The Better Customer–Startups or Big Enterprise?

Selling software to startups can be successful, as demonstrated by companies like Stripe and PagerDuty. However, selling enterprise-grade products to startups is not effective due to limited budgets, lack of infrastructure, and preference for simpler solutions. Selling to startups may seem easier, but it can be challenging when they don't have a genuine problem or a clear decision-making process. Startups can be just as demanding as big enterprises and may not be willing to pay for support. Early stage companies often experience high churn rates as their needs change. Sales is crucial for startups and relying solely on self-serve flows or networks is insufficient. Selling to startups can create value and a path to large enterprises, known as the "bottoms up" approach. Understanding different strategies used by successful companies is crucial when selling software to startups or big enterprises.

Intro

Selling software to startups offers potential benefits and opportunities. Examples of successful companies like Stripe and PagerDuty demonstrate the success of this approach. Key points discussed include:

The success of selling software to startups
Examples of top companies that started by serving other startups
The potential benefits and opportunities in targeting startup customers

When selling to startups doesn't work?

Selling enterprise-grade products to startups is not effective; founders should focus on targeting the right customer base.

Startups often have limited budgets and may not prioritize purchasing enterprise-grade products.
Startups may not have the infrastructure or resources to fully utilize enterprise-grade products.
Startups may prefer to use simpler, more cost-effective solutions.
Salespeople face challenges in selling to startups, such as longer sales cycles and difficulty in gaining traction.
Examples of companies like Snowflake and Workday illustrate the limitations of selling to startups.

Startups might not have the problem

Selling to startups is often perceived as easier than selling to big enterprises
However, it is actually more difficult to sell to customers who don't have the problem at all
Startups may seem like an attractive target, but the decision-making process and lack of a genuine problem can make it challenging

Startups are not an easy customer than enterprise

Startups are not necessarily easier customers than big enterprises
End users at startups can be just as demanding and high maintenance as those at large companies
Startups can be even more demanding and may not be willing to pay for the support they require

Early stage companies churn

Early stage companies often experience high churn rates as they grow, especially in categories like HR and platforms like Heroku. Selling to startups can be successful if the product can grow with the company, like Stripe. However, as the company expands and the buyer changes, the product may no longer meet their needs, leading to churn. Startups need to be mindful of this and consider whether they may end up becoming an outsourced development shop for big enterprise customers.

Startups in non-technical areas like recruiting, marketing, and HR face challenges in building products for big enterprises.
Certain categories, like payments, do not require significant modifications for enterprise use.
Other categories, like CRM, often lead to startups adopting established solutions like Salesforce.
The scalability of a product with people versus revenue plays a role in churn.

Sales

Sales is a crucial aspect of startups and big enterprises alike. Many startups try to avoid sales by focusing on self-serve flows or relying on their network, but this approach is often insufficient. Sales involves changing people's behavior, influencing them, and getting them excited about the product. It requires effort to make people aware of the product and to craft effective messaging. Simply relying on accessible networks or self-serve flows is not enough.

Key points:

Startups often try to avoid sales by relying on self-serve flows or their network, but this is often insufficient.
Sales involves changing people's behavior and getting them excited about the product.
Effort is required to make people aware of the product and craft effective messaging.
Simply relying on accessible networks or self-serve flows is not enough.

The benefits of charging startups

Selling to startups can be a powerful strategy for creating value.
Startups like Gusto used their initial success with startups to become the go-to payroll provider for small businesses.
Selling to startups also creates a path to large enterprises.
It allows companies like AWS to train engineers on their software and eventually penetrate the enterprise market.
This strategy is known as the "bottoms up" approach.

Bottoms up sales strategy

The bottoms-up sales strategy is effective in startups and big enterprises, but it is not a standalone solution. Key points include:

Involves getting developers and evangelists to help make sales
Companies still need to build real enterprise sales teams
Bottoms-up approach can serve as a booster, but someone still needs to make the enterprise sale
Not as simple as big companies switching to a self-serve flow based on engineer recommendations
Sales deck is still necessary for successful sales.

Big takeaway

The most profound aspect of the text is the importance of understanding the different strategies used by successful companies when selling software to startups or big enterprises.

Key points:

Knowing which game you're playing when selling software is crucial.
Successful companies like Stripe, AWS, and Gusto have developed effective strategies.
Learning from their experiences is more valuable than trying to invent new approaches.