Know the game you are in
Know what you are getting into
I will walk next to you as far as I can, but, don't ask me for the reason, when I leave
I am getting into a habit of quoting Simon Sinek, but here it is -
Most Leaders don’t know the game they are in!
In B2B world, your product walks side-by-side to user’s growth journey. And choosing the point of intercept can be a key differentiator in choosing the way your business needs to run - venture backed or self-funded (bootstrap).
Type I When your product needs to be discovered by creators, who are early in their aspiration - people who are just mulling over the idea of starting a business, build a product or write a book or a newsletter - some choices are already made for you -
- The moat of your business will be lead scoring. how well can you identify users who will stick around and be successful in long run?
- The lifetime value of each user is vastly different. For most users, you will spend more money acquiring the users (ad cost > LTV) than you get from them. For example - Patreon knows that most of the creators drop out before they even launch.
- Venture Money: You either need venture money or dept to funnel early growth. Simple reason for this - You can’t charge high, since that will detract users - who are just starting out - and so you need to spread your marketing spend over several years. And your successful users will also bear the cost of others who dropped out. Heroku is an example of this. The paid users end up bearing the cost of free tier users
- In an ideal world, people will see a social aspect to this, as creators get subsidised in their early journey and then help others do the same. There are exceptions to this - if you create your own acquisition map first. Lemlist has done an exceptional job of creating an acquisition loop through a support group on fb group.
- Competition: You are not just facing churn of users - before they even pay you - but also competing with other venture backed businesses, keen to acquire their piece of market share.
Type II Your product is for creators, makers who are later part of their journey - they have discovered the potential - and are now looking to do things right.
- Since the users are already trying to be seen (for their own success), its easy to identify them. So Account based marketing (ABM) can work well and save you $$ in public advertising. Reach people through direct emails, make connections, share e-books or resources.
- You can do this being self-funded. Easier to get paid as the users are by now serious about the work.
- You can now spend on marketing and get that money back as life time value (LTV) is predictable
- The challenge is to get attention as now the creators (users) have more choices to choose from. Now they are looking for a software that helps them make money, not something that just helps them get started.
Why does this matter? Your personal goals are equally important to building a products that others want. More often we get into businesses, that don’t align with our idea of running business.
Know what you are getting into, before you go all-in is one of my best learnt lesson the hard way.