Getting to your seed fundraise with momentum

When you start a company, a natural tendency is to keep options open in terms of which types of customers you will be serving — enterprises, sme’s, specific departments etc.

You don’t know for sure where you will be closing deals at the start, so you want to chase different opportunities “Big company X wants to meet, it may take 6 months, but it could be huge!”, “We want to explore industry Y also, it could make our market 10x bigger if it works”.

This usually leads to failure unless you start focusing very early. Instead of trying to keep options open, you should ruthlessly focus on what the best segment for you is.

The below graph shows what the difference can be in terms of growth for a Focused (Blue) and Non Focused (Red) Company.

• They are closing the best customers with the same lead time (15 hours of work, 3 weeks)
• They start out with the same number of sales people

The difference is that the Red Company also sells to segments that are not optimal, where the sales cycle is much longer, leading to longer sales cycles for all customers.

The differences in data is shown below.

The difference is between ruthlessly qualifying customers in the beginning versus trying to close every customer.

The blue, focused company says no to not-fully qualified leads. The red, not focused company is trying to get meetings, still learning from customers and trying to push customers to buy even if they are not the best type of customer.

Preparing, scheduling, having different meetings, using different communication channels all take up a large amount of time when trying to close deals.

With those parameters, you get the above graph for the first 24 months when you’re selling.

I can tell you it’s difficult to invest in that red line.

The Google Sheet is here: https://docs.google.com/spreadsheets/d/e/2PACX-1vS4ClbgNN40Btr25ukZwBKCril83Bp36Z7iVERgJFU4tJlcpj9CqhiEDe0lEW0jnQAxxFZFNbt00s-h/pubhtml

So why does this happen?

I often notice that startups want to learn about different verticals and sizes of customers and because you’re slow if you do that, it takes about the first 24 months. You don’t have time for that. You need to be able to qualify even without selling to everyone first.

The ones that survive stop selling to everyone early enough and are able to attract funding, the ones that continue to waste time on unqualified customers usually fail.

Very early, before you even have a ready product, you need to talk to your potential customers and figure out who actually has a burning problem and can buy within a timeframe that makes sense and pay an amount that will make sense (large companies often fail at the timeframe). I’ve experience that if you jump too far in and set ambitious sales goals, it starts feeling that you’re failing if you don’t run after every opportunity.

You shouldn’t sell to anyone. You really need to let them go.