Meet Matthias* and Quinn*. M. is the marketing & sales guy, and Q. is the CTO. They are the two co-founders of a company called Nero*.
*While this story is 100% factual and the numbers and timeline are real, person and company names (except for our own) have been changed to preserve anonymity.
Back in 2019, these two started Nero, a software company. They had an early investor come in and back them with €400K. They knew they were lucky to begin like this. They were on a mission to develop a product they knew would be a game changer for many companies, and they flew out of the starting gate with gusto.
For most of 2019, M. and Q. dove into product development, even taking time to fly to Bulgaria to work directly with their developers. They worked diligently at creating their product (virtually ignoring sales or marketing during these initial stages), right up to February 2020. Then they hit a bug. A really big, real-life bug of the name of Covid-19.
While Nero was getting ready to go to market, companies everywhere were freezing budgets with the onset of the pandemic. It became difficult to get a demo meeting, not to mention making a single sale. A few CEOs showed interest, yet no one had the budget to invest in Nero’s software. Besides this, Matthias and Quinn discovered just how hard it was to sell their software - despite their best efforts, it remained too abstract for most outsiders to understand. They spent many more hours than expected explaining their software solution. Neither M. nor Q. had factored in the high level of consulting that their sales would require. In fact, they didn’t know their client’s processes well enough, but they couldn’t see that yet. They could solve a problem, yes, but they were too far away from simple solutions of relevant pain points, and so the software remained too abstract for the decision makers to feel the push to buy. Amidst the confusion of their would-be clients, Nero’s initial seed money was slowly drying up. No new cash was coming in; tension mounted in the team.
Just as it started to dawn on Nero that they were going to need a major shift in perspective and focus, their paths crossed with the GoToMarket.Ninja in 2020. The Ninja did what the Ninja does: made himself useful and valuable, as he pushed the Nero founders out of their comfort zone. The focus turned towards defining their target client. It was time to venture into uncharted waters and focus on impact creation.
The initial challenge for the founders was to change their own stale thinking about their brand. The Ninja showed the founders, and Matthias in particular, that Nero needed a niche. "Try selling to everyone, you will end up selling to no one. Solve all problems at once, and no one will know what problem you’re solving!"
Matthias resisted at first. He was proud and determined to create a tool that was multifaceted and helpful to almost anybody. They had created Nero to be flexible and open. It didn’t matter that no one was searching the keywords describing their solution in Google - they had no search volume and no way to place ads. Never mind that it was taking them too much time and energy to explain the validity of their software to clients. Matthias dug in his heels and pushed back. Matthias fought. Until finally…he relented. He realized he was going to have to “change and adapt” or… perish.
The hunt for a niche began. Nero identified a potential target and gained a client…who turned out to be a problem client representing a problem industry. This kind of energy-draining client was not worth the hassle. They went back to the drawing board. All the while cash reserves were slowly trickling out. They had meant for their initial budget to last them for much longer. The covid-19 pandemic moved to a new wave as Nero headed towards the end of 2020, and the founders wondered if their initial luck had run out. Sure, they had a good product, but not only was no one buying it, it wasn’t yet clear who they were selling to. Steadily, relentlessly, their seed money was trickling out.
They were entering a downwards slope and heading for the proverbial valley of death. At this point Matthias likes to say that despite the persistent setbacks his strong will pulled him through. He believed that Nero could move forward even if there were no customers and no money. Somehow, someway they would find their way through.
Grasping at a last-straw opportunity, Matthias and Quinn looked into a government subsidy program. For this they would need a partner organization (easy), and they would also need time (not so easy). The application moved forward and then…they waited. The cash had almost completely run out at this point, and M. and Q. faced the unfortunate reality of firing some (or all) of their developers. They had no money to pay them. From a great team and a daring vision they felt reduced to two guys with a failed company and no sales. Their situation was officially hitting rock-bottom.
With the Ninja's continued support Nero finally zeroed in on a niche and an easy-to-define solution to a common problem. Sure, their software actually could do it all, but for now they would focus on solving a specific problem. Finally, they had a search volume in Google to lean on and advertise in. Things started to look up by early December. New clients started booking appointments through Calendly. It was a relief to see scheduled demo calls in the calendar. What’s more, the government funding was finally approved, and the team began to breathe a bit easier in December. Matthias had client presentations to give, but despite his relief to get in front of customers and pitch his product, he followed the Ninja's guidance to remain more open-minded, listen more and talk less.
These initial presentations turned out to be crucial to Nero’s development. Matthias would double down on attention to his customer's everyday life and fiercely take notes at these meetings as clients explained their struggles and pain points, and then he over-promised on everything they asked for. “Do you have AI?” - yes of course we do, Matthias would answer confidently. “That other feature we require, do you have it also?” Yes, of course we do, he would chant back to the prospective client. In reality, none of the asked-for features were ready yet. He sent over the long list of new, needed features to Quinn. Q, nose to the grindstone, created and coordinated it all within several short weeks. Nero was finally hearing and answering real client needs.
Their first €800 contract manifested in January 2021, and it was abundantly celebrated.
They could sense the upswing, as Nero began to steadily climb out of the dark valley and the team felt the abundant joy of finally bringing in some real money to the company!
Interestingly, it was also at this point that they re-evaluated their pricing strategy. They realized that they were valuing their software far too cheaply, and it was affecting them negatively. Clients assumed that cheap software had fewer functions, and they weren’t buying. In reality, Nero’s software was bursting with useful functions. Matthias mused that this pricing prejudice might be due to an old German mindset where many people still relate to the expensive price tags attached to high-performing software. Whatever the rationale might be, the founders were certain of one thing: Nero is high-performing. So they chose to 10x their price. It worked wonders for their bottom-line as well as their morale. Now €800 is their smallest possible deal, and within 1 month of that initial deal and subsequent price increase they were signing multiple 4-figure deals!
2In the spring of 2021 the focus turned to improving the highest-revenue performing product features. These improvements were based on carefully collected learnings from client feedback. Matthias would regularly inquire (and collect data) to understand which functions were the most used and the most important to their clients. He was pleasantly surprised to see just how supportive and excited their customers were to help them. Ironically, the functions Nero was now focusing on creating and improving were very broad and flexible and could be applied to many company processes. Niching had been one of the biggest hurdles in the beginning, yet Nero was coming back full circle to provide a broad range of services.
Clients kept knocking on Nero’s door and the cash kept flowing in. By late summer 2021 Nero was presenting to VCs in a second seed round and looking at a €13 million valuation.
Here’s an excerpt from a message that Matthias sent to the Ninja in September 2021:
“You won't believe it, but we've already made over 100K€ revenue this year (2021) - recurring license agreements of course - it's going really well now and we're just going into a seed round with a 13 million valuation, if that happens, that would be great. 10 million would also be something of course, but the numbers are increasing daily, and so is the valuation :-) That you believed in us when it was hard, I really appreciate that and I don't forget it either. :-)”
Several more months passed and this valuation increased to the €20-30million mark. In gross revenue in 2021 Nero brought in about €230K. While very rare for most start-ups, Nero is actually able to finance its expansion from its own sales turnover. Additional financing from VC is no longer their life-blood but a nice-to-have that will allow them to expand even quicker.
What’s next for Nero?
In the first quarter of 2022 they are looking to close their current fundraising round. New hires are coming onboard for business development and marketing. Nero is also keen to open up to new markets, and of course, to continue to improve their product.
Nero went from a company that nearly flopped when they first went to market at the beginning of the pandemic…to finishing 2021 with a strong turnover and valuation. While the valley of death looked endless during this time, Nero shows us that things can always shift and move towards something better and stronger.
What are the most important points? This is what the founders of Nero want you to take away from their story of resilience:
Matthias: “Remember that the darkest hour always comes before the dawn. Especially when it gets really hard you have to find the strength within yourself to push forward.”
Quinn: “Whether or not you look like a “winner” or a “loser” depends on where (and when) you’re looking. Nero has been both a winner and a loser - almost in the same month. Don’t get too caught up in how well or poorly you think you are doing right now - just keep moving forward.”