Mark Suster writes that most startups should be deer hunters.
Nearly all of the mistakes I made at my first company I fixed by the time of my second company. This is the only mistake I repeated twice and it is a mistake that I see many, many companies make.
I know that this advice won’t apply to every possible startup – but I think it applies to many.
When you start your company the very first question you need to ask yourself is which kind of customers do you want to serve. Many start-ups (and even growth firms) lack this discipline and they therefore serve customers off all sizes. This leads to suboptimal results for all.
Make sure you know what the size of customer you want to serve is, what the people in a company of that size do, the problems they have, the features that will resonate and the channels you’ll need to sell into and service that customer. Because it will vary dramatically by different segments I believe you need to pick an animal size and go for it.
Elephants:
It is very tempting for many start-ups to hunt elephants. These are really massive customers. It’s landing AT&T or Microsoft as a customer when you’re a start-up. You’ve got 8 people and are serving a business unit that has 5,000.
It’s tempting on many levels to be an elephant hunter. If you manage to kill an elephant they have so much meat they’ll feed you for a long time. But elephants are hard to catch and take whole teams of people to bring down. They take special tools. If you’re not successful you may starve. If you do catch them, it could be even worse. Avoid elephants in your early stages. Learn from my mistakes.
Rabbits:
Equally deceiving are rabbits. There are so many of them – they seem like they’re everywhere. So you chase them. But as you get closer to them you realize that they’re quick little buggers. They scatter and get away. You wonder whether they were really worth the effort after all.\
Deer:
The analogy is now obvious. Deer are easy to kill. When you do bag deer they have plenty of meat on them to have made it worth you while. Deer are right-sized for a start-up.
Deer are not so big that they can make huge demands on you for your development resources or customer support. They can barely get you to agree to make changes to your standard terms & conditions. If you catch lots of them you’re not beholden to one big one that if they cancel their order you’d be devastated.
When you’re a start-up it is far easier to cut your teeth on companies that are easy to serve, not as demanding yet can afford to pay you fair prices for your product. If their demands are too high you can easily move on to the next customer. They allow you to stay focused on your defined company strategy without having to compromise.
Market segmentation is very impornant for startups. It is very tempting sometime if you offer a horizontal platform to say I will go after all types of companies. But you need to figure out which markets are the best to attck first when your resources are limited and focus on them. For SME plays, deers are the best bets.