Many startups begin life selling to small business (SMB). SMB is a very appealing market. For one, it’s big (30 million businesses in the US alone). Also, they make quick buying decisions. Sounds great!
The challenge with SMB as a customer segment is that each customer is small. It might be easy to get your first few customers. But over time you become a victim of your own success. The bigger you get, the higher your customer acquisition costs go. Hubspot’s CEO Brian Halligan illustrates this challenge beautifully in his recent post ‘why aren’t there more Intuits”.
I was talking with the founder of a very successful startup this week. His company has been around for almost 10 years. With over 100 people, it’s well on it’s way to being a market leader. They have achieved that success without raising a penny of outside capital. But that’s about to change.
For the first time ever, this company will be raising capital. The obvious question is why. He had several good reasons. Wanting to be the clear market leader was one. But a big driver is that his company competes with other well-funded companies for talent.
As he said, “talent is everything”. In the current environment, startups and large tech companies alike are fighting over the best talent like never before. Developer salaries are climbing. Benefits like free meals are becoming more and more commonplace.
How do you compete with companies that have all this funny money lying around? And with valuations being as high as they are now, selling shares in your company is relatively cheap.Continue reading The end of bootstrapping
Yesterday was a huge day for the Canadian tech scene with Shopify‘s long-awaited IPO finally happening. In its first day of trading the company that began as Tobi’s little rails app gained 51% in market value and is now worth approx. ~ $1.8B.
Having been involved in the Canadian startup scene since the 90s the big thing for me here is that there are no more limits. It was accepted wisdom for many years that we just couldn’t build big technology leaders here in Canada. Yes, we had some exceptions (Blackberry, Nortel, etc.). But by and large our tech companies have been smaller and sold early.
How often have you sat in front of VCs or advisors and been asked ‘Can this be a billion $ business?’. I have. I find it to be an incredibly frustrating question. When you’re at the start of your business, if you’re spending time thinking about how to be a billion $ business, you’re wasting time.
Here are some stats: There are 100s of venture firms investing in many 1,000s of startups. Out of all of that activity there are 80 privately held technology companies worth $1B (source: CBinsights) in the US. In Canada, there are two (Shopify and Hootsuite).