What to Do When You Are Too Early To a New Market

Hey everybody, I wanted to talk about, what do you do when you're too early to a new market and this is going to happen to a lot of you, there's really one of two ways to get a startup off the ground. Either you enter an existing large market, your Zoom, taking on WebEx and GoToMeeting. And that has its own set of challenges because the incumbents are strong, they have brand. But there's budget. There's billions and billions and billions of dollars of buyers in most mature markets in sas, at least hundreds of millions. Or, or you can try to create either a new category or at least a new market within a broader category. And some of us take on those titans head on. And that's great. But a lot of us, even if we're not creating a brand new category, we are entering a new segment, a new area that has not had a software solution before. A type of environmental compliance that's competing with paper, a new type of E signature that doesn't do what Adobe sign and DocuSign does. Something, something where there isn't budget and there isn't a large customer base. But as founders, we see a problem, a big one that can be, that can be monetized and we go for it. But the customer base is limited. So what do you do? What do you do when you're too early to market? I just wanted to go through maybe eight steps and a few. Eight thoughts and a few related ideas. So the first one is, and this one is so obvious, but I just want to say it to folks that are early, that are early to a market which is be conscious, it's going to take longer, probably three to four years longer. That's typically what we've seen take a company like UiPath. Now, it's not a perfect example, but UiPath is insane. It's a $40 billion cloud leader and it went from 1 million to 600 million ARR in a little over five years. One to 600 little UiPath. But the first 10 years, it took 10 years to go from zero to one. Okay. It took them a long time to get to product market fit. Now their first years, they didn't exactly create a new category or enter new market, but it was close. And it just is an example that it could take long. Atlassian started slow. These new markets take longer. Especially if you're bootstrapping, they can take even longer. So just align with your co founder. Look, if you're entering a new market, a new segment, you know, giving yourselves 12 to 24 months to get this off the ground, that's not enough. You're probably going to need three to four years to really get the business going. It's just a fact, because you're going to have to wait for the market to catch up to your early success. Okay. Second interesting point if you're in, if you're too early to market is, and this is positive, is take advantage of the fact that your competitors will quit when, when things are early. New competitors actually pop up all the time. When a category is really established, it's hard to compete head on with the leaders because they have so many years of workflows and features and functionality. You can, you can win in CRM, but it's hard to take Salesforce on directly. Canva and Figma and others are taking on Adobe Creative Cloud, but not so much, not 100% directly because there's so much workflow in that Creative Cloud. There's so much workflow in Salesforce that you have to take it on a little bit indirectly. But in a newer market, actually the competition is there, is often weak. All the products are kind of nascent, they're kind of new. So take advantage of the fact and what will happen is copycats will pop up in new segments in new markets because it'll seem easy. It'll seem easy because the 1.0s won't be as sophisticated as they are in ERP and CRM and others. So a lot of folks will see your cool little tool and say, you know what, I can build that. I can build that little tool to manage this little piece of mobile or this little widget. But then they'll quit because the market is so small that there won't be enough revenue. They'll think they'll make a million or $2 million the first year and they won't and they'll quit. So just staying committed and going long will pull you ahead of the copycats in a new market. Point three, and maybe all of these are obvious, but I think they're worth saying at least to be supportive. If you're working in a small new emerging market, number three is keep the team together. When you're recruiting folks to your startup, you'll get them so excited about the vision, the opportunity, how big it will be. But if it's a new market, a lot of them will be a little disappointed that it doesn't take off as quickly. It's not at that, that crazy viral growth level, it's just small. Like if you're entering a new market, you may close 10 customers your first year instead of 100 like other startups are, for the same amount of work, for the same amount of Software. And those 10 customers may love you as much as 100 at a similar stage startup. But it's just all you have. And it, it can be tough on the team. The team has to believe you're going to be a unicorn and a decacorn someday. That's what startup people are there for. They don't need it to be today. They know they're early, but they have to believe it's possible that a unicorn or Decagorn is coming. So keep them inspired. And what's the best way to keep the team together in a new market? The key is to celebrate every win, every customer, every customer. And look at every metric that's growing. This is important. Things compound in SaaS now, of course we're. When things get good, the revenue compounds at a magical level, right? Asana is growing 60% at 300 million in AR, but that's a ways out for most startups. But other things compound as well. Users, transactions, database calls, whatever it is, find the things that are compounding that are growing, that are growing ideally week over week or at least month over month. So you can show from January to February to March to April, this sub metric is growing. And then draw a line. Draw a line and say, look where this is going to be five to seven years out. It doesn't feel big today and the market is small today. But if we just keep growing at the rate we're growing, this one metric, we're going to be huge in seven years. That helps keep the team together. Show them, show them how compounding works in recurring revenue and SaaS businesses. Okay, idea number four. When you're in a new market, which is lean into your relevant partner ecosystems. If you're developing some new niche e commerce product that no one really knows they need today, I don't know what it is. Some post Covid e commerce product. Your customers may not know you're there. They may not even know you need it. But you know who might get it? Shopify or BigCommerce or Magento or commerce cloud. Shopify is so big and it has such a robust partner ecosystem. On the one hand, there's a million partners to compete with, but a lot of those customers may know this problem and Shopify or someone like that or Salesforce may be able to help expose you, expose your solution to customers that don't even know it exists. Look, all the leading platforms, of course have lots of partners. So breaking out of the noise is tough, but try it, try it. These partner ecosystems, if you get them right, even a few extra leads, even five or ten extra leads from Shopify or Salesforce, sometimes that can make your business in the early days. Okay, point five, this one's a little less obvious, but if you're in a new category, you can probably actually be a thought leader. And what do I mean by this? Once you, you know, a lot of marketers want their CEOs to be thought leaders, we're going to get you on the leading podcast, we're going to get you on stage, we're going to write these amazing blogs. But, you know, in a lot of categories, no one's looking for another thought leader. Okay? There's already like well established leaders and vendors in a category and no one wants to hear what some startup at half a million a year in ARR thinks about CRM or ERP or big issues, right? Or video collaboration. Okay, you can just go here from Eric Warner and Marc Benioff on those topics. But if you're in a niche category in a new market that's coming, you can be a thought leader. One company that I was lucky enough to be the first investor in, Revenuecat, we just raised 40 million from Y Combinator and others. The team was super early how to manage mobile subscriptions. And so the CEO in particular, Jacob Iving, was able to become a thought leader through some very thoughtful, very carefully written blog posts when there were a lot of other people that had domain expertise already talking about how to manage mobile subscriptions and the Wall Street Journal and New York Times and TechCrunch and others would reach out. And he was able to be established, at least in a niche, in a segment, a thought leader in a way that in a more established category you couldn't be. So I'm skeptical when every new VP of marketing or CMO wants to turn their CEO into a thought leader. But in a new catego, or at least a new segment, you actually have a shot. So try it. Try to truly be a thought leader if you have domain expertise in it. Point six, and this one goes back a little bit about keeping the team together. But when you're in a new category and things are small, use micro milestones to build confidence. And we sort of talked about this already, but what do I mean by that? If it's going to take you another couple years to get to 10 million ARR because it's a new category, find something else. Find another core KPI where people can see interim progress until you break out again. User base usage, even leads show leads growing over time. Use micro milestones and say, look, we're going to go, we want to go in this quarter from 1,000 users to 2,000 users or we want to go from one new customer a week to one new customer a day. Now, maybe those customers aren't big enough to really carry the wind, but people can see this progress in micro milestones and folks rally about it. As founders, we care about 1 million, 5 million, 10 million, 20, 100 million ARR. And so do your employees. But they will care just as much about these micro milestones that they can see coming in a quarter or two that are tangible. So try to use micro milestones to build confidence. Okay, penultimate point on a new category. Number seven, triple lean into customer success. Okay, Obviously if you read Saster or listen to our podcast or watch our videos or come to our events, you know that customer success has been one of the themes since the beginning of Saster in 2012. How second order revenue is the magic to SaaS. How look at Salesforce today, even Salesforce at 23 billion, 70% of its new bookings come from its existing customers. Customer success is the magic in SaaS. Salesforce starts at. It just starts a 10 year journey. But in a new category, a new segment, a new market, your existing customers are even more important. Why? They will market you. They will market you when the market doesn't even know you exist. If you get one CIO to find out about a product that you didn't know, one who exists and loves it, they will tell their friend, she will tell other CIOs, your sales leaders will tell other sales leaders. Your marketing manager will tell folks at other companies. Folks are friends with folks at other companies. They're in user groups, they're in discords, they're all over the place. And if they love a vendor like it's especially, especially if it's something brand new, if it's something they haven't deployed before and it's magical, they will tell it. And so they will always be your marketing weapons, your happiest customers. But especially when you're in a new market segment, you will be a gem, a gem that they will tell their friends about because hey, you didn't know you could automate this workflow. You didn't know you could do this. And they will tell their friends and that will percolate and help you scale. So overstaff cs, overstaff. Customer success in new segments and new niches, when you have even any customers, they will find a way to get you more customers, even when it's not clear however else to do it. And Last point, point 8. And again, this one's a little redundant, but I'm going to say it again. If you're early to a market or if you're in a new category or a new segment, if you're in a small market that's going to get big, stay in the game. Stay in the game. It may sound trite or obvious, but it isn't. Here's why. When you enter a new market, your gut's wrong. Let's say wherever you worked, your last company may have grown faster. Let's say you came from Stripe, you're used to this hyper growth and then you do something new, you do something new in payments and it feels so slow compared to Stripe or slow compared to your last startup. Your gut may tell you you're failing. And I will tell you in new markets, a new segment, your gut is often wrong. If you can get any new customers in the early days, that means and they're happy, that means you have something special. If you can get 10 customers, it means you have something. If you can get to 100, it means you get to a thousand. So the point is your gut is often wrong. My gut was wrong when I ran a startup that a new market and challenge yourself, challenge yourself to stay in the game. You may not even feel the progress you're making. It will feel like it takes forever to get there in a new market, a new segment. And you know there's that old expression that it's that you can get less done in a year than you than is planned, but far more than a decade. It's true. Especially in new categories. It's going to take you those extra couple of years until you feel it. So you've got to use those micro milestones, you've got got to use those interim goals so you can see it happening. Because your gut will tell you it's not. Your gut will tell you you'll never get there. This new market's too hard, it's too small. But when I started in E Signatures it was a million dollar market, okay? Today it's 3 billion. It happens, it happens every day, it happens every week. Now these aren't these, these, these eight points are not magical solutions. Your revenue is going to be tiny in the early days in a new category, but you got to have the confidence to see it will grow. To get it to a 1 just to get it to 2, then to 4. Even if it takes you four years to get to 4. Because when you get to 10, if you get to 10 million in revenue, you'll have a real market. You will have a mini brand and it. And if it takes you a couple years extra because it's a new market segment, new product, so be it. All right, stay long, folks. Get to 10 million. It isn't easier, but you get better. And if you get to 10 and you're growing decently, you can get to 100 and you'll have a unicorn.