Greg Lawton (Nodes & Links): Why product-market fit won’t get you through enterprise procurement

0:00Andreas Munk Holm:This episode is brought to you with Luxembourg Venture Days, back on the 14th and 15th of October. It's where Europe's venture community comes together, private capital, corporates and high growth startups, all under one roof at Lux Expo, The Box. Last year, 3 ,400 attendees, more than 400 speakers and 330 plus investors actively scouting deals. We'll be there with the EUVC studio recording on site. If you're building, raising or deploying in your, this is your room. Had to venture-days.lu and do tell them that EUVC sent you. But we're dealing with companies that are designed to be incredibly stable and designed to introduce friction into change of the organization.

0:44That's what all the procurement processes are. So actually, for startups entering this space, there's multiple chasms they must cross, not just the product fit one. Totally forget revenue. Forget it until you're able to do those things. If you're able to do all three of those things very, very well, you'll never need to worry about revenue. One man's reluctance to procure or barrier to entry is another man's barrier to competition. If you can't figure out how to sell, you're not legitimate competition for anyone in the industry. So someone who can balance really thinking about how do I actually give value to the person I'm talking to and have a relationship with them above the value of making a sale.

1:31Teaching them the value propositions and teaching them the mechanics of scheduling or project management is far easier than teaching someone about relationship management and true sales process. So we hire for people who truly understand the job and we teach them the sector.

1:52Andreas Munk Holm:Greg Lawton is an astrophysicist who ran 100 million pound defense programs at BAE Systems. In 2018, he co-founded Notes and Links to bring auditable AI to capital infrastructure. To date, 744 years of project time saved. Oracle Global Partner, backed by 2150 and others. But this episode isn't about construction tech. Greg introduced a concept I think every technical founder selling to slow enterprises need to hear. Organization commercial fit. Beyond product market fit, your organization has to match the way your customer commercially procures. Milestone gates that have nothing to do with your revenue line.

2:30Andreas Munk Holm:And the line that will stay with you. One man's barrier to entry is another man's barrier to competition.

2:39Andreas Munk Holm:This show is not investment advice, and the hosts of this episode may be invested in the funds and companies featured. Greg, before we dive into a really deep look into your sales process and how you've built your team and how you think about building up sales talent that can actually sell to these change-resistant customers, as I call them, I want to ask you about a concept that you have, which is you're saying that VCs need to not only obsess about product market fit, they also need to obsess about the organization commercial market fit. Can you just lay out that concept to us and tell us why you think this is so imperative, especially in the more complex industries?

3:20Sure thing. So first, I love the concept of product market fit. And actually, some VCs listening to this might kind of reflect that it's the true process of you've gone from the definition, as Andreessen put it, is money's piling up in your bank account and people can't spend money with you faster. We kind of internalize product market fit in the industry a bit more to be that your solution is 10x and incredible for users. but we're dealing with companies that are designed to be incredibly stable and designed to introduce friction into change of the organization that's what all the procurement processes are so actually for startups entering this space there's multiple chasms they must cross not just the product fit one so you know if we're taking the looser definition you have to achieve product market fit in that your product needs to be great for the solution of the market but then you also must across the chasm of company commercial fit, as in your company must look and be like the kind of company that these organizations do business with.

4:30That means you must have proper insurances, proper processes in place, like anti-bribery, anti-slavery policies. You must have data recovery policies you must have iso certification possibly sock certification like you must have professional legal counsel like all of these kinds of things and the error that i see a number of vcs doing trying to enter the space is they treat it like normal sass they treat it like oh your product's been accepted here's a ton of money time for the you know hockey stick curve and it's like no there's milestones to cross so you have ticked all of the functional requirements that your tool can do something incredible for the industry our traditional product market fit then you must tick all of the requirements of you must be able to be able to be properly procured not a little innovation procurement proper procurement you're like the innovation team can tick some things off but once you're talking with a procurement lead it's a very different conversation then you must show you're able to customer success but professional customer success these organizations to see all of the benefit such that they can scale these are all milestones and i was actually advising a founder last week who's just started in the industry i'd be like totally forget revenue forget it until you're able to do those things if you're able to do all three of those things very, very well, you'll never need to worry about revenue.

6:06But, you know, it's not a, until that, it's not a revenue game. It's a milestone attainment game. And to me, depending on the company, those are funding milestones.

6:16Andreas Munk Holm:Yeah. Anyway, I'll leave it at that. That makes a ton of sense. So let's go from here to then dive really deep into how you've built the sales organization, the sales processes to be able to sell into these customers. Reset the understanding here, notes and links. What do you do? Who do you sell to? And why is it that you're on such a tier? Beautiful. So I'm going to use some loaded terms, but as accurate as possible. We are auditable scheduling decision intelligence. So I'll unpack those. And we sell to capital projects across every industry across the world. What it is, is you're undertaking a waterfall.

6:56So a sequential construction of something, it can be a nuclear submarine, it can be a nuclear reactor, it can be a solar farm, it can be a data center, it can be a chip fab, it can be a road, a rail, whatever. You're doing that methodology and you're doing it at large scale. Now I said auditable scheduling decision intelligence. So decision intelligence is AI specifically focused at making big impactful decisions. So delay recovery, acceleration, risk mitigation, forensic analysis, these kinds of things. So it's how you would resequence and things that impact contracts. Auditable because we're in an engineer, you know, the pinnacle of engineering here where, and I'm going to say maybe some controversial things.

7:50We have no want or need for AI to tell us anything. if it cannot be proven to be true. So for example, if an AI is telling me, oh, it's totally fine to just remove that safety beam from your design. One, I'll go to jail. Two, let's get some proper engineers in to actually do the equations of physics to say if it's true. Because, you know, we believe in physics and engineering. We don't believe in just made up answers. So auditable is we've built the first system in project management, in scheduling, that has zero hallucinations. Every single number it produces and every single analysis it produces can actually be backed up by proven and fully QA'd and explainable models, and the entire audit trail of calculation can be provided.

8:49So it's very specific. It's engineering grade AI for billion dollar capital infrastructure projects because you cannot lie. You cannot hallucinate. And equally, it's like the exams we did at school. If you can't show you're working, the answer's wrong. Even if the number's right, the answer's wrong because you cannot prove you were competent in doing what you did. So, yeah, we provide auditable scheduled decision intelligence to some of the largest capital programs on the planet.

9:27Andreas Munk Holm:And then let me ask you this question, because I have a couple of friends in construction and they do not believe in AI at all. They keep saying to me, Andreas, you're wrong. It'll never take off. Like, I need to be able to trust it fully and completely. And even when I say to them that there are one thing is ChatGPT, which you're using at home, which is full of mistakes still. But then there are systems made specifically for your sector that are made exactly as you described now. But still, it doesn't really compute with them. Can you tell me a bit about the sales process to people that have this view on AI?

10:11So that view is very wide held. and it comes down to liability. So if you kill someone, you're going to jail. If you did wrong calculations, you're being sued. Well, it's a full profession. It's a chartered profession. Many people have that view, including us. We have that view. It is unacceptable to release hallucinating AI into the engineering world. so we actually talked to them about that and if i was to talk about the elements of the product experience in the sales process probably 80 percent of it is going through all of the auditability of the systems and the equations and all the backups everything so that people understand exactly how everything works we've got this conflict i'm just going to size it for that we've got this conflict at the moment, which is most of the companies in construction want the productivity benefits of AI.

11:14They want them, but they cannot accept them if they're not true. So it's this thing where it's like, I want to buy. Please show me that this thing is true. And that's essentially what we do. We say, look at the amazingness. They're like, wow, they get it within 20 minutes and like cool now we'll spend three meetings plus hundred pages of document review reviewing everything to make sure it's true that's essentially how it works tell me a bit about how you market this

11:47Andreas Munk Holm:because one thing is of course the product development that you just described you've got to nail that you've got to have that in other words you've got to give what your customer wants everyone gets that then you're describing the real aha moment with the customers happens when they get to audit it. Am I understanding you correctly that that's exactly? And then tell me a bit about how do you go through what is a very large and change-resistant sector to get into the right places? Who are the customers you target who are the entry points into the organizations. So this is a funny thing, I could write a textbook on how you actually sell to these organizations.

12:32I'll give you the long answer and then I'll give you the short answer because I actually think that people listening to this will really appreciate it. So we sell to project schedulers, project controllers, project managers, the PMO discipline of major owners, consultants, and GCs or APCs. So on the owner side, think the Intels of the world and the HS2s and the Scottish powers and these kinds of things. On the GC side, you're thinking the Bechtels, the DPRs, the Lanko Rocks, like these. And on the consultant side, you're thinking the ACOMs, the McDonald's, the Jacobs, these. Essentially anyone that hires scheduling or PMO kind of people.

13:24The selling process within these organizations is you have to get a whole bunch of yeses and you have to not get a whole bunch of noes. And the processes are designed to be, we see it as change resistant. okay they're designed for for risk reduction stability these organizations generally make 10 hundred billion dollar purchases and those purchases you can't get wrong so there's a whole bunch of processes surrounding those now they water them down for procurements that aren't a billion dollars and these kinds of things. But they never water them down to the extent of one person can make a decision.

14:16It just doesn't follow their internal processes. So even if you're doing a pilot or initial deployment, you've still got a level of you have to get a bunch of yeses and you have to not get a bunch of noes. Now to be very specific, in our situation. The bunch of yeses you need to get. You need to get user support, so the people on the ground. You need to get management support. You need to get budget holder support. You definitely need a yes from IT and security, which are not the same people. And you need to get a yes from procurement, because they all have different incentives. now you need to not get a no equally from other decision makers around looking at ecosystems of tools security or anyone in a management position that says you know actually we've got another initiative we're looking at different things so you can have the greatest product in the world with incredible product market fit but actually the job of selling is one of stakeholder mapping and understanding how people make these.

15:28Now, if you are selling 10K a year, the economics just don't work out to do that process. But if you are selling hundreds of thousands to millions a year, they do work out. So as I said, these organizations are built for enormous procurement. They go down. Six figures is kind of the line where below that, they don't really care. If it was important, I'd spend more on it kind of thing. Nothing critical or incredibly important goes much below six figures. So that's why that process is stopped there. Now, if you think about it, a lot of startups try and get in. At a pilot slash semi-low values level, they're still having to go through all of that governance and all of that control.

16:19all. So it's one man's reluctance to procure or barrier to entry is another man's barrier to competition. If you can't figure out how to sell, you're not legitimate competition for anyone in the industry. So they never have to think about competing with you. So once you truly know how to sell and you're adopted, there's very little competition on the other side.

16:47Andreas Munk Holm:And in other words, you're saying, do not go for the low entry point, because you're not going to be able to get through, get the organization, the buyer to do the hard work to actually get you approved for something that's below six figures. If you're selling to prime organizations, or major organizations, that's what I'm saying. If you're selling to tier two or tier three in the supply chain organizations, it's a different beast altogether. They do buy a lot quicker because their purchases are a lot lower value slash singular slash a lot more complex. So if you're going for like a local house builder, it's slightly different.

17:30But if you're talking to like a major global consultancy, no, no, it's, you know, you're at a certain level.

17:37Andreas Munk Holm:Tell me a bit about your journey to get to that insight and to be able to navigate these organizations at that level. It's not a simple undertaking. It's something that requires quite some insight about how the organizations work. Did you know that beforehand from your BAE experience? Or was that something that someone else brought internally and for that reason you could do it? Or did you have a very long and terrible journey on to understanding it? I knew it when we started. So I used to sell to the Navy. And the Navy is probably the pinnacle of complex organizations that you are selling to.

18:14And we would have entire campaign teams of like 20 people set up to figure out if we're going to sell something to the Navy. Not even doing it. like figuring out if it's even worth our time to sell to them because you know you would you're not just kicking off it you're not just going oh we've got a thing we're going to sell it these things cost 100 million to design and build you're going to have a few conversations before going look if we're able to do this is this something that fits your strategy and your roadmap and your capability constraints and all of these kinds of things so i'd actually come from an area that was even more complicated.

18:55So coming into this was actually, I was like, oh, it's simple. It's much simpler. Fair enough. Now, the one thing that you can't change too much of are timescales. Now, I'm talking here, if you're in defense and you're making a major purchase, you're talking like three to five years. So a sales cycle of like six to 12 months is enormously rapid. Now, within that six to 12 months, let's say it's nine months, okay? The first month or two, I get in contact with people and having conversations and starting to build momentum. By month three, they've basically decided this is the capability we want.

19:37The rest of it is just navigating the whole procurement and governance and security aspects, which is just a process. So by month three, you already know if people are going to buy and at what value they're going to buy at. So it's just the way I think about it is the sale, the unofficial sales cycle is only three months. And then there's a gap to when you start work. That's the way to look at it.

20:08Andreas Munk Holm:How do you onboard salespeople onto this? Do you only hire salespeople that come from the industry and have done it before? or is it something that is well enough to find internally that you can bring in anyone who has sales talent? You can't bring in anyone. The analogy, saying that someone is a salesperson is like saying that someone is a doctor. Like, there's a lot of specialities within that. You have salespeople, for example, at BA Systems that specialize in$20 billion government procurements, and they'll spend 10 to 15 years doing one sale. That skill set is far more about government relations than it is actually about value propositions and things like that.

21:01It's about being in the rooms and being trusted enough that you're not going to blab your mouth off and people can talk to you about sensitive things. The other extreme is I'm at Vodafone. I've got a list of people I'm calling and I'm trying to upsell them on a phone contract, which is about I don't have a repeatable relationship with this individual. I need to quickly figure out if they're able to buy, if the value proposition resonates, and then try and do some objective handling solidify the deal and move on. So there's a spectrum from I don't have a relationship and it's about selling to the relationship is everything and actually I never do selling.

21:51I introduce people who can solve problems and it's like a spectrum along that line. For the construction industry, you absolutely need people who can manage relationships but can also communicate value propositions, but in a way where they don't care if the deal gets made. It's about fit. So you'd be like, look, this is what we do. This is how we help. And these are the companies we've helped. If we can make a real meaningful change to your company, tell me. And I'm happy to work with you on it. If we can't, totally fine. Totally fine. here's some interesting information, you know something more about the world, call me if you need anything.

22:41And then walk away. It's that kind of level. So it's someone who can balance really thinking about how do I actually give value to the person I'm talking to and have a relationship with them above the value of making a sale. So it's more towards the right than it is towards the left. Those people are actually quite rare. Now, some of them are in the industry, but if you imagine the performance in the industry is like a Pareto distribution, so you don't want anyone in the bottom 50%, you're talking like the top 50%. But also, there's other industries that you can bring these people from where they understand that that's the role.

23:22Teaching them the value propositions and teaching them the mechanics of scheduling or project management is far easier than teaching someone about relationship management. and true sales process. So we hire for people who truly understand the job and we teach them the sector.

23:44Andreas Munk Holm:And tell me a bit about how you're thinking about the funnel. How do you do a top end of funnel? And you've described quite well how you need to manage it once you're in contact with a potential customer and the importance of running that as a relationship approach rather than a cold hard sales approach. But how do you deal with that top of funnel when you're not allowed to sell very aggressively? Selling aggressively is a loaded term. I wouldn't say selling aggressively because it's about fit and it's about the economics of the sale. If we find an incredible customer, that is worth more than 10 average customers or low value customers.

24:32So it's about being very, very precise with who you want to work with. Top of funnel in our particular section is all about legitimacy and awareness. People in these organizations, the projects are so complex and the organization is so complex, normally people do not know what happens outside of them. Most people in BAE don't know what happens outside of BAE because navigating DAE itself is a full-time job because you're building very complex stuff. So it's like, I'll have a meeting with the head of engineering, then a meeting with the head of procurement, and then I've got to do all of this paperwork for submittals, and then I have to review all of these changes.

25:18You don't have time to sit there going, oh, I wonder what this random contractor is doing. It doesn't work. So there's awareness. but the second which is awareness is 10-20 % like that's that's simple to do it just requires work the most important is legitimacy these companies you might find a handful of people who are innovative that like trying new stuff if you really want to break into the majority you've got to be legitimate across all levels of that procuring so you're legitimate in understanding the problem, proposing the solution. And that isn't just like, here's the thing, here's how you will work after this.

26:00Here are your processes. Like, this is exactly how things will work. So all of the users and the management go, yes, this will be a benefit, not a disruption, to the operation that we have. But then you also have to be incredibly professional around, for example, information security called InfoSec. So you know exactly what you're talking about. You've got all of the documentation. You've got the ISOs. you've got, the security credentials, like all of these. Same with procurement. You know exactly what you're talking about on your T's and C's, how the process with legal goals, like these kinds of things.

26:33And if at any stage in that process, you're what I'd call amateur or not professional, they'll sniff it out and most organizations go too risky. They're doing mission critical work, so they cannot accept the things that can break because things that can break can ripple and cause massive problems across the organization, especially at the value props that we're targeting and the level, like ours is mission-critical, critical, auditable intelligence software. So it's like people are making$100 million decisions based on what we say. So in those, it's top of funnel, which is you have to be educated, you have to really know what you're talking about.

27:18And the best way, really, of generating pipeline is meaningful events. You're not trying to get 10 ,000 people. To be honest, if 10 ,000 people approach this, we won't be able to deal with them. You're trying to get 20 to 30 ideal people a month having real conversations. That's all you need to do. And that will translate into significant revenue. Because those 20 to 30 people will actually expand into people management of 200 to 300 people within these organizations and blah, blah, blah, blah, blah.

27:57Andreas Munk Holm:Yeah, which is in itself incredibly complex. Okay, now I think we've mapped the sales process. And I think that there's a ton of learning for founders that are selling to complex industries here or change resistant industries, as I call them, with the complex products. Now, let me ask you a question because this is about the AI moment that we're in. Because you were building an AI-driven project intelligence in 2018, which was before everyone was talking about AI. Then 2023 happens and suddenly everyone's talking about AI and everyone's both positively opinionated on it because we can see the opportunity.