Because recognising patterns and coining new phrases is fun. 😉
a sinkhole is a depression or hole in the ground caused by some form of collapse of the surface layer.
I've spoken to dozens of PropTech startup CEOs, and most of them have never started a tech company before. They usually have a business background in property development or finance, and have identified a problem that needs solving. Before you know it they've grown some stubble and they're wearing jeans to work.
If you're from the property industry, you know it's very much a "who you know" industry. We tend to operate in friendly, professional competition rather than aggressive rivalry, and it pays to know the right people. Therein lies one of the biggest pitfalls of the PropTech CEO: The PropTech Startup Sinkhole.
The PropTech Startup Sinkhole is what happens when a founder - with all the best intentions in the world - uses their Black Book, their investors' contacts, and their salespeople's networks to start selling their product, but fail to see how this is going to quickly fall flat as a sales strategy. They think to themselves, "I know everyone in property, this is going to be a breeze!" and inevitably, their business falls into The PropTech Startup Sinkhole; a dark place where leads are hard to come by, email threads go unanswered, hot sales grow cold, and revenue grinds to a terrifying halt. The super-hot target customer list that you drooled over in your first month of hitting the phones now looks stale and outdated. The spreadsheet you'd coded with optimistically bright green cells and notes such as, "great intro call, 90% chance of closing!" is now full of greyed-out rows, and tagged with "does not answer" or "no-show to meeting" and you're dreading chasing up contacts who are suddenly giving you the cold shoulder. Investors who readily gave you their Black Book are now asking questions about projected revenue growth, and you shift uncomfortably in your seat when they ask you how the pipeline is looking.
You burned your leads, you haven't got fresh pipeline coming in, and your revenue has stopped growing. You're in The PropTech Startup Sinkhole.
Luckily, the way to get out of the The Sinkhole is to understand why it exists in the first place. Well, thankfully I'm here to tell you the cold hard facts. It's not pretty, but it's honest, and it will help you succeed.
Reason #1: your ego is inflated
I'm not saying this to be cruel or critical, I completely understand that you need to back yourself. I promise, this is not a character assassination! But the fact of the matter is this: I have seen, time and time again, business leaders who have managed to get investment through good industry relationships, and are mistakenly under the impression that they should then hire people who have similarly good industry relationships. You recognise that you could talk a good game and get that investment money, and you therefore assume your salespeople can do the exact same thing downstream, and you'll be successful. But you know what comes after this line of thinking? The following situation: you've hired people who talk a good game, but ultimately don't deliver. Why?
Well, for starters, let's talk about your interviewing process. When you interview people, you ask them who they know, who they've worked with, what projects they've delivered at such-and-such a company... you're looking for answers that you think demonstrate great business skills. But I have news for you: these are ego-based questions rooted in how you see yourself, rather than questions around the true competency of others. This will not work. You do not need to hire more people who are just like you. Diversity breeds resilience. In order to create a resilient, sustainable business you need to be surrounded by people who are experts in their field, who think differently to you, and who will challenge you.
Furthermore, in case it wasn't already obvious: your Black Book is never going to be good enough. You need really good people onboard who possess the skills and experience to build a pipeline that does not depend on existing business relationships. Your pipeline should be a reflection of the great value your product has to offer your customers. If it's simply a reflection of your Black Book, I can assure you it won't convert into success, and it definitely won't scale.
Reason #2: your position has changed
Following on from my first point: this is an ego issue. You used to be on equal footing with your business contacts. These people were your peers, your colleagues, even your friends. But now, where do you sit in the hierarchy? Well, if you're getting investment from them, you are now performing a service for them, and they have expectations on you to deliver.
Furthermore, where does this leave you when it comes to hiring? Well, you know the people you're hiring could earn more money if they continue in a corporate job and stay away from startups. You can offer them equity, but you know even that's not a huge motivator given the uncertainty of your future success.
Then - of course - you are at the mercy of your customers. You need to be offering them consistent, measurable value for money, or you'll lose them, and once they're gone, they are very hard to get back.
It's time to eat some humble pie. You, my friend, are on the back foot. This is not a bad place to be. In fact, it's a good place to be! It's humbling, exciting, interesting, and it's an adventure! Accept it, and understand that you now need to work harder than ever to ensure your investors, customers, and staff can trust and respect you.
Reason #3: your investors are not your customers
You have investors because they believe your product stands to benefit your customers. This belief may be partially rooted in their own industry experience and therefore they may very well be able to bring a few customers onboard, but the view of the investor is limited to their own experience, and as such, they will not have the market insight required to truly understand your customers' needs. This is something you need to establish through market research, testing, case studies, and trials.
While there will be some inevitable overlap between investors and customers, you really need to develop your own strong ICP and work on identifying the businesses who fit that profile.
Reason #4: your investors are already rich
...that's why they're investors. They have invested in your company because they think it might make them richer, not because they're strapped, desperate, and need you to succeed in order to keep a roof over their own heads.
Your business - while it undoubtedly matters to them - is not their top priority, and it never will be. The reason you have a job, is because it's meant to be your top priority. You are responsible for making it succeed, not them.
Your investors may help you (since it's in their own best interest to do so) but you should not be relying on them (or their contacts) to sustain your pipeline. That is something YOU need to build, and fast, before your runway is burned.
Reason #5: your business is not (yet) scalable
Speaking of building your pipeline, are you even ready to manage and onboard a good number of leads? Do you have a robust sales process with a clear value proposition and call to action? Does your onboarding ensure good product engagement, and does it allow customers to self-manage without needing loads of hand-holding from your team?
The truth is, some of this will be an exercise in trial-end-error. But that's no excuse for having a sloppy (or nonexistent) sales and onboarding process.
One reason you've burned your Black Book leads so fast is because your sales process sucks, so even a customer that seems like a perfect fit is just not going to close. You need to ensure your processes are scalable, so that when you do start working that pipeline you're able to manage it well and close as many opportunities as possible.
Reason #6: you've invested in the wrong type of commercial strategy
You've probably invested in PR, sent out a few email campaigns, spent money on advertising in industry publications, put a few things on LinkedIn... you may have even hired an entry-level or mid-tier marketing manager who has spruced up your website and written a few blog posts.
Unfortunately, those behaviours are not going to drive sustainable business growth. You may have already realised this, and have developed an understandably negative view of marketing as a result.
You need a robust, holistic, commercially-sound marketing strategy to support your pipeline. You need to build a completely new kind of "Black Book" in the form of a CRM. You need content that speaks to your target market and provides them with support, encouragement, and practical advice. You need to get cracking on a scalable growth strategy that will deliver ROI and get you out of that sinkhole!
Did you find this post useful? Would you like some support in making it all happen? Book a call with me today - I'd love to chat with you!