Glenn Elliott, Tenzing’s Entrepreneur-in-Residence, has become a dedicated customer of three hot startups and believes PE CEOs and management companies can take key learnings from how they’ve built their platforms.
Living in Berlin, there are three startups that have changed my life. They have something unique in common – they’ve all turned what could regularly be a convoluted experience, into something that makes my life simpler, easier, on several levels.
Swapfiets: curing analysis paralysis
When I was keen to get a bike, I was stuck in inertia about which of the thousands of makes and models to choose from. I spent ages to-ing and fro-ing over different websites. I had advance FOMO worrying I would get the wrong one – a classic case of analysis paralysis.
But Swapfiets came along with two very simple choices – a bike with gears and one without, and a monthly rental model to boot including insurance, a lock and a 48-hour swap system in case of breakages. My analysis paralysis was cured faster than you could say, “Where do I sign?”. And just like that, I had become a monthly subscriber. A very happy one indeed.
Bosque Plants: taking the pain out of garden centre shopping
Then if you’ve seen my house from my Zoom window, you’ll have seen the plants, small and large, occupying any possible cosy corner where there’s a chance of sunlight. But being into plants comes with a particular occupational hazard. Regular visits to the garden centre, which, like my bike story, end up being a purchasing situation punctuated by choice and confusion. There are hundreds of plants, and when you finally make a decision, you have to go and find a matching pot, which is in a different part of the garden centre and come in all shapes and sizes so finding one that matches is much harder than you think.
Then you have to get them all into a trolley, wobble it to the checkout and then try and stuff them into your car, fiddling with putting seats down and ending up with leaves flying out of your window. Only to get home to find what you’ve painstakingly selected aren’t actually suitable for the climate and soon die, adding a fitting anticlimax to what was already a stressful experience.
Discovering Bosque Plants turned my green-thumbed world around. They only sell around 30 plants which you can buy individually or in a box of five. They’re suitable for the home. They come ready placed in a pot with a saucer – available in just two colours. Needless to say, it’s goodbye clunky garden centre, and hello third delivery.
Gorillas: insanely fast, friendly shopping
Finally, 10-minute grocery delivery is putting an end to that annoying trip to the shops you have to make when you’ve run out of that essential ingredient that you need for that meal you’re cooking right this minute but forgot to get when you went out earlier, or in your big weekly shop that you already did last Saturday.
But the emergence of the likes of Gorillas promise 10-minute delivery thanks to a network of agile micro-warehouses and speedy cyclists. It means inconveniences like missing ingredients or shopping in advance so you buy things you don’t need that end up wasted in the bin or worse, a supermarket trolley and car park hell, are a thing of the past. I now order from Gorillas practically daily (and usually the same stuff – cottage cheese, raspberries, bananas, apples and oat milk).
Yet it isn’t just the speed and convenience that’s got me hooked. While Gorillas’ pricing is comparable to that of the retail giants, its product range is significantly smaller – and that’s what’s working. They have just two types of butter rather than the 100 different types that my local supermarket in Berlin has – just many versions of the same. It’s bewildering and leaves you thinking, “God, I just can’t find anything”. With Gorillas, shopping is literally a breeze!
Lessons for PE-backed companies
Ok, so now you know about my domestic purchasing habits. But what’s that got to do with private equity-backed companies?
Firstly, that the ‘less is more’ approach is an incredibly valuable one. And that reducing choice is actually a legitimate business model. It can seem counterintuitive when you’re looking at a growth trajectory of double to triple over the four to five-year private equity cycle. But sometimes a bit of simplification through some good, old fashioned pruning is just what you need to reach your target (forgive the gardening term).
Before you invest in new ideas and strategies, it’s always worth looking at what’s no longer working, and what you don’t need anymore. Because the more complexity there is in a business, and even a single product, the more your growth becomes less of a straight line upwards and more of a steep curve. That’s why you need to be constantly pruning your business to keep it as simple as possible, so it doesn’t become encumbered by its own weight.
Pruning can be tough. When I was CEO of Reward Gateway, we had one particular product that had just 20 customers. That is, of course, not profitable. But then again, they’re 20 important customers who buy other things from you, and you’re going to risk putting them out by turning that product off. So every time I looked at it, I thought, “let’s give it another six months”. Naturally, it took my successor to do what I couldn’t, and he was right. Ultimately, it wasn’t a good product. It required lots of manual intervention to make it work. We were better off financially with it gone and frankly our customers were better off finding a supplier who was really committed to that product niche.
Understanding what the customer really wants
The other thing these startups have done is really examined the experience of buying. They’ve looked at the status quo and thought, “Is this what the customer really wants?” Because somewhere along the way, the choices available on the internet meant the experience became clouded by overwhelm.
Paying such close attention to the customer experience can also be done in a B2B tech context. In this space, it’s easy for people to be very cold about thinking about the features and functionality clients want. But that’s changing. People want the experience of using a product, even a B2B one, to be joyful. And I think, increasingly, this is how customers are going to evaluate B2B tech.
For example, HR tech is changing. Today’s systems are really investing in the user interface and making them nice to use because it’s a competitive market. And they know that the person buying the product isn’t actually a business, it’s a person. The user interface is one of the reasons I prefer Slack to Microsoft Teams (and believe it’s critical to the success of internal comms) and Google Docs to Word. The experience makes such a difference – teams using Slack always report much higher rates of adoption and therefore collaboration than teams using MS Teams.
Being bold enough to do things differently
These elements both point to a final common denominator – being bold enough to reinvent a category in the most straightforward way. Swapfiets’ founders must have had feedback from investors who said, “That’s ridiculous. No one’s going to want to choose from just two bikes now”. But they did their research, and there were a whole bunch of people like me who wanted a bike – but didn’t know what they were doing, and didn’t want to have to think about it.
In growing a PE-backed company, how can you make your product as easy a sell as that?