Friday night Twitter thread: the road to $1m revenue runrate and beyond often requires starting over many times – even when things seem to be going well.

Why? Read on >>

1) Some caveats – this mostly applies to software companies that sell things. So not games or pure consumer apps etc.

Let’s say you start a b2b co. And the first few months, there are basically 3 things that can happen.

2)

1) you’re selling like crazy 2)sales are slow / ok but problem seems to be validated 3)your hypothesis is wrong and the customer development isn’t going well

3) In the last case, it’s clear you can see how the road to $1m rev runrate is tough. You’ll have to go back to the drawing board on the thesis and try something else.

And maybe even in the 2nd case, you need refinement in the thesis.

But what about the 1st case?

4) You’re hitting 50% MoM for the first 6 months. Things are going well!

Chances are you’re getting this high growth on fast sales to individuals or startups or quick moving organizations.

And chances are, the price point is low-ish.

5) Your growth is high at first because you have so few sales the previous month. But at some pt, even though sales are going well, it’s really getting hard do 20% MoM.

At higher sales volume, you just need so many customers!

6) So your sales slow dramatically and now what has been amazing is all of a sudden a panic moment.

How are going to keep growing fast?

7)The good news is this happens a lot. And often the solution to this is you need to find a peripheral audience.

If you’re doing SMB SaaS, often this means selling to enterprise. Or if you’re selling to individuals maybe now you’re selling b2b2c.

8) The unfortunate news is that this is an entirely new audience. So even if you have an existing product, the needs are different, the sales process & msging is different, & the product will be different.

In many ways you are starting from scratch.

9) And then maybe you learn that you have a potential enterprise customer who had heard about you just by being in the mkt w your SMB product, and they are very excited about using your product.

But it doesn’t have the right features. They need you to build out a LOT more!

10) This is a critical moment, because everything is seemingly going well but it’s actually a spot where a lot of ppl trip up because…

11) …you’re a small startup and you’re busy w your existing customer base who is different. And using resources to serve them.

You have potentially a large customer but nothing is signed. They need many more features.

12) So what do you do? Do you stay the course and continue focusing on that SMB customer?

Do you try to serve the enterprise customer? Is that just a one-off? Or do other large companies want this too?

And how do you get resources to do the latter?

13) The natural move I see startups do is they try to raise money.

Ppl think they can serve both customers & build out the features that the large potential customer wants.

However…VCs don’t like to fund this.

14) It’s too speculative. Unclear if the enterprise customer will buy. Unclear if there’s more of them. Unclear if you’ll get the product right for enterprise.

Basically from a VCs perspective, your work in derisking the initial SMB audience gets you “no credit” here.

15) And as a catch 22, VCs tell you to come back when you have landed the enterprise client as a customer!

16) This fork in the road happens all too frequently and ppl don’t realize it’s a critical moment where you will need to find much fortitude.

17) Since it will be hard to raise $$ before validating the enterprise customer, you will need to find a way to sell this customer quickly – perhaps w a barebones product or perhaps w consulting as a design project. Maybe they will even pre-pay to get a significant discount.

18) And just like before, you will need to go through customer development *again* w this new customer. But perhaps even faster in order to continue growing fast. And you have no additional resources who are tied up w the SMB product…

19) And you’ll need to take a bit of a leap of faith that if you can do this with one customer you will find a large audience of a lot of other enterprise customers who want the same thing.

20) In fact, the road to $1m rev runrate – even w things going well may feel like trying many businesses

It is during these times you need to be creative w your cashflow because you are effectively going through a pivot by adding new customer segments & you have no new resources

21) Eventually if you pull this off you may find that this is the bigger mkt.

But doing the first product wasn’t a waste – you needed that biz line established to help you even attract attention of this peripheral audience.

22) The good news is that while all of this may seem challenging, many ppl have gone through this before you be you won’t be the last one either.

Getting to $1m rev runrate is hard. but, you can do it!