Early stage startups often look at a category and see it as a daunting marketing and sales exercise requiring massively expensive (dilutive) infrastructure. They look at a B2B market, with the Fortune 1000 as prospects and think they need outside venture capital to build massive marketing machines. They embrace dilution as the only way to success.
And this is always a mistake for the raw startup.
A story makes the point.
We brought an entirely new fraud detection system to market. Not a neural net, not a pattern recognition system, not a SQL search product. Something entirely new and so different it had no antecedent.
Our new, 23 year-old sales rep, in his first job, was given the property & casualty insurance industry as his target market. Looking at this daunting market he said he could not possibly make any inroad in this multi-billion-dollar industry all by himself.
After all, he was just in his first job with an unknown technology, no marketing resources and nobody ever heard of our firm.
So we looked at the market. How many insurers constituted 80% of the sales? 20
How many fraud product decision makers/influencers were in that 20? 80-100
What 3rd party firms influenced that fraud detection market? 3 organizations
How many people in those 3 organizations did we need to know about us? 3-4
Ok, so let’s rejigger the problem.
Can you get to 50-100 people, directly or indirectly, over the next 12 months, who just happen to be in the property and casualty industry?
Sure, who couldn’t.
So now that we defined the problem this way, we could figure out how to focus on the likely early adopters who would influence the later adopters.
We focused all our marketing efforts on this short list (our web site is all we had and we wrote a 1-page product brochure). We used Webex to do demo after demo, without ever buying a plane ticket.
We defined out fraud technology AGAINST all known technologies. Thus we were not a better neural net, we were a totally different way to find bad guys hiding in the data.
And our marketing expenses? Close to zero. Our sales force expenses, just paying a 23 year-old in his first job.
Our results: State Farm, GEICO, The Hartford, Travelers, National Insurance Crime Bureau and a dozen other companies bought our offering and it became the standard for an entire category of auto fraud detection.
So, any market can be broken down to 532 people (or any reasonable number you choose) and if they know of you, understand your value prop, you can become the disrupter of a market.
Focus on knowing who those few hundred are, not on building expensive go-to-market machines that dilute you. You can do this with the slimmest of budgets. And there is little or no waste—meaning no dilution.
Find the customer looking for you. Works every time it’s tried.