Guy Poreh of 5eyes on testing demand before you hire a marketer

Guy Poreh 00:47

Well, mine is a pretty weird one. I started out as EVP Digital at BBDO in Tel Aviv, one of the best advertising firms in the world, you've probably heard of it. While I was there I had an idea for a startup, and we made it real. I got funded by some of the biggest clients we had. The startup was called Snoox. This was 2013. It was what you'd call Instagram shopping today: somebody says "look at this product" and you click and you buy. This was before Instagram, so we were way ahead of our time.

The fun part is that it enabled me to move from Tel Aviv to New York, where I stayed in advertising for a while because of that startup. A lot of startups started approaching me: help us out with marketing, help us out with sales, we don't know how to get investors. After a few weeks of this I said, this is really interesting, I'm going to quit everything and start helping these startups. In the beginning I did a lot of the work for sweat equity. Over time I built a portfolio, then I had two secondaries, which gave me real money to invest in startups. My partner Ohad and I opened a syndicate for investing in startups called 5eyes. We've done about 10 investments together so far, and I have 22 companies in my portfolio. It's a whole lot of fun.

Guy Poreh 03:05

You know what, this is a fun one. Being an investor, you'd probably think there are Excel sheets, CAC, LTVs, and so on that I'm looking for. I work a little differently. Let's take a step back, because marketing means a lot of different things to different people. For me, marketing is the art and science, but it's definitely an art of making your customer choose you over the others and be willing to pay a premium to work with you over them. So when you ask what I'm looking for in a marketing team, it's not just the numbers and the Excel sheet. It's: are you able to create a brand that people will gravitate to? Do you know how to do it even without a budget? Are you creative enough to find your customer, really understand their problems, and have a solution that answers those problems? That's what defines a marketing team to me. If I were to summarize it, for me it's less the science and more the art. It's the way of thinking about the customer's problems, not about the product you're building. It's about your customer's problems, how that product can solve them, and how you communicate that.

Guy Poreh 05:10

That's a great question, and it's not really about the metrics for SaaS B2B versus e-commerce or anything like that, this is what I'm looking for over time. By the way, we usually invest in earlier-stage startups, mostly around seed and Series A, we don't do pre-seed. What I'm looking for is the evolution of the metric: has the CAC gone down? Are you able to reduce it, whether that's by improving the creative on your ads or coming up with better content? I want to see the CAC trending down like this. That's why I won't say "here's the metric for a certain vertical," because let's be honest, if you build a brand, your metric should beat the standard anyway. What I'm looking for when I assess a marketing team is the evolution: are you creating a lower cost of getting your clients to buy your product or service?

Guy Poreh 06:43

Say someone tells me, this round is about three months, and this is the first time I'm meeting them, and they tell me their CAC is $300. You know the round is ending in three months, so you don't have enough time to evaluate the progress and the decrease in the CAC. Are there other metrics you compare it to, against other companies you know? Absolutely. First, three months should be enough, because everybody starts somewhere. For instance, if it costs you $600 to get a client in month one, and by month three that's coming down, you're on the right path, and I already know that. That's super important to me. You'd be surprised by the other metrics I look at. You're going to have a lot of VCs after me, and they'll talk about their Excel sheets and how they evaluate marketing teams and startups. Let's put it this way: if I've heard of you before you walked into the room, that's a great start. If I've never heard of you, you're starting just like everybody else. There's a reason for that.

At the end of the day, marketing, and I am a marketer at heart, that's what I've been doing for 20 years before I started investing in startups, at the end of the day, if you don't have awareness, you don't have marketing. What are you doing? It's just sales, as far as I'm concerned, if you don't have that awareness. So I'm evaluating: have I ever heard of you? What have I heard? Is this a good team, a bad team, a good product? Have I seen something about you? I'd say this to every startup: if you're cold-calling an investor who has never heard of you, you're starting at the bottom. Make an effort to make sure your clients, your customers, your partners, your vendors, and especially your investors have heard of you before you've even reached out. That's the major metric for me. All the rest, to be honest, you can work on: the LTV, your product marketing, your collateral, you can work on everything and make it better. But come in with a great impression, meaning I've heard of you before, in a good way. Heard of you in a bad way, I'll say you're starting at the bottom.

Guy Poreh 10:19

You're absolutely correct, you're talking about attribution: how to attribute every piece of your marketing to the results you want, and what results you're actually getting. That's very smart, and you do have to have that. By the way, once you go beyond a Series A round, it becomes an Excel sheet, and I'd say more of a PowerPoint presentation than anything else. How do I evaluate founders who come and talk to me about their metrics? Excuse my French, I'm from advertising, so get used to this: I need to know their [bleeped @ 10:46]. It's not about the story around the numbers, it's more like, do you know what you did and why you got those results, and what you're going to do to make them better? I'm looking for a method behind the madness. If a founder comes in and says, I ran this creative on Facebook and it brought me these leads, then I did this on Google, then I did this in the email campaign, and these are the results, that's it, that's not enough. There has to be a reason behind what you did, a reason behind the numbers, and a thought process that says, this is why I got these numbers, and this is what I'm going to do next based on the data.

Guy Poreh 11:36

Well, not every VC was a marketer, not every VC was a founder. I'll say this to every startup: if you have the privilege of choosing your investors, and by the way I'm not saying I'm not one of those, finding a VC is the same as finding a partner for your startup, you need to choose carefully. I know you need the money, and if somebody offers to write you a check you'll say yes. All I'm saying is go for investors who were founders themselves, who have been through [bleeped @ 12:08], who have been through the wars, who have had their guts kicked out and their faces punched and still went forward. Those are the investors you want, because they get it, and they're the kind who will tell you it's not about the number, it's about the thought, the reasoning and the deduction behind the numbers that lets you move forward. Sometimes it's easier than you think.

Guy Poreh 12:50

That's a good one, because the most surprising thing is everybody makes the same mistakes. I'll give you the two biggest ones. I've got quite a few, and some of them are very funny, but let's be serious for a second. The first mistake is marketing your own product instead of the problem the client has, instead of an answer for the client. I've seen so many startups that say, this is the problem I think exists and this is my startup's solution, but they've never talked to their clients. They don't really know if that's the actual problem. Then, when things get real and they go talk to their customers or clients, B2C or B2B, they find out nobody really wants their product, after they've already spent something like a million dollars building it. I'd say that's problem number one, because that's the marketing team's responsibility: to really know the customer and their problems, and have a solution for their problem. The second mistake is treating marketing as just a direct-response department.

14:01 If somebody out there doesn't know what direct response means, here's a quick example. If you're in the States you've probably seen those TV ads that run for 30 minutes: look at these knives, they're cutting coins, they're doing this, they're doing that, and if you buy now you get a 35% discount and another set of knives, and so on. The expectation is that people buy now, because it's time-limited. Most founders treat their marketing teams as direct-response teams. They put out an ad and the founder wants to know the metrics the day after, and it just doesn't work that way. When you're building a new product for a new audience with new technology, it's not a knife cutting a coin, it's a new startup. It could be a SaaS platform that helps the cloud work better. You're not going to get a client within a day, you're not even going to get one within a week, it's going to take months. As a founder, you need to be able to direct your marketing team to do the right thing, and not wake up stressed every morning because the numbers from the day before aren't what you wanted to see in one day. In other words: breathe, and let the work be done.

Guy Poreh 15:43

Great question. Yes and no, because sometimes founders, and some of the most genius founders I know, are introverts who have a problem talking to clients. That's okay. They're great with code, they're great with product, they're great with thinking things through, but they find it very hard to pick up the phone and talk to a client. That's why it's always good to have someone on the team who can do it for you. Let me give you a great example. I'm saying this on purpose, I'm not going to talk about any of my own portfolio companies, because that's like talking about my favorite kids and comparing them. I'm going to talk about a company I want to invest in instead. That company is called Heavys, and they make headphones for metal, for people who love metal music.

The founder had the idea, and he's not the kind of person who's going to strike up a conversation with metal heads himself. It's a weird crowd to begin with, and it's hard to get a straight answer out of them. So here's what he did: he went to Wix, and he built the worst sales page in the universe of sales pages, with a picture of some heavy metal headphones and a pre-order button. He spent like a hundred bucks on Facebook ads. Next day, he had $220,000 in pre-orders. That is talking to your customers too. You don't have to pick up the phone, you don't have to be able to do marketing yourself, you need to be able to find someone, or something, that will do it for you. It's as simple as that. What he found out was that his customers are an underserved community willing to spend a lot of money to get their real needs answered. By the way, this company did $10 million in sales in its first year. Really, really impressive.

17:38 My take, as both a founder and a marketer, is that it's way easier on the B2C side. When you're planning to do this as a B2B enterprise seller, you definitely have to pick up the phone, it's way harder to estimate otherwise. On the consumer side, it's definitely easier to take something like $1,000 and see if it works, and then you have a read on whether there's a need in the market. To be clear, you're right that it's not always the founder who can pick up the phone, that's all I'm saying. Sometimes the founder can do what the CEO of Heavys did, by himself. Sometimes you just pick someone from your team, or even a friend, to do it for you.

And sometimes there's even more structure than that. You've probably heard of Team8, they're doing really well, and they have a really interesting model. A big part of it, as far as I know, I'm not part of Team8, but as far as I know, is that before they build the product, before they incubate it, before they invest any money, they have someone senior, not the founder, at Team8 who picks up the phone to the potential client. If the potential client says, I don't need this, they just won't build it. If the potential client says, this is something I'm interested in, they will build it. The point is you need to find a way to talk to your potential customer even before you build the product.

Guy Poreh 20:36

The number one mistake, I'd say, is treating the marketing team as a sales team instead of a brand-building team. Most founders only tell their marketing teams to look at the metrics: how much money are we putting in, how much are we getting back, how many sales did this bring immediately, that direct-response thinking I mentioned before. They don't understand that the path to success is building a brand. Most of us know this instinctively. If there's one shoe and it's Nike, which one are you buying? Nike costs more, by the way. You're probably going to buy Nike anyway. If you're looking for an EV and you want something great, you'll pay more for a Tesla. This laptop I'm on is an Apple laptop, it costs way more than any PC, and I still bought it because it's Apple. That's where you want to be: you want to be the brand leader of your category, where it's obvious to the client that they want you and not your competitor, and they'll pay more for you instead of your competitor, and it has nothing to do with your features or your solutions. Everybody in your industry, at the end of the day, will have roughly the same features and the same solutions. You want to build a brand. Let your marketing team build that brand.

Guy Poreh 22:17

Absolutely, and that's the goal of the marketing team: create that feeling, create that value, create the thing that tells the buyer, especially in B2B, especially in B2B, that they want to buy you and nobody else. By the way, most people forget this, but in B2B you've got companies like Salesforce. For anyone from Salesforce about to hear this, I'm sorry, but your product is [bleeped @ 22:45], and I'll still pay more for it because you're a [bleeped @ 22:49] brand. It's not because I think it's built so much better, that part can change. No one got fired for buying IBM, and no one got fired for buying Salesforce. Don't get me wrong, it does the job, but once you have your name attached to that phrase, you're a brand.

Guy Poreh 23:15

And I'm constantly talking about this: finding the point where you need to put the money into the brand, because you don't need to do it from day one. Day one, you need to show people are actually willing to buy, and then you need to build the brand in order to really make it scale.

Guy Poreh 23:38

That you're always wrong in the beginning. At the start you have a certain idea of what the startup you're investing in could become, an idea about the team, an idea of who the clients are, and usually within six months you're genuinely surprised at how wrong you got it. Companies you thought were an okay investment suddenly are worth half a billion, and companies you were sure would be rock stars close down after a year. By the way, I haven't lost a company yet. I've got 22 over seven years, none have closed. Hang on, it might still happen, statistically it will happen, but at this point I'm really proud that I haven't lost anyone.

Guy Poreh 24:29

That it's somehow easy, that it's a path to riches. I think most startup founders start out assuming this is going to be an exit, a path to riches, that it'll work out and be easy, one client after another. You'd be surprised, even though the literature and the podcasts and the videos will all tell you otherwise, it's like nobody listens. I want to debunk that myth: it is a roller coaster ride, you will get punched in the gut, in the face, kicked in the balls, and if you're a woman you'll be kicked everywhere. By the way, female founders are the most successful ones in my portfolio. You'd better get ready for it, because being a successful startup founder means being able to take the hits and keep moving forward. It's not easy, but in the end it's the most fulfilling way to live that I can think of.

Guy Poreh 25:39

But at the end of the day, as a founder, this is yours, and you're not working for someone else. There is nothing that can replace this feeling when someone sends you an invoice, and it can be hundreds of dollars or $100,000, it's the best and the worst feeling together.

26:02 Of course. That feeling when somebody's willing to pay you for something you created is the best feeling ever. It's not just startups, think about it this way: musicians, actors, whoever, when people are willing to buy a ticket to your performance, that's an amazing feeling. When people are willing to pay hundreds of thousands of dollars, or even $10, for something you built using your laptop, it's just a beautiful high. Then you come back down to earth and get back to work.

Guy Poreh 26:48

Don't treat your investments as passive. Every investment you make, work with the founders to help it succeed, be on their side, be there to help. Not like most VCs, sorry to my community, but I'll tell the truth, it's not just "give me a call, how can I help." No, at least in the beginning, sit down with them once every two weeks for an hour, help them solve their problems. If you don't know how to solve their problems, find people who will help them solve their problems, get them consultants, get them advisors. Be on their side when they really need you, not just for the check. Otherwise you might as well put that check into real estate and forget it.

Guy Poreh 27:41

The hardest question of all, I think, if we're talking about marketing, is when do you start building the brand, and how much money do you need to build it. That's a really tough question, I'm glad you didn't ask it. If you had, I'd say this: if you're B2C, from day one, find somebody who knows how to build a brand even without money. There are plenty of examples of that, including Mark Zuckerberg, who built a brand out of this thing called Facebook, mostly by not letting everyone use his product at first. There was that velvet rope: you had to be at Harvard, you had to have a harvard.edu email to get in, and that created demand. That was one tactic, the demand was also because of other things, but it started building his brand for free. So if you're B2C, from day one. If you're B2B, once you have more than five clients paying you, it's time to start building the brand and investing in it.

Guy Poreh 28:52

I always have a great time. It's my pleasure, thank you so much.