a big problem that was going on with the sales people that were not located in the headquarters and just made things a lot more efficient. And so that just changed my career from then on. So that’s exactly how I got started into techno.

Tanner:

Awesome. So fast forward to now, how did you get started in BoomStartup?

Tara:

Yeah, so wineries, we’re not the place to really have a cutting-edge technology career. I actually then took a webmaster position in Silicon valley for a software startup, which was recently acquired. And I got to go through and experience a lot of fast forward, fast thinking companies. Eventually I worked for a CRM company and I also was the very first hire of a commercial open source CRM company. And I basically ran the marketing as well as did anything else needed and I just became a startup junkie and then eventually started to become an executive at several of those companies as well. Then in 2012 I started an incubator called Henhouse Ventures. And the reason why I started the incubator is because there was a pretty big need for strengthening go to market strategies, especially in the enterprise software space. We’re breaking into these markets are very expensive and very long in cycles.

And then I also started to focus on fundraising themselves since the prior startups, where I was like the marketing executive, et cetera, we would fundraise. And my companies that I worked with closed over $60 million. So I had a lot of experience going up and down sand hill road winning and more importantly, losing funding opportunities.

Henhouse Ventures has been a fantastic experience for me as an incubator because I’m very entrepreneur empathetic as well as being an entrepreneur myself. I also did prior to this, co-found a software startup as well. And so all of this in fact is just been a stepping stone to the next piece of my career, which is creating funding opportunities. And actually the funding terms for pre-seed companies because I really believe that’s the most important part of our economy, especially in the middle of America where there’s not as much resources as well as capital compared to the posts from where I’m from.

Tanner:

Are you seeing a change there? Are you saying that resources are becoming more and more available in areas that aren’t Silicon valley?

Tara:

Yeah, there is, but the deficit between the two is so substantial, just because of the amount of capital and the longevity of the capital being there. However, what’s happening is it’s actually creating different DNAs of startups. And so I’m personally excited, especially since I’m working at like pre-seed investment thesis to see how basically startups evolve and how they developed different strengths because of where they’re founded and where they’re started and what’s immediately available or not.

I like to say that Silicon valley creates rocket ships.

Tanner:

Yeah, that’s really interesting. So how would you compare the startup culture between Silicon valley and right here in Utah?

Tara:

Yeah, absolutely. Because I would say Silicon valley is extremely fruitful when it comes to cash as well as talent. That there’s, when I was there, there was a very heavy and intense focus on top line growth and honestly, to break through the noise and to get any attention from the tier one VCs you’ve had to have, like, for example, very insane growth rates. For example, like user adoption, seats sold, subscriptions, et cetera. And it could even come at a loss and that’s totally fine because they, you know, the funding size was astronomical as well as valuations being astronomical. And again, everything was much more skewed towards influencing the top line growth. I like to say that Silicon valley creates rocket ships. And when I look at the companies that I’ve helped create out here in Utah, it’s more like creating an airplane and both of them are absolutely important and you know, this right vessels to actually take flight and soar but they have different approaches.

And Utah has much more of an emphasis as well as history with lean startups. And that’s just because it’s been capital starved, especially, you know, for seed capital since the turn of the century. The amount of early stage investors just really hasn’t been here except for the last 20 years. And now, because we’re seeing more exits from Utah based companies, there’s finally that sort of bloom of early stage individual angel investors. So I find this a very exciting time because we can start focusing in a little bit more aggressive, a little bit more risk oriented sort of funding versus what was going on here before, which was basically if you can’t sell it and bootstrap it yourself, it’s not gonna work.

Tanner:

Yeah. That’s really interesting. You know, I really love seeing the news all these recent acquisitions like Divvy. That was, that was a really big one. I was really excited.

Tara:

Yeah. Crazy.

Tanner:

Crazy. Crazy.

Tara:

Yeah, it is.

Tanner:

So Tara, what’s your opinion about being a founder? What’s that like in a pre-seed, company post-seed company, bootstrap company?

Tara:

Yeah, I, you know, I’m pretty lucky because I’ve, I’ve been in several startups over my career, as well as been able to incubate several startups all the way through series C. And there is an absolute mental mode shift between the different stages. Pre-seed is really all about the product market fit. And in fact, this is one of the themes that we’re focusing on at BoomStartup because it’s in fact, the first opportunity to say, how big can this company be? For example, it’s great that you have a company, but if it’s a niche it’s are basically sell, being sold into a niche, then it’s going to be less attractive because there’s not significant upsell that investors are looking for. However, it doesn’t mean that it’s going to be a failing business. In fact, it can be quite successful and pretty much cap out between five and $10 million. And, you know, the founding individuals of that team can have quite a cushy life. But that’s the interest about pre-seed is really the product market fit and the market potential and market growth.

Be comfortable with failure and objectively learn from it before moving on.

Tanner:

So Tara, what would you attribute the success to over the years? And this question really applies to any startup or company that you’ve been involved with.

Tara:

Yeah, so Tanner, that’s a really great question. I think the success really comes down to sticking to it and grit. And usually that’s because there’s been a certain experience that has driven a person to become that entrepreneur, to carry that burden as well as that hope and to just do whatever it takes to make it happen. So I’ve always been interested in the founders’ backstory as to why. Why are they doing this? Why did they get into this? And that motivation that how deeply personal it is is usually the indicator as to their tolerance for frustration, for the nos and for the difficult times. You know, also I like to look at the person and see if they have the sort of personality that can in fact accept feedback, accept coaching, be comfortable with failure and objectively learn from it before moving on versus making excuses and sticking to the points.

I know there are the Steve Jobs situations that every founder, you know, get stuck to and they just have to stick to their hunch against what everybody else is telling them and then all of a sudden they come up with the iPhone. Right? But very often that’s usually once in your career lifetime, and you usually have several other failures to basically balance out your decision-making and it’s not taken quickly, it’s taken very seriously. I also think the founding team and the support network to keep you aligned and to keep you going is awesome. Important.

Tanner:

Yeah, no, I think it gets really hard to determine what feedback you should be willing to accept and what feedback you think might not actually mean anything. Right?

Tara:

Absolutely. You know, let’s go back to like that product market fit. Especially in the pre-seed that we were talking about before. There’s a couple of paradigms that can happen. One, the market is too small, which we discussed, or two, the problem that you’re trying to solve is a nice to have and not a need to have. And that just means that it’s not compelling enough for people to be loyal, to become advocates, to pay for it, et cetera. And that’s, that’s really hard feedback to actually go through and accept and listen. Right? And then there’s also market, you know, timing, you know, maybe it’s just too cost restrictive at this time to get whatever innovation you’re creating out to the market. You just got to wait for something else to break out. You know, for example, let’s go back to the iPhone that, you know, the voice to text was enabled and then all of a sudden, all of these new apps are just opened up and created because of that new in available technology. So yes, there’s a whole bunch of different aspects to consider.

Tanner:

Yeah. I agree. Sometimes you need that bridge, take you to where you need to go from a technological and technology standpoint.

Tara:

Absolutely. And, you know, that’s the whole thing is like I’ve seen founders that are fascinated by the product or the innovation, and those are usually the founders that burn out the fastest because they’re more fascinated by what they’re creating than why they’re creating it. And so if we go back to my question as to like, why are they committed to it? We can continue that with the second question is to why you’re creating it. And oftentimes if it’s listening to the market and understanding, you know, what does that solution embed it’s defendable? Then that just drives that sort of interest in retention as well as a compatible business plan. Meaning like, how is it packaged? What’s the value proposition and what is the minimum viable innovation that you have to deliver to just get it there and across the board?

Product market fit is absolutely critical, but it doesn’t require coding.

Tanner:

Yeah. And I’d also like to add along the lines with your MVP product market fit stuff, too many entrepreneurs out there spend all their focus on, you know, giving their product all these bells and whistles when really it’s not really needed. And they could have been spending that time, you know, focusing on their why and their core purpose and coming up with that value proposition and creating empathy with the market, understanding how it’s actually going to help.

Tara:

You’re absolutely right. I recall meeting two co-founders and an investor who were in a very sticky situation. The investor pulled me on board, and this is when I was running the incubator to just basically, and it was on a call. It was very brutal. He gave these co-founders $65,000 to design an MVP yet nobody was using it and he wanted answers as to how to do it. Unfortunately I drove the conversation in a direction that he was unhappy with. He wanted me to say, well, now start spending on marketing and sales. But in fact, marketing and sales is what I would call not organic sort of growth, you know, product market fit happens. And then all of a sudden, you know, you’re in it because it’s just going naturally organically and just unexpectedly bigger than what you ever anticipated.

When I asked them about the MVP that they spent the $65,000 on and the sort of user adoption and user testing that they did, prior to even coding, and they came back with the answer, well, we didn’t, we just talked to a couple of our friends and knew they were in big trouble. And so what I told them was that before they even did another code rewrite or invest another dime is that they can actually create, in instance, that would gauge interest in participation by basically throwing up a webpage with basically a mock event that emulated in-person what their actual app mobile app would be delivering. And the investor was very upset that the co-founders didn’t think about having an actual test to see if people would move back to do the trade that they had a marketplace kind of an app without being digital first. And, you know, I think you’re absolutely right. Tanner. I just know these situations and you know, that product market fit is absolutely critical, but it doesn’t require coding.

Tanner:

Yeah. I think that’s an excellent point. And along the same lines of what you were saying with organic growth and how sales and marketing is artificial, you need that organic growth before you can start doing sales and marketing because you need to prove your concept. Right? And you’re absolutely right. You don’t have to create a product to get interest. You can have just an idea or show simulated screens, ask people if they would buy it. I mean, it’s all you really have to do. You need some interest first.

Tara:

I agree with you, you know, what companies or startups that I like to work with first? Take a guess.

Tanner:

I would say post revenue.

Tara:

No, I love pre-revenue, but I enjoy working with consultants. When I see a consultant CEO, I get very excited because they know how to create and deliver a service that people would pay for. Consultants naturally have this sort of DNA for product market fit before they actually create a product. So one of my things is like, you know, go and test and see if someone would buy what you’re thinking for $5,000 over a course of a month. Right? And go see what really is sticky and what is in fact repeatable, or can be automated or can be delivered online or autonomously. Right. And that’s how they can start and backed with, by creating revenue and creating and testing that market identification right out of the gate to start really getting into what is the MVP of the innovation itself.

You’ve got to have people that are 110% committed to the plan.

Tanner:

Yeah. Yeah. That’s really interesting. So how would you define the difference between a startup and a pre-start?

Tara:

Oh, great question. So basically we talked about pre-startup where there’s focus on product solution fit. Then I think the next thing, and that’s when you’re just like changing and pivoting in that ideation and just, you know, going to town, making 50 adjustments, but then once you start to get that sort of initial traction, and maybe you are pulling in revenue, but it’s not consistent nor is it insanely profitable, that’s when you began concepting. And that’s that concept in phase is like, well, what exactly can we become? How big can this market be? Are there adjacent markets that have needs, what would be the cost or the barrier to entry into those markets who are the competitors of those markets that I would be pacing against. And those sort of concepts being at that high asset technical level is really important because it also allows you to build out a team that aligns with your vision. And sometimes the people who you start with are not the people that you end with when you get to that startup phase itself. And so that’s, that’s the whole commitment level because a lot of discovery is going to happen and that strategy. And that’s usually when you’re getting your first round of investors in the morning and you got to have people that are 110% committed, you know, to the plan.

Tanner:

Yeah. And I think that’s something that doesn’t really get talked about enough is building a team around the vision and, you know, the vision shouldn’t really change, but how you get there might. That might change, you know, if your team is going to be compatible with the path that you’re going on. Right? So what’s the process that a pre-start goes through before you would consider them a startup?

Tara:

Yeah. I think you know, pre startups are basically making sure that the strategy that they’re going on is not only acceptable by the market, but has some sort of financial backing either self-supported or by outside capital that makes sense and also has competitors. And even if it’s not a direct overlap, but you know, partial overlaps, I think that’s very important. The delineation with the startup after you get that sort of like planning and process down, I think really goes into the validation of the product market that, that really goes to the go to market strategy and figuring out how to take, you know, the MVP that is glued together by bailing wire and duct tape, and really getting that into like a hardened process with a supporting team that matches the sort of service or innovation agreement and expectations that are being set up with the customers. That startup phase is like really, what I would say, validates business in the business file, you know, the business viability.

Get close with your buyers.

Tanner:

Yeah. That’s awesome. You’ve had some really informative answers. I really appreciate it. What’s one piece of advice you can share with someone that maybe is just beginning their entrepreneurial journey?

Tara:

Yeah. my advice is that you got this. Do not underestimate yourself. If you think you need support, get help and you’re not alone. I think when it comes to the formation of the product problem, and the formation of your company, you know, just make sure not to get too enamored with features you know, to enamored with innovation. You need to just find that sort of passion and compassion for your buyers and not the users, but the buyers. And so the closer you get with them, the faster you’re going to iterate, the faster you’re going to pivot and the less sort of expenses in time will be wasted. So get close with your buyers.

Tanner:

That’s excellent advice. So, Tara, what would you say your secrets to scale are?

Tara:

Yeah, I mean, I think we’ve covered a whole bunch of that, but definitely look at this as a profitable business, profitable business at all times. And unless you’re in the environment where you have easy access to capital, as well as talent to create that insane sort of top line growth then be conservative, so you just don’t burn that out and are finally able to fulfill your expectations or dreams just because your resources were properly planned. There are a ton of different resources available, no matter where you are located. For example, there’s a lot of free resources at universities, as well as local and state governments, because everyone knows like the academics, the nonprofits too, that you know, basically startups create over 60% of the United States economy. And so, you know, for you to succeed is very important for all of us to succeed as a society.

Tanner:

So, Tara, I really want to appreciate you taking the time to do this interview. You’ve been really awesome. What’s the best way for anyone listening, get in contact with you.

Tara:

Yeah, you can find me on LinkedIn. It’s just /TaraSpalding. S P A L D I N G, just like the basketball. Or you can drop me a note [email protected] And that’s my email address that manages all BoomStartup Accelerator. I guess the other thing that I should mention is Boom Startup Accelerator is an open and online accelerator. We accept all companies at all stages and backdated percent of our user base are pre-revenue. And we have a lot of great programs that are free or low cost that are basically customized and designed to identify your business opportunities for growth. And then we align you with programs and mentors and experts and tools and all that other good stuff. So come check us out.

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