The Hazards of Hunting Whales
Let’s stipulate from the beginning that early stage startups are hard. There are dozens of things that founders have to balance and even the best laid plans are often rendered moot by changing market dynamics. It’s therefore critically important to simplify things as much as possible.
Imagine you’ve started your B2B startup and read the SaaS Napkin. You see the required metrics for your next round of funding. A natural conclusion to draw is that the fastest path is to close some higher ACV deals with marquee companies and brands. Said differently, to hunt whales.
This can be a very dangerous approach for a seed stage startup. It’s axiomatic that enterprise sales cycles are long. But what does this really mean? How long? How many hours of sales outreach is required? The problem when hunting whales is that the answer is often unknown. Large organizations have so many layers of processes and so many decision makers that a deal that seems just over the horizon can easily be months away.
The challenge for seed stage startups, of course, is that they don’t have those many months. The burn is, well, burning. The hunt for the whales is often a double negative as it takes resources away from closing smaller deals that would drive your ARR up and make it more likely you would hit those elusive SaaS metrics.
So what can be done? A better approach is likely to split the exercise. Focus your sales efforts on targeting more modest contracts that can be closed quickly. This has the benefit of both driving up ARR and getting usage and the product feedback that comes from that usage. It also will provide referenceable accounts for your next raise.
Treat the whales as more of a business development effort as opposed to a sales effort. If one of them closes — great! But you haven’t tied the success or failure of your startup to the one that got away. A succesful approach we have seen is to have the CEO focus on developing relationships with these whale customers while the sales team is focused on closing smaller deals.
