Intro
In a recent tweetstorm Martin Tobias, a pre-seed venture capitalist at delphi.ai, shared his expert insights on the best strategies for early-stage B2B startups. Drawing from his experience with over 250 companies, Tobias highlights both the promising avenues and common pitfalls for pre-seed ventures.
His recommendations resonate quite well with me. In my Tech Strategy and Due Diligence projects I focus on Tech, but knowing the basics in all other areas is crucial. And I’ve seen many of these error patterns kill the tech strategy of the startup.
Here’s a summary of his recommendations.
Do this
✅ Make Your Customers Investors
Engaging customers as investors, even with small amounts, can significantly boost referrals. While large strategic investments are often prioritized, small checks from executives and mid-sized customers can have a profound impact on your business. This approach fosters a sense of ownership and advocacy among your customer base.
✅ Partner with Influencers in Your Industry
Identify influencers within your industry who have larger audiences and align their incentives with your goals. Start by collaborating with mid-sized or smaller influencers, as they are often more accessible and eager to engage in performance-based revenue sharing. This strategy can expand your reach without the high costs associated with top-tier influencers.
✅ Build a Proprietary Lead Database
Instead of relying on generic lead databases, build your own tailored database that incorporates data specific to your product’s market. This bespoke approach ensures that your leads are more targeted and likely to convert, providing a strategic edge over competitors.
✅ Leverage Happy Customers and Referrals
Referrals are a powerful growth engine for pre-seed companies, with the best achieving over 50% of new customers this way. Make it easy for satisfied customers to refer their friends and encourage your sales development representatives (SDRs) to ask for referrals 2-3 months into the customer relationship.
✅ Adopt a Bottoms-Up Approach
If your product can deliver immediate value to individual contributors or teams, start there before expanding enterprise-wide. This “bottoms-up” strategy has been successful for companies like Slack, allowing them to gain traction and demonstrate value before tackling complex enterprise sales.
✅ Embrace Building in Public
Even B2B software companies can benefit from building in public. Share your development journey openly, engage with others discussing similar challenges, and foster a community around your product. This visibility can attract early adopters and partners.
✅ Booking a Demo as the Only Option
Reduce friction by only offering a “demo” as point of contact with you. No sales re. No pre-sales screen. Straight to the demo and great stuff of your product.
Avoid These Common Pitfalls
Tobias also warns against several strategies that can be tempting but are often unsuccessful for pre-seed B2B startups:
❌ Don’t Start with Paid Advertising
High costs and low conversion rates make it an inefficient strategy for early-stage companies.
❌ Done’t Set Up Channel and Sales Partnership Too Early
Large partnership companies may not effectively prioritize or understand your product, leading to poor sales performance. This is something to tackle in a Series B.
❌ Don’t Let One Large Customer Dominate Your Business
The Great White Whale Problem. Landing a massive customer too soon can divert resources and stall progress with other clients.
❌ Don’t Accept Every Single Customer
That’s related to the Great White Whale Problem. Prioritize customers who align with your product’s strengths and growth strategy. Offboard customers that distract you from your vision and lead to a complicated product that is hard to sell.
❌ Long-Term Contracts Too Soon
Avoid multi-year contracts until your company is more established; focus on short-term proofs of concept.
❌ Multi-Channel Marketing Too Early
Identify and focus on one or two key customer profiles rather than spreading efforts too thin.
❌ White Labeling
Unless core to your strategy, avoid white labeling as it diminishes brand value. DocuSign was approach many times to white-label their product. They did not do it, focused on their brand and won in the end.
❌ Services First, Software Second
Focusing on service revenue can detract from software development and scalability. Service revenue might look very tempting. But it is hard to scale and will totally distract your software teams from creating a scalable product.
