In his blog post, Mark Suster talks about the importance of knowing what size of customers to serve during the initial stages of a startup. It’s extremely important to know what the customer of that size does, the problems they have and the features that will resonate with them. There are three types of customers that startups can go after:
These customers are the Google and Microsoft in your target market. Landing one elephant will give you enough meat to survive for a long time, but they require special skills, serious time commitment and a huge resource drain to catch. If you don’t catch one, you’re in serious trouble. Waiting out months in hopes of getting the big catch can be detrimental to the survival of the startup.
Even if you’re successful in catching an elephant, there’s some serious trouble ahead. Companies likes Microsoft require very high service levels. You have to go above and beyond your MVP (minimum viable product) and in most cases; you have to build custom features specifically for their needs. Most startups initially have small teams. If you’re servicing a company with 1000 plus people with a team of 5, the elephant will consume your startup. There won’t be any development resources left to focus on your initial MVP.
*2) Rabbits *
These are the opposite of the elephants. They’re deceiving and there are tons of them. You’ll chase them for a while, but as you get closer, you’ll realize they were never worth your time. There was never enough meat to help your startup survive.
Think of freemium models in the market. There are many examples of startups that release their product or service for free. They continue releasing free updates in hopes of acquiring a big customer base. But when the time comes to release a paid version of the product, the big customer base shrinks faster than it initially grew.
Only mass scale startups can benefit from a freemium model. Companies such as Facebook, Zynga and Twitter are all good examples. The user base is so massive, that even if a tiny proportion of their total customers pay for additional features, it amounts to a huge revenue stream.
Deer are the ideal kill for a startup. They’re easy to get. There’s enough meat to help you sustain for a while before you go after the next one. They are not too big that they can put a huge constraint on your resources. They are not too small meaning they will be worth your effort. Deer are the perfect transition in helping you catch the elephants. The goal is to have enough companies to help validate your product and get it well known in the market. Once you have a steady revenue stream and the business is growing, you can start the hunt for your first big client.