Getting to Initial Traction

Don’t Worry Too Much If All Your Customers are in "Tech"

echojason@gmail.com'

Jason Lemkin

I remember at EchoSign, Back in the Day, I met with a Top 5 VC.  The one question they asked me did stump me:

“So many of your customers are in tech.  What’s your plan to go bigger?”

logosstartups

It wasn’t like 100% were in tech.  But sure it was the majority.  At the time, I thought it was a fair criticism, a concern.  Like start-ups that only sell to other start-ups.  Or YC companies with 50% of their initial revenues from other YC companies.  🙂

But as time has gone on, I’ve learned to get a little more Zen about it, and in fact see it quite the opposite.

The way I see it now is … if you can grow pretty quickly, and even get to say $10m ARR or further, with almost all your customers in “tech”, or even $10m ARR just from start-ups … that doesn’t mean your market is limited in some fashion.

What it means instead is it’s just getting good.  Because “tech” companies are, often, more aggressive in betting on new vendors, those without Big Brands, those with something that can impact their companies now.  They are more aggressive at taking these risks because they are in the business themselves.

If it takes you 5 years to get to $1m in ARR, and all your customers are start-ups, I’m worried.

But every company is becoming a tech company.  Software is eating the world, or whatever variant you like.  Every Fortune 500 and 2000 company has an engineering team.  Has a mobile app.  A web service of some sort.  A workforce.  They can all buy from you, at least, eventually.

So here are my new rules and thinking:

  • Get to $1m ARR however you can.  Whatever way you know how.  Don’t even worry about the logos, even the ACV, or anything.  Do whatever you know how to do to get to Inital Traction.  If it’s all YC companies, or SaaS companies, or Series A start-ups … don’t worry about it.  Get to Go.
  • From $1m to $10m ARR, go the path of least resistance.  But … where you can, collect logos.  And go the extra yard for “anomolies” and customers outside of your core verticals and segments.  If you can expand to 10-20% outside of tech, or outside of your core, whatever that is … put the extra effort in here.  But don’t chase the shiny penny.  The fastest way from $1m to $10m ARR is almost always doubling down on what is already working.
  • After $10m ARR, when there’s fat … go broader than where the market is already pulling you.  And if you are 90%+ tech when you get there … that’s OK.  All it really means is you are still in the Early Adopter phase.  And if you got all the way to $10m without even needing to go mainstream, if you can get there still with early adopters … all that really means is your market is HUGE.  Huge.
  • Remember, “Tech” is now the largest single segment of the economy by many measures, and the largest segment of SaaS buyers overall.   So at a high level … none of this matters.  Because in the end, for most of us, most of our customers are going to be in “tech” anyway.

logos image from here

 

Published on November 17, 2015
  • Are the rules also applicable for SaaS companies starting outside of tech? Can they at some point also grow into the tech vertical?

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