Perfection Kills the Art of Selling
While the perfectionist approach can be a great tool to scale the business, it kills all the potential for Czech startups.
The Czech startup scene has thrived over the past few years, fostering the innovation of newly emerging companies that aim to change the future with their phenomenal ideas. In 2022, it was ranked 32nd in the top 1000 startup ecosystems globally and 4th in Eastern Europe, according to StarUp Blink, the world's most comprehensive startup ecosystem map and research center.
While the startup environment is full of beautiful ideas, businesses often face the challenge of selling effectively in local and global markets. This raises a question: is it the startups' fault? Let's explore the current state of the Czech market, the challenges Czech startups face, and the strategies businesses use to overcome them.
Czech Market: Overview and main challenges
Czechia’s economy is known for its competitiveness and attractiveness to business investments. The country boasts a skilled workforce, combining an outstanding level of general education with solid science and engineering topics, as noted by CzechInvest, a Prague-based business and investment development agency. Due to the availability of technical graduates, the country has developed an intense manufacturing center, with several notable companies such as Volkswagen, Skoda, and Siemens having manufacturing facilities in the area.
Apart from storing technical education and manufacturing industries, Czechia’s strategic location in Central Europe makes the country a crucial hub for trade and commerce. It is part of the “Golden Triangle” of Berlin, Vienna, and Prague, one of Europe's most economically active and densely populated areas, as noted on Czechia’s Ministry of Foreign Affairs website.
On top of that, Czechia’s market has a favorable business environment due to a low tax burden and a streamlined regulatory environment, making it appealing to businesses looking to set up shop there. Additionally, the government also provides a variety of tax breaks and subsidies to foreign investors.
Nevertheless, several Czech companies face challenges in selling their products and services despite these advantages. A vivid example of such an issue can be found in the high degree of market competition, as many small and medium-sized enterprises operate in various industries. In a recent interview, Billa's CEO highlighted the country's intense retail competition. "The competition in the Czech market is fierce, not just in retail. It affects all industries. That's the way the market is."
Another challenge for Czechia is the small size of the market. With a population of 10 million, Czech companies often struggle to achieve economies of scale. According to a Ministry of Industry and Trade report, many Czech companies face a "glass ceiling" when expanding beyond the domestic market. While some companies have successfully expanded to other countries, many struggle to overcome language and cultural barriers that make business difficult.
Reasons why Czech companies struggle to sell their products and services
There are several reasons why Czech startups face challenges in selling their products and services. One of the significant issues is poor timing which could lead to missed opportunities and lost market share. Tomáš Sohlich, project manager for startup investments at CzechInvest, highlighted that Czech startups "focus too much and too long on developing the perfect product, while they are missing the right time to go on the market; that is the opposite of what US startups do."
While the perfectionist approach can be a great tool to scale the business, it kills all the potential for Czech startups. In 2021, the Czech press agency published a report in which one of the main reasons why Czech companies struggle to sell their products is their focus on "perfection." In essence, startups focus on small details that may not be critical to success, delaying product launches and opportunities to enter the market.
The story behind "perfection" revolves around the lack of experience launching new products. In 2021, the Czech National Bank reported that small and medium-sized enterprises (SMEs) accounted for more than 99% of all businesses in Czechia. And many of these businesses may need more resources or expertise to successfully launch new products, resulting in a cautious approach to business.
Another reason Czech companies struggle to sell their products and services is a lack of effective sales and marketing strategies. Sohlich observed this reason as a paradox: "Even though more AI alumni are creating outstanding products and solutions in Prague and Brno than in Montreal, which is considered to be an AI supercluster, many technology startups hesitate with their sales." Furthermore, based on the Czech Confederation of Industry report, small and medium-sized enterprises in Czechia devote less of their budgets to marketing and advertising than their counterparts in Western Europe, which makes it difficult for them to promote and sell their products and services effectively.
A lack of clarity in product messaging is another reason why Czech companies struggle to sell their products and services. This can confuse potential customers and make communicating the product's value difficult. "We often failed with senior, experienced salesmen at this stage. They have been lost in uncertainty about what the product does and can do shortly," said Nikola Rafaj, a chief operating officer at StartUp Yard, an incubator in Czechia.
This ambiguity may result from focusing on technical features and specifications at the expense of clearly defining the product's value proposition and target market. In other words, Czech firms may be overly focused on the "what" and "how" of their product rather than the "why" and "who."
A lack of experienced sales professionals could be another reason why Czech companies struggle to sell their products and services. "As startups scaled up, we realized the vital role of a seashell salesman. But in the case of startups, it relates to the startup stage and the person selling. When discussing early startups, the only salesman is the founder," Rafaj said. While the founder may be enthusiastic about the product, they may need more sales skills and experience to sell it effectively.
"I would say that "the art of selling," in general, is, unfortunately, one of the weak points of many Czech startups. If we compare this with the United States, in our view, there is a lot to learn," concluded Martin Kovalčík, Manažer PR in i&i Prague, s. r. o. and i&i Biotech Fund.
The role of incubators in supporting startups with sales training and mentorship
Incubators can play a critical role in assisting Czech startups in overcoming sales and marketing challenges. Since 2010, they have provided many valuable resources and valuable services aimed at helping entrepreneurs and first-time founders develop their sales skills, identify potential customers, and, most importantly, close deals.
Most incubators provide a variety of programs, including workshops, mentoring sessions, and networking opportunities, tailored to meet the specific needs of businesses, such as improving the selling game. So which organizations play a critical role in sales training and mentoring?
CzechInvest: the backbone of Czech startups
CzechInvest is a vivid example of an organization supporting Czech startups from the early stages. The corporation's rich history takes us back to 1992 when the Ministry of Industry and Trade of Czechia created it as a contributory organization under Czech Agency for Foreign Investment, shared Tomáš Sohlich. Over the years, the company has helped with over forty-one investments worth over CZK 1.15 trillion in foreign and domestic assets.
What distinguishes CzechInvest from other incubators in Czechia is its emphasis on education. "We can offer several options, including business shakers, such as free workshops on defined topics such as expansion to the US, ways to raise money, product development, and so on." Furthermore, in 2022, CzechInvest launched the Investment Academy to provide valuable information to startups about understanding the investment process.
Besides that, the company started the Technology Incubation Program in 2022, which supports innovative startups in strategic sectors, such as mobility, artificial intelligence, the creative industries, and space. Before the Investment Academy, CzechInvest ran the Support for StartUps program, offering a large pool of mentors, connections to investors, and other services for startups, as mentioned by Sohlich.
Another Czech incubator offering sales training and mentorship is StartUp Yard, which we covered in our previous article about the Rust Belt notion in Czechia. The organization provides a comprehensive 3-month acceleration program, including events such as mentorship from experienced entrepreneurs and sales, marketing, and business development training. Furthermore, StartUp Yard has a diverse network of investors and partners that help startups to raise capital.
Regarding sales training and mentorship, StartUp Yard plays a significant role in supporting startups. As Nikola Rafaj outlined, "The finding of product-market fit and connected selling is one of the most important goals for accelerators." By providing experienced mentors and experts in the industry, startups could shorten the time to find must-have products and focus on the client's needs.
i&i Biotech Fund
i&i Biotech Fund is a venture capital firm that invests in innovative European life sciences companies focused on drug discoveries, medical devices, diagnostics, and digital health. "Helping startups in this area is one of the benefits we offer. Before investing, we always try to get feedback from potential industrial/commercial partners," noted Kovalčík.
VC offers a vast network of contacts to businesses just getting started, allowing them to match potential customers more efficiently and faster and become leaders in the market. For example, consider the Czech startup Sophoner, which has been supported from the beginning by the i&i Biotech Fund.
"It is a prime example of technology transfer because the story's beginning was not an idea but an industry need that we could identify with our partners. As a result, this startup launched its first product on trial sale shortly after its founding. It is currently working on its first order, and the industry's biggest players are already testing its technology," Kovalčík explained.
The South Moravian Innovation Center (JIC), UP21, and Startup Hub are among the other incubators that offer mentorship and sales training programs.
The Future of the Czech Startups
Despite the difficulties that most startups face, Czechia provides a favorable business environment, with the government offering a variety of tax breaks and subsidies to foreign investors. To overcome these obstacles, Czech startups must be more proactive in their sales and marketing strategies and better understand their target markets, and incubators can help them with this.
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