The elephant hunting fallacy:

Why singles and doubles beat grand slams

In baseball, it’s common for a sustained rally of singles and doubles to build momentum toward victory while a grand slam injects momentary energy that quickly fades. Yet, too frequently, companies attempt to go after the “grand slam” customer to build immediate credibility and attract other customers by brandishing a few marquee names. Unfortunately, the momentum fades just as fast as it does in baseball.

Elephant hunting—targeting large, strategic customers—very early in a company’s life is attractive for a number of reasons. Landing one of these customers can juice the company’s value for the next round of funding. Marquee names provide credibility that can be used to combat the fears of other potential customers of going with a company with no track record. CEOs and sales people are dreamers at heart so when the opportunity to win an elephant presents itself, they can’t help but be drawn to pursuing it. Investors, advisors, and board members also might be well connected to some of the major strategic companies in an industry so the initial introduction might come easily.

Despite all the reasons elephant hunting is attractive, it’s also a great way to stymie any momentum a company develops toward market traction. It takes a lot of courage to say no to elephant-hunting early, but in my opinion, doing so is critical to successfully build traction with a new company. Traction is best demonstrated through small, consistent wins for three reasons:

Big customers = big expectations

Large customer contracts typically come with large expectations and extremely complex product modifications. These expectations often surpass the capabilities of an early stage company and prevent successful execution to truly satisfy the customer. When building a new product, there are a number of foundational issues that must be sorted out that are best done outside the pressure cooker of delivering on a large, make-or-break contract.

Big customers = more leverage over sales terms

Small companies with little market traction dealing with marquee customers will command less favorable contract terms than they would with smaller customers. Finding customers with less power over contract terms enables the business to test out its monetization model earlier and even generate revenue from its first few sales instead of selling free proof-of-concepts.

Big customers = longer sales cycles

Larger customers have a lower tolerance for taking risks on unproven companies which leads to longer sales cycles. Longer sales cycles slow down the iterative learning process for new companies as they seek to prove out their product and business model. Pursuing elephant customers can cause the organization to stagnate in a never-ending sales cycle focused on a single marquee customer. This increases the risk of failure by putting all eggs in one or a few baskets at a time when all efforts should be focused on de-risking the company’s future by proving out key hypotheses associated with success.

Just as the most successful rallies in baseball start with a few singles and doubles, the surest path to success in building a new company is to focus on small consistent wins. There’s no shortcut to success. Pursuing elephant customers in hopes that it’ll change the company’s trajectory overnight undermines growth rather than fuels it.