Inside Top SMB Startups
GGV Capital, NFX and Fenwick & West hosted a summit for top startups in SMB Tech. The amazing speaker line-up shared valuable insights — here are highlights.
With more than $200 billion in value created in the SMB Tech space created in the last 8 years, there’s never been a better time to be an entrepreneur. With strong tailwinds for technology adoption among SMBs, global markets open for the first time via the app store distribution model and global ecommerce platforms, we expect the rise of SMB Tech to be a storyline worth following for the next decade+.
Building Your Brand as a B2B Business
Scott Cook, Founder and Chairman of the Executive Committee at Intuit, says that what separates the winners from the losers in terms of products are three things: 1) does it address a giant, unsolved customer problem? 2) is it a problem you can solve? and 3) can your solution build a durable competitive advantage?
Lessons for Founders
- It’s so easy to copy products now that you’ve got to assume that everything you do will be copied. Get a durable competitive advantage.
- Network effects are the mother of durable competitive advantages.
- Understand the customer’s problems deeply. It’s not always what you think it should be, learn what they believe their problems are.
- Don’t trust what the customer tells you they’re doing, see with your own two eyes what they’re doing.
- Learning comes from the things you didn’t expect. The human brain is not set up to see surprises.
- You’ve got find a way to trick the mind to see past its cognitive biases and look for the unexpected.
- Everyone running an experiment has to put a numeric hypothesis down. Learning happens when you understand why the outcome differed from the expectation.
- Nothing is better for creating fanatical word of mouth than by taking a great pain out of your customer’s lives, solving a real problem for them.
The SMB Tech Opportunity
Anne Raimondi, Chief Customer Officer @ Guru says people undervalue meeting customers and prospects in person in the early days and that face-to-face is critical.
Lessons for Founders:
- Stay in cross-functional pods as long as you can, and don’t build out specific functions early on.
- The reason for this is that some teams and functions are more set up to be iterative and adaptive, while others aren’t.
- Example: if you hire a lot of sales people who are paid on a quota, expecting them to experiment is a sure way to fail early on.
- Hire people who are inherently curious, who don’t come in with an established playbook or right answer.
- Sometimes your best hires are customers who are really passionate about your product.
Scaling Go-to-Market
Lorrie Norrington, Operating Partner at Lead Edge Capital / Board Member at Eventbrite, BigCommerce, and Autodesk and former President of eBay Marketplaces, and Lisa Pearson, CMO of Big Commerce, provide insight into building and scaling in SMB and knowing when you have product-market fit.
Lessons for Founders
- When you think you have product-market fit, ask if you’re serving the customer well or are they disengaged. Are you helping them to solve their biggest problem?
- It’s important to remember. Not all customers are disruptors. Not all are change agents. Mostly they are harried people who want to solve a problem fast.
- There is no one-size-fits-all exemplary product marketeer. You might need someone different at every stage.
- It’s easy to dismiss Brand as expensive. It doesn’t have to be. At it’s core — it’s what you stand for. The key is how to translate this to value for the customer.
The Power of the Merchant
Ilir Sela, CEO & Founder of Slice, emphasizes the value that can be had for SMB tech businesses that align themselves closely with their merchants and champion their brands. He believes in creating economies of scale for small companies to match the infrastructure advantages of the giants.
Lessons for Founders:
- A lot of value can be created if you align yourself closely with your customer, particularly for B2B companies
- Empower the supply side of your marketplace and pass on the infrastructure and cost advantages you get at scale
- Champion the brand of your suppliers and they will become your fervent advocates. Become an indispensable layer of their business.
Rallying Around a Customer-Centric Mission
Dave Vasen, CEO & Founder of brightwheel, says they repeat their mission statement at the start of every meeting and share stories and pictures that show that mission coming to life.
Lessons for Founders
- Find ways to bring the customer to life every day.
- In recruiting, make sure that every hire is aligned with the mission — even before they come on board. The mission has to be embodied by everyone, not just the founder.
- Identify customer champions and stay close to them.
Customer Segmentation
Sarah Schaaf, CEO of NFX Company Headnote, reminds herself constantly that the name of the game is perseverance. She advises startups to stay alive long enough to win and to segment early to make a go-to-market machine.
Lessons for Founders
- Your job is to stay alive long enough to win, to get enough tactics so that you know more than the competition.
- If you’re a B2B startup, customers at all sizes don’t deserve the same sales or customer success resources.
- Customer segmentation is important so you can prioritize resources.
- Segment early on to make a go-to-market machine.
- Make sure that every person in your company knows their role in the funnel. If you do this, you can adapt quickly.
Lessons Learned in SMB Tech
Dane Atkinson, CEO of Odeko and former CEO of Squarespace, talks about the quandary of serving SMB customers who want enterprise-level solutions but that have adoption habits that resemble consumers. For Dane, curing a problem for customers is about making it as simple as possible.
Lessons for Founders
- Curing a problem for customers is about making it as simple as possible and consolidating solutions.
- Learn your customer’s biggest problems by spending physical time with them and in their shoes.
- Stand out in a way that shows you really care about your customer’s problems.
- You can get a lot of momentum from a fanatical first cohort of customers.
- Affecting the customer’s lives in order to really make a difference is the only way to make sure you’ll stick around.
B2B & B2C Synergies and Positioning
Lee Fan, CFO of Grubmarket, says that there’s a lot of synergy between B2B and B2C because consumers can be such huge advocates of your product in their workplace.
Lessons for Founders
- There’s a lot of synergy between B2B and B2C. Consumers can be huge advocates of your product in their workplace.
- Most B2C companies tend to go to the demand side first, but in some cases suppliers are more important. Make sure you have a high value add to supply.
- If you’re in a space where customers are reluctant to adopt new tech, that reluctance can often translate to high retention if you can get past the hump.
The Market Network
James Currier, Managing Partner at NFX, talks about the evolution of market networks four years after initially identifying them in his original essay. By adding a SaaS software tool for SMBs and allowing them to draw their offline relationships online, he says that you can create a market network.
Lessons for Founders
- You can start in a vertical to find the white hot center and get your business going, but from there you want to bleed out horizontally because the same principles will apply across service layer.
- Most of the time you can’t just stay vertical and build an iconic company.
- If you can get multiple people collaborating around a project using your service, it has natural vitality and network effects, positively impacting both growth and retention.
- People really care about their status and how they look, which is why networks with identity and reputation management are so powerful.
- Offload the demand generation to your supply if you’re a marketplace.
GGV Capital, NFX and Fenwick & West are committed to identifying, financing and helping to grow the next generation of SMB Tech companies. We’ll be organizing future community activities and events in this area; if you’d like to join us, drop us a note at chinton@ggvc.com and follow us on Twitter @GGVCapital @NFXGuild @FenwickWest + @jrichlive (Jeff Richards), @peteflint (Pete Flint) @lucktm (Tiffany Luck) @mtesquivel (Michael Esquivel).