After 13 years in the venture business (and 21 years in operating roles) I have come to realize that although there are many ingredients required to build a successful company, the most common important success (or failure) factor is developing the right GTM strategy. This may be obvious, but after sitting through thousands of presentations the questions I get asked and the advice I give, almost always boils down to what the go to market strategy is. It is also the number one reason for deciding not to make an investment. Why? Because a well thought out GTM strategy should undoubtedly take the market opportunity into account, which generally becomes the area that most VCs fixate on and fret about (is it large enough, or growing fast enough, can it be addressed profitably and in a reasonable time frame?).
All my conversations around GTM end up by my repeating what I believe to be three basic, but critically important components: (1) What is your value proposition, (2) Who is your audience? and (3) How do you get to that audience? The order in which you address these is important as well, as I will explain shortly.
It is important to make sure that the value proposition is very clear and that you understand a priori at what end of the “nice to need to have” spectrum you believe your product or service belongs. The “need to have” category will almost always provide an easier route to market. Anything that solves pain points or has a clear return on investment tends to result in value proposition that is easy to both explain and grasp. The other analogy that is often used is “are you a vitamin pill or an aspirin?”. I’ll take the aspirin every time. Getting the value proposition right is no easy task and requires spending significant time understanding the market and customers, which will be the topic of another post.
Once the value proposition has been finely honed, delivering this to the right audience is also critically important. Whatever your value proposition might be you want to make sure that you are delivering it to an audience that “values” the proposition. Taking the aspirin analogy one step further, if your audience does not have a headache, the value proposition is likely less interesting. Understanding and clearly identifying your target audience is as important as having a compelling value proposition. The “target audience” exercise is also a proxy for understanding the size of market or opportunity. It is important to be as granular as possible when identifying market opportunities. Generalizing about “billion dollar market opportunities” is not helpful. There needs to be a thoughtful bottoms up analysis that complements the basic market research data.
Finally, how do you get to this audience? This is all about your sales strategy and cost of acquiring customers profitably. Depending on your value proposition and audience you will have to decide which is the most effective way to get to your audience. Key factors that will influence this include pricing, complexity of your value proposition, and who the decision maker is that will acquire your product or service. The spectrum will range from self-service online to inside sales, to channel and distribution partners to high touch direct selling. Or a mix of any or some of these.
Much of this may seem obvious, but the execution of these components, as well as the sequence is what separates success from failure when building a company. I have also seen too many companies overlook the fundamentals to realize that maybe this is not always obvious, or companies give way to being opportunistic about how they go to market. This is understandable given the pressures of building a company and showing early results in order to get the precious and well needed funding to keep scaling their businesses. However, signing up a distribution partner that addresses the wrong audience, with the wrong value proposition, for example, even though it may produce a short term one off win, is a recipe for long term disaster and disappointment. The best way to burn through precious early stage funding is to have a weak GTM strategy that is out of sequence.
The best advice I can usually give an early stage startup company is to make sure they have a well thought out GTM strategy.