Pricing & Revenue

Why There Is a 50/50 Chance You’ll Tilt Upmarket in SaaS'

Jason Lemkin

customersWhen you’re starting off in SaaS, it’s very tempting to target small businesses.  After all, when you launch, your product will be pretty feature poor.  You won’t have the resources to service the Fortune 500.  And in fact, unless you’ve worked and lived inside the Fortune 500, you won’t understand them at all.  How they buy, when they buy, why they buy.  And why would some Fortune 500 company buy your little MSP (Minimum Sellable Product) product run by a team of 8 guys in a one-room office?  It sounds nuts.

But it will probably happen.

Here’s why.  If your product is really only applicable for SMBs, or techies, then that’s where it will stay.  But if you are solving a problem universal to all-sized companies, if you get some traction with SMBs, with anyone … that means you’ve solved a least a little piece of a real business problem pretty well.  And that means, eventually and maybe even pretty soon, the enterprise customers will find you.  Perhaps not on Day 1.  And most likely, almost certainly at first, just a division, a group inside of a F500 to start.  Because the more agile parts, divisions, groups of Fortune 500 companies act a lot like SMBs sometimes.  They need to make quick decisions just for their group, their division, to get things done.

But if you solve a universal problem for a Company of 10 people, or 100 people … there’s a good chance you might solve it for a company of 10,000 employees as well.

The first time you get a few in-bound leads from true large enterprises, you may be confused.  You may even be overwhelmed, because they’ll quickly identify all your huge feature holes and push you to fill them faster and in a different order and manner than you were expecting.

But my advice is, consider it.  Consider taking those first few large enterprise customers, even if you seem ill-suited to them at the time.  If you can get huge on SMBs alone, that’s great.  But most SaaS companies get there with companies of all sizes — including the true, big large, scary enterprise.

And if you can start at the bottom, with a product elegant enough to actually work for small businesses — who don’t have time for training, or non-intuitive software.  And then grow up market … then you can have something that really changes how the enterprise uses software.  Then, you’ll be doing something really special.

Published on February 14, 2013


  1. There is a bi-furcatiion in the value propostion for Saas companies at some point in their evolution. It is always great to have a single point solution that becomes a massively popular consumer app. The Instagram phenomenon. But it is so rare. The rest of us must struggle in the “tweener” space and must, sooner or later, take a definite step towards winning the commoditization battle at maximum operational efficiency (for 90% this is darkly known as the race to the bottom) or go upstream and add value as “defined by emerging markets”. This opportunism can be viewed as unfocused by many. You have to stay loose and be many things to many prospects. But eventually the tidal pull of a huge new market will be felt. At this point capital is the next necessary stimulant.

  2. Great post, Jason. I totally agree with this assessment. As an enterprise-focused SaaS company, we initially thought of going after SMB’s as a way to get traction. At some point, we realized that would be a dead end for us, and we had to build an app that could support enterprise customers from the start. That was a tough decision, as it effectively meant kissing goodbye to any chance of VC funding, especially in Boston, for YEARS. Everyone investing in SaaS was focused on consumer/SMB, and if you uttered the word “enterprise” you were automatically pushed to the back of the line. So, we pushed on and (gulp) organically funded the company.

    Now that enterprise is suddenly hot (see:, we’re seeing the benefits of having made that decision early. Though we don’t have as many total customers as an SMB/consumer focused company would, we did build an app that can scale with the big customers: Zynga, Williams Sonoma, Airbus, etc., and run in a 24/7 enterprise environment.

    So, I agree, there’s a choice to be made. Just wanted to share that there are tradeoffs for making that choice early, pre-traction.

    Thanks for bringing this to light.

    Tim Jones
    CEO, Buzzient

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