86. Innovations in Business Modeling

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Becky Jaimes is a Product Manager at Salesforce, and she's interviewing Nick Frandsen, a co-founder of Dovetail. Dovetail is a company that helps startups grow into ambitious technology companies. They do this by providing an independent team of designers and programmers that will help the startup with growth hacking and marketing. The goal is to help them build their company and scale it into something much larger than where they currently are. In exchange, they take a piece of equity in the company, resulting in a longterm partnership. Employees at Dovetail both have a salary and a stake in each of the companies they work with.

When it comes to working with clients, there are a set of factors Nick and his team relies on. First and foremost, they only work with startups that already have funding and a strong founding team. Leaders with a large domain expertise provides Dovetail with confidence that VCs have done their share of research in believing in a startup's future success. At the beginning of the relationship, they'll work directly with founders, and even work on hiring world class talent to achieve their goals. They'll set milestones together and Dovetail will step up to do the work wherever the startup might lack the experience or people power to complete them. Startups typically witness the benefit of the Dovetail relationship as more user engagement accrues, which helps to establish a longer term relationship.

Yeah, we, we get quite a few. I mean, we have an investing framework where we sort of look for a range of different factors. I mean, some of them are the same things that I guess a lot of VCs are looking for. We're looking for a really strong founding team, people that have succeeded in the past, people that have been able to do a lot of interesting successful things in their past, and generally people that have sort of a lot of expertise in a certain area. One of the things that we really like is people that have a huge amount of domain expertise in something. We actually often like things that are not purely software, so something where there's either difficult barriers to entry or another thing that we like is sometimes we get founders coming to us with relatively obscure industries that we don't really know much about initially, but then we start looking into the industry and it turns out that it's enormous and that there are not tons of really modern companies operating in that industry.

One of the things that I think is really important and actually often kind of under appreciated in our industry is just the importance of sales and marketing, especially in startups. The technology is really important, there's no doubt about it, but we see a lot of young companies that are strong in the technology side, but they really haven't put as much effort into how they're going to sell this product, how they're going to market it. It's kind of been an after thought. It's page seven of the pitch deck, but really without sales and marketing, you're not going to build the traction that you need. You're not going to get enough customers to get the feedback from them to raise further investment. I mean, in some ways, it's kind of annoying. I wish you could just build an awesome product and go from there. But that sales and marketing really is hugely important.

Most of the companies in Dovetail's client list are FinTechs based out of Australia, but they have recently expanded to the U.S. Dovetail's business results eventually become aligned with the performance of the companies they work with, which positions them less as an agency. Their model requires a lot of discipline and investment, not just financially, but also strategically: both halves are continuously improving along the journey towards bigger growth.

Links from this episode

• Dovetail is a full-service product development studio specializing in building digital products that scale