In the past two years I’ve invested in 10+ startups and I’ve seen many early-stage founders make the same mistake (and I’ve done it myself too).
Right after fundraising, they decide it’s time to go upmarket by targeting enterprise accounts.
Because they believe that getting traction = winning big logos.
They believe that:
- BIG logos will impress new customers and investors
- Annual deals will allow them to get enough money to stay longer in the game
But in reality, the majority will fail.
In this artilce, I will explain why.
The reality of going upmarket too early
Most people who want to start a company and target enterprise deals usually get super excited at first. Usually, it’s because the founders come from the enterprise world.
So, it’s easy for them to close 2-3 deals leveraging their network.
From that point, they have enough traction to raise a few million of $ for their seed round.
With that money, they hire new sales reps as it’s time for “scaling”
But here’s what actually happens 👇
They realize that the sales cycle is actually much longer than they expected
So they first blame it on the sales reps and fire them.
But after 2 or 3 sales reps, they eventually start understanding that an enterprise deal actually takes a lot of time to close when you’re not talking to your BFF
This happens for the following reasons: 👇
→ More decision-makers are involved
→ Each step has to be coordinated in a never-ending meeting
→ No deal can happen without 6 months of back and forth with the legal team
But that’s not it!
It only gets tougher…
Eventually, they realize that the adoption actually sucks.
No one is really using their product, and each enterprise has different needs.
But since their point of contact is changing every 6 months, it’s now becoming almost impossible to get direct feedback…Is it time to pivot?
Maybe, maybe not…But it’s been 18 months after the first seed round, and they’re almost out of cash…
This story happened so many times…
What to do instead
When you launch a SaaS, it’s extremely important to stay agile and in control.
Focus on profit, don’t raise too early, and find customers you can build the product with (hint, it’s often not enterprise)
There’s always time later down the road to go enterprise and move upmarket.
But if you do it too soon, don’t be surprised if what I described happens to you!
Every week I’ll publish new articles on how to build and grow a B2B business that generates millions of dollars.
Without any BS and giving you practical templates that you can steal.
Peace, love, and profit 💰
G. ✌️
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