Going to Market With Your Startup in Today’s Climate
By: Darling Ventures
Tags: Entrepreneurship, Venture Capital, Business Strategy, Technology, Startup

BUSINESS MODEL

Pricing model aligned with value creation

It is more important than ever to have your product and business model co-developed from the point of inception. Your model should strive to enable frictionless selling, be a native fit to the solution and be informed by surveying or testing on potential customers. Yet most importantly, it needs to be simply tied to $ saved/value created and easily measured by your customer.

Our guidepost: Develop your business model based on the impact you can quantify on your early customers. Strive for easy to understand pricing tiers tied to KPIs or usage. Use your invoicing and renewals interactions to reaffirm the impact you’re having on your customer’s business.

Optimized for quicker collection cycles

Securing cash now is more valuable than future revenue. Evaluate time and revenue as one together on a spectrum and prioritize short frictionless closes rather than optimizing for maximizing contract value. What is important in today’s climate is to gain a foothold from which to scale and demonstrate steady linear progression rather than less predictable and disjointed larger enterprise sales with long sales cycles.

Our guidepost: Offer discounts for upfront payments or longer contract commitments. In monthly SaaS talk of discounts in number of free months than percentage off, it is oftentimes more effective in conversion.

Go-to-Market

A frictionless beachhead into a key part of your customer’s business

To successfully secure mind-share and budget, a startup must be able to both validate their impact swiftly and be designed for streamlined adoption. Securing a low friction beachhead customer and market niche is more important than ever in a climate where pilots and sales cycles are doubling with little appetite for upfront investment or unproven risk. Optimize trade-offs in favor of securing a regular cadence of new deal closures.

Our guidepost: Look for entry in open platforms. Integrate first as a lightweight extension on an existing workflow platform to quickly demonstrate impact on clearly defined KPI. Expand once validated to become an integral performant solution. This has the additional benefit of lower cost to scale. Be mindful that any beachhead you’re securing has a path to meaningful scale within your customer’s business, avoid the standalone innovation departments who are prolific testing grounds with no business attached to them.

Optimized for a single sale per customer

Demonstrating a performant sales processes at the seed stage is now an important KPI that was typically reserved for the Series A not too long ago. Proof of concepts in the enterprise and industry sectors will become increasingly unreliable indicators of early adoption or market fit as the number of them that don’t convert into recurring revenues increase. Look at more linearly progressing bottom-up or automatically converting SaaS subscription business models that only require an initial beachhead sale rather than multiple disjointed ones.

Our Guidepost: Annual SaaS subscription with a 90 day opt-out period and clear success KPIs instead of PoCs that then needs to be negotiated and converted once completed. This essentially gives the customer a PoC period while removing the second sales process of getting from PoC to a full contract. Note you will need to have good resources in account management / customer success to ensure that customers are adopting the products and continue to grow without complications.

Proficiently suited to remote sales

Enterprise sales are currently unable to occur in person. As companies look to save on costs and get used to the new virtual format, we may not see the return to the same face-to-face reliance on sales as previously. Solutions and sales processes that look to be well suited to being done over video or, ideally, products than can be bought self-serve online have the advantage.

Our Guidepost: Be aware of the threshold that your buyer has before they need to seek sign off on a purchase. Optimize for a beach head priced at a point that they can swipe their credit card for without needing to go through a procurement approval process.

See the final part of the series: Startup Financing in Today’s Climate.