Validate MVP with seed/Series A or follow the money (Series B/C/+)

[aconfusedperson]

Hey r/startups!

New founder here. We're at MVP / beta testing. Would like to hear others experience on GTM at this stage.

Context:

- To date, we've focused on seed/pre-Series A companies because they are less likely to have a competitor's tool. From user interviews, most companies purchase our competitors after raising Series A.

- However, this is an uphill battle with budgets, priorities, etc. (Our core value prop is employee retention. Many seed/Series A companies are focused on hiring and implementing basic processes like performance reviews).

- Series B/C is where we are starting to see more interest in our value props (w/ $ to spend). However, many already have our competitor's tool.

- While we have differentiators, they're not advanced enough (yet). Would like to get real-world feedback via beta testing to solidify our differentiators / shape our roadmap.

Question - which path to take (or is there a 3rd)?

1. Stay the course. Get the few seed / Series A (who don't have our competitor) as Design Partners. Conduct beta testing. Refine value props (features + positioning) to be ready for competition.
2. Shift to Series B/C. Convince them to try us out - even if our core differentiators aren't quite there yet.

Thoughts?

 

[krista123]

@aconfusedperson my .02: you need actual users. If your play is employee retention, and you address no need in the seed/A, then what do you learn? How do you get renewals?

You're almost certainly not going to win the fight for a tear out. Though you should offer eg the remaining contract period of your competitor for free as long as a prospect signs a contract that is at least a year longer. But it sounds like you need to find B companies that aren't using a competitor.

tl;dr: You need actual use, and seed/A won't give you that, thus you must have later stage customers.
The fact that this is harder is irrelevant.

 

[aconfusedperson]

@krista123 That's right. Thanks for being objective! Will focus on later stage companies and see how it goes.

 

[enoch23]

@aconfusedperson Early startups often have no money or won't spend it on tools that established businesses use to manage the org. They are best seen as an early adopter for a freemium model.

Startups that raised 'real' money and are in growth mode might be targeted as paying customers with low procurement hurdles.

Late startups are enterprises and have politics, procurements, legal hurdles to deal with when selling.

Note that each magnitude size change also changes the needs, org structure, comms, expectations, processes, etc. So one size fits all from tiny startup to enterprise might be hard.

 

[aconfusedperson]

@enoch23 Our thinking is that the 'early startups' are good partners to help us round out our MVP before we launch publicly. We have a pilot MOU where if we achieve certain criteria, they pay for a subscription. But I feel like I'm putting in a ton of effort for a very small subscription ($)

When we are public, I'd expect our GTM to focus on the 'startups' that are in growth mode.

Q: Given we're in beta/MVP, should we focus on the early startups to get quick feedback (pre launch) or should we focus on our ideal customer (post launch) instead?

I agree - enterprises come with bureaucracy that I've navigated in the past ... sometimes little to do with MVP. Might also require a lot of customization which will hurt our scalability early on.

 

[enoch23]

@aconfusedperson Getting feedback from your expected customers (who actually can pay) is most valuable imho.

But getting any feedback is better than none.

So go for customer-like feedback if you can, go for small startup feedback if you can't.

My fear would be building for the 3 person startup a service that is not relevant for the 30 or even 300 person startup. In my experience, things change dramatically in startups every time staff grows 10x (process, renumeration, comms, HR, IP, collateral, departments, structure, ...).

Lastly, you are more likely to stretch into the enterprise market than the penny-pinching mini-startup market for customers in the future. So starting in the middle working up is easier than starting with the no-money customers.

 

[cynicious]

@aconfusedperson Also, to confirm... Small/medium regular (nonstartups) are not your target market also at all?

I ask because there are plenty of older companies that are traditionally grappling with employee retention. Generally, these companies may be behind the curve in buying tech but probably see value in investing in tech if they have enough $.

 

[aconfusedperson]

@cynicious Someone suggested we go all the way to Enterprise. Must admit, have not allocated much time to study this segment of the market. Partly because of the (assumed) longer sales cycle and (again, assumed) requirements re: privacy, security, etc. At this point, our #1 priority is validating the MVP. I think what Enterprise values is a secondary priority for us ....

All that said, I'm open to any conflicting points-of-view! This is my first time as a founder .. just want to be cognizant of time/effort & not spread ourselves too thin

 

[rivertree]

@aconfusedperson https://www.census.gov/library/stories/2021/01/what-is-a-small-business.html

A lot less enterprise companies out there than people think and a lot more small / medium size companies. (And a lot more than the # of startups).

If you need help targeting certain ones I would narrow by industry problems related to people and understand is your product something that will help or are there systemic issues (such as in the trucking industry) I expect might hard to have success in no matter how great your product is or can be.
Another thing is looking at the nurse /teacher side which are seeing them leave in droves. You could target smaller hospital for the MVP / school district. Hope this helps.

Another thing is smaller companies generally don’t compensate as much as enterprise so they will have to get more creative in retention.

Edit: sorry I realized replying from my phone on the Reddit app is my personal account not my business account I posted the 1st comment on

 

[krista123]

@aconfusedperson The enterprise stuff is tough. I've gone down that road, and would be happy to have a private chat about it some evening.

But you're starting with at least a soc2, pentests, saml, rbac, and likely people/permissions ingestion from some existing HRIS or directory as the bare minimum to play in this field.

 

[victoriapirere]

@aconfusedperson Hi