B2B Marketing Advice from Mike Troiano, Newest Partner at G20 Ventures

Mike Troiano joined G20 Ventures as the third general partner almost a year ago. The Boston-based firm invests in “early traction” stage (late seed/early A), East Coast enterprise software companies. (Here’s a post from a few years ago on the founding of G20 Ventures.) G20 is currently investing from its $67 million second fund. Its sweet spot investment is $2 – $5 million Series A. The firm has persuaded an impressive group of individuals (the group of 20, hence the name G20) to serve as LPs and as advisors to portfolio companies.

Previously, Mike served as the Chief Marketing Officer of Actifio, a global enterprise data-as-a-service provider. He spent his early career in the ad business, with stints at McCann-Erickson and FCB, and he was founding CEO of Ogilvy & Mather Interactive. He was also president of systems integrator Primix and GM of mobile content pioneer m-Qube.

As a venture investor with a marketing and agency background, Mike brings a different perspective to enterprise software than most VCs.

You can follow Mike on Twitter, Medium, and SoundCloud.

Mike Troiano

Q.   Mike, what made you decide to enter venture capital?

A.   At the highest level, it’s a chance to get paid for doing what I love, which is to help entrepreneurs build businesses. While it was not something I’d aspired to, when the opportunity arose I took a closer look and realized the day-to-day focus of it wasn’t dramatically dissimilar to being a principal in an agency.

If you’re running an ad agency, you’re spending a lot of time beating the bushes looking for new clients and new relationships. You’re trying to add strategic value on a range of questions across a range of different industries, and to be a kind of a consigliere to people who are on the firing line.

So, the day-to-day motion – the lifestyle, if you will – is pretty familiar to me. It’s just a dramatically better business model.

Q.   Why G20?

A.   A lot of reasons. Number one would be chemistry and cultural fit with my partners. Ash Ashutosh, the CEO of Actifio, initially warned me off venture because a lot of venture partnerships are weirdly dysfunctional – a lot of ego, a lot of politics. Not things I care for.

I had worked very closely with Bob (Hower, one of G20’s founding partners) on the board of Actifio for five years. I knew him as a person. We’re very aligned in terms of how we think about business and about marketing. I knew him to be the kind of person I would be happy to be shoulder to shoulder with, going through the ups and downs that are part of building any company.

Q.   You were one of the original group of twenty for whom the firm is named.

A.   I was. Despite probably being the least accomplished in the group, but somehow among the most called upon by the portfolio. For whatever reason, companies tended to tap me on the shoulder quite a bit.

The other thing I liked about G20 was the segment of the risk curve we’re focused on, which is kind of late seed, early A, and kind of a sweet spot for me. I like order. I enjoy finding the patterns in the dots, synthesizing complex ideas in ways that make them simpler and more accessible. I think that skill set, and the marketing skill set in general, is best applied after the point of product-market fit. In the seed stage, there’s a lot of rapid iteration, which I find personally stressful, as opposed to stepping into a situation with a company that’s sold the same thing the same way a few times and helping them tell that story more effectively. That’s really the part of this I think I’m uniquely good at.

Q.   On your website, you say G20 supplies “early traction capital”. That’s new to me. What do you mean by traction capital?

A.   There’s been such atomization of the various funding stages – angel, pre-seed, series A. You’ve seen companies raise anywhere from $3 million to $40 million across the first or second money in. What really defines where we enter is less the round and more the stage of the business. We like to invest at the point a company has stabilized their offering and is shifting focus to scaling the go-to-market model. We came up with the idea of “early traction capital” as a way to communicate what we do, and the people we want to get it seem to.

Q.   What types of companies do you want to see?

A.   We like enterprise technology, something that has a business buyer. There’s a lot of overlap, not coincidentally, between the kinds of companies we think we add the most value to and the kinds of companies we like to invest in. If you’re looking to scale a mobile app, we could probably bring some good ideas and some good talent to the table, but it’s not something we’ve done ten times. But if you’re building an enterprise sales organization and trying to understand the levers of success and productivity, we can really bring a lot more to the table than the vast majority of venture firms.

We tend to like B2B businesses where the core IP is rooted in some kind of technical differentiator, usually software based, but not always.

Q.   Still an East Coast focus for G20?

A.   We think there are actually dis-economies of scale in venture… That venture is really a fairly intimate, face-to-face kind of a business. I think that’s a bit of a contrarian view in a world of $4.5 billion super funds, but we really feel like this is a human-scale business. Our aspiration is to engage with a limited number of very good entrepreneurs to build great businesses. We have a pretty concentrated risk model… We’ve invested in nine companies in fund one, for example, and that’s about right for us – eight to ten companies per fund.

Our geographic focus stems from this philosophy. We want to be connected to our companies, to engage with them in solving problems on the ground, as opposed to an arms-length global or even cross-country transaction where we’re going to check-in via speaker phone once a quarter for the board meeting. That’s not how we roll.

Q.   When do you want to meet a new company? Before they’re ready to raise money? What milestones should they have hit before you’re ready to write a check?

A.   We want to see them as early as possible. We want to see them when they’re at the seed stage or even at the angel stage. We’re happy to meet smart people about to pursue great ideas, regardless of the stage of the business.

Smart money invests in a line rather than in a data point. When we have an opportunity to meet with an entrepreneur who says X, Y, and Z are going to happen, and then engage with them eight months later and see that X and Y have already happened and Z is in the works, it gives you confidence that you’re dealing with a team that understands what it’s doing.

So we’re very happy to engage with entrepreneurs, and, by the way, to do work on businesses to see where we can add value. I’ve done a bunch of messaging workshops for companies that were still early for our fund but were businesses or entrepreneurs I was excited about.

It’s a relationship business so we’re happy to add value and engage as early in the process as we can. We are very much aligned with some of the better angel firms in Boston and always happy to make referrals when we see a fit for both parties. I’d go so far as to say that if you want an objective but informed assessment about which seed firm might be a fit, where the best place to begin.

Q.   As a former CMO, do you think there are opportunities now in AdTech or MarTech? Are you investing?

A.   I’m sure there are, but they’re few and far between. Ironically, having been a CMO, I’m very cynical about AdTech. I’m actually negatively predisposed to opportunities in that space because I know how hard it is to break through the noise of ROI claim.

As a rule of thumb, I think any new software solution in that space has to eliminate at least three other software solutions. I’m a big believer in radical simplification. We’ve seen some interesting businesses looking to apply AI to improve returns, but nothing that’s gotten us off the dime. We’ve seen some really smart tactical executions – things around influencer marketing and incentive marketing – but it’s hard to break through there and find something that has the potential to offer a venture-scale return.

Q.   I know you’re very interested in blockchain. Which use cases do you find most compelling? Is there a difference between those that are most compelling and those that are most investable today as opposed to a couple of years from now?

A.   In general, we’re more enthusiastic about DLT (distributed ledger technology) than we are about cryptocurrency per se. That said, you can’t really separate those two things in the better business models out there. Generally speaking, we believe in the power of blockchains to disintermediate lots of different industries and that offers the potential to transform value chains and create venture-scale returns. We’re looking for companies where there’s some sort of rent-taking trust-enabler, let’s say, acting as an intermediary between multiple parties. The rents they’re extracting tend to be huge. We’re talking about banking, insurance. Those are the companies we’re spending time looking for, but there are interesting blockchain solutions out there performing things like identity verification and other forms of transactional services.

As for timing, we have yet to come across a project that met our “early traction” criteria. But there’s certainly a group of companies out there that we’re closely tracking and rooting for, and in some cases actively supporting. Down the road some of those are going to reach our sweet spot on the risk curve.

Q.   As an investor, do you want to see an enterprise software company go global with its Series A, or should it stick to the U.S. market until later rounds?

A.   I’ll give you the wimpy answer, which is that it depends. I think there are businesses that are very homogenous around the world – storage, the hypervisor business, even networking. These are business that have a fairly well-defined stack and whether you’re at a company in Estonia or Hong Kong or San Jose, they have basically the same logos in the data center or they’re using the same cloud service provider. So businesses that have a very homogeneous technology stack, I would say that’s gate number one.

Gate number two would be the nature of the distribution channel. Channel partners play a much more important role in Japan than in the UK, for example. So we’d look at what is consistent globally and what is variable globally, and ask if the management team has the experience and the personal relationships in the geographies they want to penetrate to manage the risks in a sensible way. If these things are true, then make it happen.

We would say do it in a measured way rather than in an aggressive way. You want to put a sales team on the ground, begin to get some traction, and then build a local presence behind sales traction as opposed to doing the reverse. That’s my bias, having been an operator for so long. But it really depends on the business.

Q.   I’ve had CEOs, and sometimes even marketers, tell me that marketing isn’t really important at a company selling to businesses, because business buyers aren’t affected by it. Having sales people is all that matters, and buying decisions are all made based on product specs and price. Your thoughts?

A.   My thought is that those people are wrong.

Look… Businesses don’t buy things. People inside businesses buy things. And those people don’t transform magically at 5:00 from “Bs” to “Cs.” You have to understand the emotional drivers of behavioral change if you want to build an outsized success whether you are selling to a business or to a consumer.

To be honest, this persistent ignorance about the nature and value of marketing really pisses me off. It’s crippled Boston relative to the West Coast for too long. If I had to put my finger on one or two things that really put us at a cultural disadvantage to our Silicon Valley counterparts, this idea is right at the top of my list.

Q.   You’re building a marketing program for an enterprise software startup from scratch. What’s the first thing you do?

A.   The first thing is to figure out a story that sells. You have to have a very quick, two or three sentence articulation of what this is and why it matters and really have discipline in engaging prospects with that same articulation at every point of contact with the marketplace. That two or three sentence distillation should come in a long form that is a 10 or 12 slide PowerPoint you can use as an executive-level introduction that answers enough questions to get customers talking about their problems.

So it starts with the story and crafting the story; unfortunately, it starts with the PowerPoint. So building a quick positioning blurb and them a corresponding 15-minute deck that gets that across in a way that’s compelling and engenders interest should be the starting point of a B2B marketing program.

Q.   What should the marketing stack for an early-stage enterprise software provider consist of?

A.   It kind of depends. Let’s talk about results rather than enabling infrastructure. I think where most B2B marketing programs go wrong is not in the selection of the underlying CMS or marketing automation suite. It really is in understanding the mission relative to sales.

The role of marketing in an enterprise sales organization is really to enhance the productivity of sales and marketing spend over all. The way I measured success as a marketer was always in sales productivity, meaning am I creating leverage? I would use a very simple ratio to measure that, which is revenue (or bookings) over a given time period, divided by my total sales and marketing spend for that same period.

The role of marketing is to improve that productivity metric. It’s to create more and more leverage for the same-sized sales organization; to help each sales guy sell more. That’s partly demand gen, there’s a brand aspect to that, there’s good story telling, there’s customer loyalty and those kinds of programs. Certainly, user experience is part of that metric and it tips into product marketing.

What I often see is this very dysfunctional approach to marketing which is about optimizing a very manufactured marketing output like MQL or some bullshit metric the marketing people have created to feel like they’re winning.

I think that’s very destructive; I think that keeps marketing people from having a seat at the grownup table. It’s part of the reason for the question you asked before about B2B marketing, which is something I’ve heard, too. I think that comes from someone who was only exposed to marketing that was trying to optimize for things that didn’t matter, as opposed to marketing that was entirely focused on creating leverage in the sales model. Where you have a marketer who is focused on that, I think you have a real accelerator in the business, someone who can be difference maker between success and failure.

Q.   How important is user experience in enterprise software? Aren’t users a captive audience?

A.   Again, it depends, specifically on how the software is used. More and more, enterprise software is accessed through an API. Is user experience really a dimension of assessing the quality of a CLI? But for the subset of B2B applications that have some sort of human interface? I think it’s very important.

You have a real generational shift inside the IT organizations of a lot of the shops I’ve been exposed to, both at Actifio and through the portfolio. You still have some diehard guys with their Cisco coffee mugs, but those guys are retiring, and the people coming in don’t want it to be harder to do things at work than it is at home. They have an expectation about how software should behave based on the things they can do on their phones.

The era in which B2B software makers really viewed complexity as a feature rather than a bug because it created a culture of certification? Those days are kind of over. Today, having a simple, powerful, elegant UI is really hugely important for any enterprise technology that is going to have a human user.

Q.   I’ve started an enterprise software company. When do I start thinking about brand?

A.   Right away. Brand is the emotional value proposition that wraps around your product experience. Right from the get-go, you should be thinking about how you’re going to change things for the customer.

A quick anecdote…. My third day at Actifio, I found myself in a customer council meeting. Now, I was a bit of an odd duck there, since Ash had brought me in as really the first true general marketing guy. They were taking about feeds and speeds and lots of math, and at one point I asked, “The first time you used the software, how did it make you feel?” There was this pregnant pause, and my whole team turned and looked at me sideways, like, “What the hell are you doing?”

Eventually, one of the customers said, “It felt awesome. Up till then, I carried a pager and I never knew when it would go off. I was terrified.” Someone else told the story of keeping ramen noodles in their desk drawers because there had been a network failure at one point, and they’d been unable to leave the building for three days. They were able to eliminate the noodles after coming on-stream with Actifio. Someone else said it was like “the first time I kissed a girl.” Totally serious.

I came out of that meeting and said we’re not selling data virtualization. We’re selling freedom. We’re liberating people from the tyranny of 20th century storage architectures. Once you have that sense of mission, everything comes into clarity. It affects UI and it affects messaging and it affects brand identity. If you can get to a place where you understand the emotional response to whatever it is the product does in the moment it does it, I think that’s hugely important and hugely undervalued.

Q.   At what point in its development should a B2B startup consider adding a CMO or marketing head? Day one?

A.   It’s a great question. I’m inclined to say no, not out of the gate. The best founders I’ve met do have a kind of innate marketing sensibility, or certainly an orientation to customers. I think the best marketer for an early stage company is the founder, because he or she has the requisite customer intimacy as well as the juice inside the organization to make shit happen.

When you bring in a dedicated professional is probably at the point where you have product-market fit. Things have to be stable enough to professionalize messaging and storytelling. In the rapid cycle of iteration that characterizes the seed stage, marketing is about formulating your hypothesis, and being disciplined about keeping the team aligned and together, moving in the same direction. But everything in the seed stage is written in pencil. It’s a rare marketer who is equally good at that kind of rapid-cycle iteration and at the kind of messaging discipline it’s going to take later on to connect to the marketplace.

Q.   I’ve maintained that one reason that average CMO tenure is so short is that the role is too often poorly defined. What should the CMO be responsible for, so that that person is set up to succeed?

A.   If you separate marketing communications and product marketing, you really neuter whomever steps into the marketing role. You have to be able to shape the priorities of product management in order to be a real marketer, and you have to work your way through a level of intimate familiarity with the product and what it does in order to matter, as well.

I would note that a CMO is very different from a VP of Marketing, in ways many people seem not to understand. The VP of Marketing is the senior-most marketing person. They represent the interests of marketing at the management team level. A CMO is an executive who happens to oversee marketing. That’s a very different orientation. At the end of the day, you are focused on the priorities of the business and looking to apply the tools and techniques of the marketing discipline in service of those objectives. It’s subtle, but really important – a CMO is an executive who runs marketing, and a VP of marketing is a marketing person who moonlights as an executive.

Q.   As a marketing person who is now a VC, how do you evaluate the marketing aspects of a business plan you’re considering for investment?

A.   It really depends where they are on the curve. Early on, what I’m looking for is lots of good ideas that are ready to be tested at pilot scale, and really good discipline and infrastructure for measurement to do attribution and assess impact. Having some humility about what will work and what won’t and having the creativity to try different things and an ability to measure that and follow the data are what you are looking for before you’ve found a go-to-market formula that works.

For a later stage or more highly-valued company, I’d be looking for a pretty clear sense of the relationship between inputs and outputs (if I spend X, I generate Y). The further along that curve you are, the more clarity there should be in understanding what is the return on an investment and what is the cocktail of tactics that tend to move the needle most in terms of revenue productivity.

Q.   What’s your take on the state of VC marketing, how VCs market their own firms?

A.   It’s transformed in the last decade. There are some very good marketing people in platform roles at VCs today. There are fewer GPs like me, but some very good platform people out there, and some firms that are doing a fantastic job telling their stories in a way that doesn’t glorify them over the companies they invest in, which is the other tricky bit here. It requires some finesse.

Q.   What haven’t I asked that I should have? What else would you like readers to know?

A.   I’d just highlight our core belief, that venture capital is best deployed at human-scale. We’re not interested in scaling our funds, we’re interested in scaling our portfolio companies. We’re very comfortable in the role of Wartime Consiglieri, because we don’t want to be the Don.

Our goal is always to contribute something meaningful besides cash to companies at the right stage and in the right geography for us.

If you’re seed stage and need help figuring out how to tell your story or you’re interested in a conversation about some of the dynamics we’ve covered in this interview, reach out to me. I’m pretty accessible on Twitter and always happy to chat with a good entrepreneur.

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