The first time it happened was with a founder in ocean technology. The second time, it was a startup in energy. When it happened the third time with an AI startup, I knew we had a problem. In every case, the founder had a groundbreaking new technology with multiple, disparate use cases and impressive results. They knew exactly what their technology could accomplish in each case, and what was needed for success. They even had a logical go-to-market strategy in their pitch decks.
But when it came time to implement that strategy, they froze. They could not bring themselves to “abandon” any market even in the near term because it would mean letting go of all other markets they could go after. They stubbornly hung on to three or four different markets, hoping they could somehow tap all these markets simultaneously. They diluted their effort by pursuing too many use cases or offering too many products at the get-go.
Their growth appetites were way bigger than their operational stomachs could handle. Needless to say, come fundraising time, investors politely declined to invest.
Why Founders Stumble
These founders took on too much and failed to achieve escape velocity in any market. This is a common trap, especially for technical founders. Why is it so common?
The Big Green Monster: FOMO (Fear of Missing Out)
As innovators, you can see possibilities everywhere – that’s what got you going in the first place. You can see in six different directions and they all look equally attractive. You might also be afraid to miss out on a hot new market – especially in new technologies with short opportunity windows. It’s tempting to tackle them all thinking you can make them work somehow.
When you do this, the results are always the same: You spread your slim resources on multiple markets, so you can’t accelerate traction in the best markets. The added risk is that conflicting feedback from different segments will dilute your product focus and lead to feature bloat and a product that’s great for nobody.
Underestimating Business Realities
Making a technology work in the lab is completely different than making it work in the real world. They say that the difference between theory and practice is smaller in theory than in practice. You tend to underestimate the realities of productionalizing your technology in the real world. Stuff that stalls progress – bureaucracies, legacy systems and production processes, approvals and budgets – these seem much smaller and easier to overcome when you’re sitting in the lab. So you risk taking on more than you can handle.
The Distribution Blind Spot
The biggest iceberg that sinks proven products is distribution. It’s incredibly difficult to find the right combination of channels and engagement strategies to scale. To make that work, you must find the formula that will scalably and reliably deliver new customers. The first few customers are easy – they are people you know, or people you can easily reach.
But to scale, you have to cross the chasm from early believers to the large mass of skeptical mainstream customers who don’t worship new products for their own sake. It’s hard enough to pull off for one segment – it’s near impossible to achieve in multiple segments.
Distribution challenges put a big brake on your progress because channels are expensive to build. And it’s worse in the beginning because you don’t yet know the most efficient channels or methods to get sales.
When investors see this, it’s a classic sign to them that you don’t understand the realities of distribution.
The net result of all these headwinds is that they significantly slow down your path to revenue and traction. When you can’t show progress, you can’t attract investors, so your startup risks going into a death spiral. Not what you’re aiming for.
Crouching to Pounce: The Beachhead Strategy
There’s a simple strategy to minimize these risks and put you firmly on track to faster revenue and traction. Simple but not easy because it requires you to make the hard choice of one market, one problem, one value proposition, one offer.
This “beachhead strategy” allows you to concentrate all your efforts and resources on nailing one path to revenue. Doing so means you can correct errors quickly, test assumptions without betting the farm and focus product development only on what matters, and achieve traction faster. It’s also the best way to prove your ability to execute to your investors: it’s the “lab scale” version of how your eventual business will grow.
Doing it, however, is a whole other challenge. The stakes are high, and FOMO can ravage your mind as you’re fleshing out the early steps of your strategy. Here’s how to improve your odds of picking the right beachhead market:
Problem Urgency and Pain Level
Markets where customers latch onto you even before you have a product are great beachhead candidates. They’re aware of the problem, it’s causing them acute pain, and they’re desperate for any solution even slightly better than whatever they’re using right now.
I worked with a founder whose first customer almost dragged them to the CFO’s office and got the expense approved because the problem was so dire that he was personally willing to do whatever it took to sign them up. That’s your perfect beachhead market: What about their situation causes this problem to be so acute? Who else might be experiencing the same urgency?
Natural Advantages
What natural advantages do you bring to the table that makes one segment a better fit? A founder I worked with had spent 20 years doing technical sales in one part of his industry. He knew all the ins and outs of how business got done in this vertical. He also knew how to position his product so that it would address a problem that they were worried about, even though it wasn’t his eventual goal. The likelihood of his signing up an early customer made all the trade offs worth it, and made his old vertical the right choice for his beachhead market.
External Tailwinds
Big external forces can work in your favor. Are there upcoming regulatory, technological or tax changes impacting a specific vertical? Is there a new law going into effect soon? Is a favorable tax treatment expiring in the near future? All these factors can increase the urgency with which customers will act – so ride that wave and make it easier on yourself to get those first orders.
Distribution Advantages
By now you know distribution is going to be a big wall to cross, but can it give you advantages in reaching a beachhead market? Say you’re extremely passionate about creating healthier shelf-stable foods and are recognized as a leading voice in multiple online communities. These channels give you a distribution advantage in selling your new line of shelf-stable and safe organic food products, so they would be a natural beachhead candidate.
Making It Happen
The bottom line is this: for your beachhead market to be a good fit, choose a segment that is a very good proxy for your eventual market, and that has some additional advantages to get you in faster and more easily, with higher odds of successful sales.
- Be clear to yourself and to investors that you’re starting small but scaling big (later). If you’re building a truly revolutionary product, chances are there will be more use cases and opportunities in the future, not less. Early success gives you more ammunition to tackle them.
- Clarify the must-have criteria for your first few sales: what critical assumptions will you need to prove? Is it technical feasibility? Price? Scale? Set targets accordingly.
- Think about the minimum number of customers you need to sign up and the time frame in which you need them onboard.
- Work back to understand what you need to accomplish in terms of sales and product development milestones
With these building blocks in place, you now have a solid roadmap that’s well supported, cohesive and credible to investors. And early wins and traction will put the wind beneath your wings to get your startup off on a great growth trajectory.
Bon appetit!
