Sramana Mitra: You are saying that you focus on customer acquisition more than technology. You are worried about how quickly a company can get into revenue and what its customer acquisition strategy is.
Can you elaborate on that? What are some nuggets that you are learning from the market of effective customer acquisition strategy?
Elizabeth Yin: There are acquisition channels that are competitive already. Every customer acquisition channel has a cost. A lot of people think that SEO might be free, but there is a cost to hire people to write, build links, and partner.
When I look at an idea and based on gut feeling, I determine if this spread might be too tight between what I perceive to be the CAC at scale and what I think the value of the customer is. That is essentially how I make my decisions.
Sramana Mitra: Let’s talk about some of the companies that you have invested in. Talk about what you see in them, especially by way of customer acquisition strategy. What were they doing that got them an effective customer acquisition strategy? Since that is your determining factor, let’s do some case studies on it.
Elizabeth Yin: I have a wide swath of companies where the customer acquisition methods will range. I have several consumer digital health companies in my portfolio. All of them have a similar playbook, primarily Facebook ads. The model there is testing out Facebook campaigns for B2C products. It could be telehealth or medications.
The most notable company in this category is called The Pill Club. They can’t say at where their current valuation revenue is, but they are what a VC looks for in fast growth. The playbook is to just bid up ads and watch your spending. Watch your payback period and don’t let it slip. Ideally, get payback in the first month.
It is doable to do that in these digital health companies. If you can provide a good experience and get retention, then the additional value from the customer will help you out a lot. That is one strategy that a lot of companies use.
On the other end, we have done a lot of B2B SaaS. We tend to stay away from enterprise because of the long sales cycle. $25,000 doesn’t last you in the enterprise market. There are variations on it, but a lot of them do outbound initially.
They do a variation outbound called cold emailing. A cold email can go a long way. These days you can make a sale relatively quickly. In the old days, people thought that cold emails are something that you can do if customers were to spend tens of thousands of dollars on you.
The reality is that the value doesn’t need to be that high for a cold email and a cold demo to work if you can get the close fast enough. Most of my companies are newer, so I don’t have companies that anyone has heard of yet. Certainly, companies on the B2B SaaS side span the gamut for us. It can be construction or pseudo fintech/B2B. They are all over the place.
Sramana Mitra: These are all selling to small businesses, so it’s online customer acquisition.
Elizabeth Yin: In some cases, the play for B2B is through webinars. We get online businesses to sign up for a Zoom webinar and make a sale. To your point, selling to startups even when they are in their Series B or C is often faster. It is a faster sales cycle compared to selling to companies that have been around for a long time. That has helped out the B2C sector overall.