Ask HN: As a Founder, is this business model compelling?

You are missing something really really important.

Most startups don't have product market fit. Further, most startups make things no one wants. The product might sound good to you and you will think "oh I can sell this", but you will work your ass off for no results.

They you may go back to the client and say "Hey the market doesn't want your product, they want this instead". Now you are doing free market research for them, and most likely, they won't listen to you anyways.

You may think "okay I need to be good at identifying startups struggling to sell who have products people want" and then you may realize there's a whole industry of VCs trying to do this, that mostly suck at it.

I think you'll find that young companies with products people want who are struggling to sell is extremely rare.

There's a reason the business model your suggesting isn't more prevalent with startups, and it's because sales skills matter far less than market fit.

Also, the model you're suggesting is really common for well established products with product market fit. Insurance sales, Tupperware, Cutco, lots of other examples...

If you're really drawn to this model, just beware the MLM ones where you have to pay first to sell the product.

I launched and shut down a sales tech startup. This was the exact experience we had with earlier stage companies, particularly startups that do not have product market fit

This is a great point, and really meshes with my experience as well. We've had some great salespeople but deficiencies in the product (mainly lack of certain enterprisey features) made it very hard to sell. They worked their asses off and closed almost no deals. And our product was good and really close to what the market wanted. Contrast that with most startups which not only have to convince you to open your wallet but also to do so for a solution to a problem you don't currently have (or at least, don't know you have).

If you have an excellent sense for products then the model might work, but I've seen some of the smartest people I've ever met walk right into a wall, even when doing everything they can to reach/verify the fit. It's an incredibly hard problem

> You are missing something really really important.

> Most startups don't have product market fit. Further, most startups make things no one wants. The product might sound good to you and you will think "oh I can sell this", but you will work your ass off for no results.

For these exact reasons, this same business model would probably work really well if you were instead connecting pre-seed / seed round startups with VCs who commit to a round instead of customers lol

agree and great comment.

maybe they should focus on. growth stage startups? frankly, even incumbant who are perpetually trying to play catchup and are more startup like in their core teams via transformation maturity and have what startups don't have, market fit and deep pockets.

target the enterprise b2b orgs in private equity portfolios.

To add to this:

Most good founders (regardless of market fit) should be figuring out sales engines themselves. Especially the first version.

I would not invest in a company where the founder is trying to offload sales. Precisely because, as mentioned, sales, market fit and product are so deeply interlinked.

Yup. As a founder who outsourced sales early, I have big regrets because it always ended up being me actually making the sales with my network and ability to understand the market.

So the regret comes from wasting a lot of money. Always do your own sales first.

Sounds like there's market demand for a consultant that builds the sales engine then. A lot of people don't know what to say, how to say it, who to approach.

Edit:

Sort of, but not in the way you are thinking about it.

People want help with this yes, but they shouldn't be outsourcing it.

The founder needs to ask literally thousands of questions to the market (can vary depending on how simple or complex the market is). If they haven't asked these questions, then they shouldn't be outsourcing it.

If they have asked all the questions, they know who to approach, what to say, how to say it. Then they can hire consultants to help them build the sale engine, which is actually all about adopting the best tools, distributing work, hiring, performance management, incentive structure, etc.

The parts that are specific to the startup (who to connect with, what to ask, what to say) need to be figured out by the startup and done by the founders. The parts that are more generic to all companies (hiring, training, performance management, team structure, tool stacking). Can be outsourced, and probably should be if the founders don't know how to do these things or really don't want to.

Edit 2:

The reason the founders shouldn't be outsourcing this, is that the founders are the ones to decide which part of the market to focus on and what to prioritize in the product. If they try and outsource it to someone else, there is an extra layer of noise in the communication between the two.

There is also this thing called the innovators bias (lots of cognitive biases really) that will exacerbate the situation because the founders with the power will over-weight their own incorrect instincts against what they hear from one person (consultant), but they will more appropriate weight their instincts against what they hear from dozens to hundreds of actual possible customers.

Great insight and feedback from all above, thank you. My approach is to be more of a supporting actor that is heavily involved rather than someone you completely outsource to. I hope to find companies that are passionate about what they are building and have a demonstrated product-market fit, but lack the bandwidth to develop an entire sales process and department. I am envisioning becoming an onramp to sales where I start by providing low-risk representation to prove my value, grow revenue enough to justify hiring sales people, develop said people and processes, and then see if it makes sense to stay on or hand off a fully functioning sales department.

To begin, I want to keep the number of clients low and then narrow it down to the one experiencing enough growth to move to stage two and beyond. There's obviously a lot of pitfalls, but I'm a dreamer and hope to find a way to make it work!

Devil's Advocate: isn't selling making people believe they do want your product and are willing to pay for it? The vast majority of sales people are (mostly) paid on commissions.

There's an entire industry of "closers" (and the natural companion, people selling courses on how to build an agency of closers). Pitches like "we place closers into your business and guarantee they close business or you pay us nothing" are the standard. The reason this business model is not as good as it seems is that the incentives aren't aligned, these closers don't care about the business, so they'll sell to bad clients to hit their targets. You can definitely be successful doing this (so don't be discouraged, if you do it well you'll stand out) but you're competing with an ocean of trash that so many businesses / startups have been burned by and/or are apprehensive of. "high ticket closer" is the phrase you can google for to find examples.

edit: https://www.reddit.com/r/sales/comments/146gjwu/what_the_hel...

FWIW, many years ago I started a little tech company. I was convinced that we had a compelling product, and we had some initial customers - franchises of a large, worldwide organization. It would be easy to springboard to more and more franchises, before even looking elsewhere for customers.

Turns out that I hate sales. Not coincdentally, I'm also not much good at it. We talked to some marketing agencies, but all of them wanted flat fees, and none of them would consider "performance based" payment.

So, yeah. I wish someone like you had existed at the time.

It doesn't work that way unfortunately. The founder(s) have to sell initially because you know your product the best. No external sales person can come and suddenly get all these sales. You may hate sales but if you want to start a business, you are the best salesperson for your product/service.

There is no magic wand to this. You just learn sales by doing. I am a nerd myself but when I started my company, I automatically started selling which is mostly just trying to talk to potential customers and understanding if your product can solve their problems. Only you know that best in early days.

Or hire someone who can sell.

The reason why many sell themselves is because it's cheaper. The founder knowing the product the best is true but trying to be a world class seller is best left to those who can be a world class seller which many founders fail at.

Marketing agencies don’t do sales, so that makes sense. You can get performance marketing agencies to do cost per lead / cost per acquisition goals, but that’s all through search/social/organic/etc and not actually closing or calling leads.

My startups get 4 of these pitches a week. All performance based. All with amazing claims of close rates - for lines of business that are completely unrelated to mine.

The investor side of me thinks the founders should be doing early sales. I don't agree that capital is any harder to raise. IMHO market turmoil is good for angel/seed as those with means are looking for alternatives.

This exactly. People are already trying to do this and judging by the sales techniques they use to approach me (spam emails) I don't want anything to do with them!

Early stage startups, no. They don't typically know what to sell, how to sell, or who to sell it to. Many failed founder sales efforts start out with wishful thinking "I just need to find someone to help me sell." Pre PMF founders will drive you crazy with their naïve sales/product decisions.

However, for a company with PMF, if you have industry connections, and can help them get a short term boost of deal flow, I could see that being very attractive.

Helping first time founders setup any sales process at all can also be viable. You help them refine their closing process, hire on their team, and then move on.

Every model has a hard part. Yours is this: you need to be able to rapidly assess which products are easy to close before the startup knows it.

If you have the taste to find that sweet spot you’ll do great. That said, this level of taste is most often deployed alongside venture capital where you’ll work less and make way more.

If your taste isn’t good then you should build a highly effective cheap rapid assessment tool out of your business so that the tool can tell you what’s good fast. Which is a thing many venture firms do or have tried to do, for obvious reasons.

Upshot: sure, give it a try. I suggest you negotiate for some options along with your cash comp for being ‘free’, because even a great venture portfolio hits like 1 in 20.

If you can assess which are likely to sell, you may as well just invest in them instead.

They are with time.

or vibe code it

I said that. And agree.

About 10 years ago I worked for a startup that used a sales agency. Unfortunately it did not go well, in the nearly 3 years I was there they never made a single sale.

They didn't understand our product and had no desire to understand our product. I advocated to end the contract with them, but management refused.

So I think I would want some verbiage in the contract that says I can just walk away if I don't think it is working out. I understand you need to protect your interest too, but I wouldn't want to get strung along by someone who is just not willing to put in the work.

Would OP’s proposed performance-based contract, where they’re only paid when the sale goes through, align their interests with yours better than the status quo model you describe here?

No, because of the second-order dynamics:

OP will have multiple clients. OP’s sales employees will get to choose which things to sell.

OP’s customer still has to do a lot of work to bring OP’s salespeople up to speed at all, and even more if they want to be successful/“compete” with OP’s other customers for OP’s salespeoples’ attention/effort.

It can be a good business model for OP if he can get it, but as has been mentioned elsewhere seasoned potential customers will not, and should not generally, bite.

The downside for OP is once the sales process starts working, his customer grows, probably hires in-house sales staff, trains them off OP’s work, and cuts his contract, so he is always having to work to bring in new.

This sounds like the "affiliate marketing" business model (earn a commission when you sell someone's thing). That business model is definitely alive and well!

I might have tried a service like you're proposing when our company was very small.

Now that it's bigger, we have revenue goals that we need to hit, and I wouldn't want to hire someone for free to help hit important KPIs. If a larger company does engage with this model, it would probably be to supplement an existing revenue stream I would imagine.

I think the biggest risk with the model you're proposing is that it's more appealing to small companies who are more likely to not have reached PMF yet, and therefore have products that are more difficult for you to sell compared to more established companies.

Hey! I'm the founder of an early stage startup. The product was long in the making, about to release v2 and I planned to do sales myself.

I've played with the idea of this model myself, in the sense that it would be an interesting value-creating service. I'm open and also skeptical.

1) My product is software, you were in hardware. 2) Do you have a large existing rolodex? 3) How many startups do you plan on representing? 4) Where are you from & where are you located?

I'm not shy of talking to people. The biggest help for me would be prospecting and qualifying.

I'm in a rush, please reach out! Email in profile.

This business model was quite popular and successful in the 90s in the UK when early stage US tech firms wanted to come to Europe without having an office or perm hires. Those working in it that I knew were highly capable. Most of them went on to be hired by the client once enough business had been built in the geography. They would typically become EMEA VP Sales for said clients. Netscreen among others started this way in EMEA.

There is no way to know if a business model is compelling. There have been many business models that didn't make sense to most people, yet yielded good businesses. If you believe there is potential, you as entrepreneur can take the risk in trying it out and potentially reach success. If you end up trying, I hope you succeed in your endeavours.

This could work if you have a rolodex you can monetize in a particular market. It could also work if you are amazing at sales and can identify which startups have PMF, so you work with just those. However, startups with PMF are rolling a stone down a hill, so generally wouldn't need the help you could provide.

Saving a penny to outsource external sales that’ll be out of the product management loop during early stage, just isn’t compelling, sorry. To my ears it sounds more likely an agility drag than anything.

It might work for a product that’s already found a segment and is looking for new markets.

I think it's an interesting approach. With, yes, caveats as people have pointed out, but there are caveats to everything, and this approach removes a huge barrier to 'try them and see'. If you want to talk specifics, contact info is in my profile.

The cost of onboarding a sales person (you) seems high for a maybe-functional part time employee. For you, learning enough about countless products sounds challenging.

There are many positive and negative sides to this but I’m willing to give it a try. Reach out if you’re looking for a small pilot customer. Contact info in bio.

This business model is always compelling, but you have to be extremely selective with which customers you decide to take on.

You're also going to have to take into account whether it's compelling for you, considering the non-zero risk of devoting a lot of time to businesses with limited product-market fit. That's obviously less risky if you're sticking with markets you know well, or if you end up with a massive portfolio of products so you can switch to pitching something else as soon as you see the customer's eyes roll...

There's an adverse selection problem where the businesses that aren't market ready are the ones most likely to be intrigued by the idea of someone who isn't an employee and doesn't cost anything doing their sales for them.

I'm potentially interested in this service, do you have a website?

I do! You can find me here - www.scalablerevenues.com

I'd be interested in knowing more. Contact me.

Outsourcing sales means not talking to potential customers. So it is psychologically more attractive than rejection.

Outsourcing sales to a person with competing incentives is even worse...by competing incentives, if you have ten clients for your service one of them is easiest to sell. Nine of them are not the easiest.

Good luck.