I have invested in over 250 pre-seed startups, mostly in B2B...
Martin Tobias (Pre-Seed VC)@MartinGTobias
13 views
Jan 16, 2025
~5 min read
Advertisement
1
I have invested in over 250 pre-seed startups, mostly in B2B software. The most successful ones have had some distribution tricks to quickly get their first happy customers.
Here are the Best (and worst) distribution wedges I have seen for Pre-Seed software startups.
Here are the Best (and worst) distribution wedges I have seen for Pre-Seed software startups.
2
Best wedges:
- Pick an underserved market segment when going after the king.
@deel wanted to compete with leader TriNet to be an employer of record for US companies but started with making it easy for US companies to hire foreign workers first. They crushed that segment and now compete head on.
- Pick an underserved market segment when going after the king.
@deel wanted to compete with leader TriNet to be an employer of record for US companies but started with making it easy for US companies to hire foreign workers first. They crushed that segment and now compete head on.
3
- Go Vertical, consolidate
Many industries use a combination of general purpose tools (Excel, etc.) with point solutions to operate their businesses. Create a single platform for that vertical and replace the disjointed tech stack. portside.co is crushing this strategy for private plane owners.
Many industries use a combination of general purpose tools (Excel, etc.) with point solutions to operate their businesses. Create a single platform for that vertical and replace the disjointed tech stack. portside.co is crushing this strategy for private plane owners.
4
- Make your customers Investors
Customers who invest in your company, even a very small amount, tend to drive outsized referrals. Don't focus so much on "strategic" large customer investments, take small checks from executives and mid-sized customers. If appropriate do a crowdfunding campaign.
Companies who have crushed this strategy that I have invested in include @drinkLMNT , @LeaseUpCRE and Equi.com
Customers who invest in your company, even a very small amount, tend to drive outsized referrals. Don't focus so much on "strategic" large customer investments, take small checks from executives and mid-sized customers. If appropriate do a crowdfunding campaign.
Companies who have crushed this strategy that I have invested in include @drinkLMNT , @LeaseUpCRE and Equi.com
5
- Influencers in your vertical with aligned incentives
There are influencers in your vertical with larger audiences than you have. Get the best ones you can to do a performance based rev share with you. Focus on the mid size or smaller ones first, not the top ones at pre-seed.
@grw_ai is getting good traction with this.
There are influencers in your vertical with larger audiences than you have. Get the best ones you can to do a performance based rev share with you. Focus on the mid size or smaller ones first, not the top ones at pre-seed.
@grw_ai is getting good traction with this.
6
- Build a proprietary lead database
Rather than buying generic, not very targeted leads from Apollo or People data systems, if you can, build your own database, augment it with data that drives purchase of your product specifically.
storage-defender.com built one from the attendee list of storage operator trade shows.
withciviq.com is extracting customer contacts from public meeting videos local government spending records.
Rather than buying generic, not very targeted leads from Apollo or People data systems, if you can, build your own database, augment it with data that drives purchase of your product specifically.
storage-defender.com built one from the attendee list of storage operator trade shows.
withciviq.com is extracting customer contacts from public meeting videos local government spending records.
7
- Happy customers, referrals.
The best pre-seed companies have over 50% of new customers from referrals. Make it easy for your customers to refer their friends and have your SDRs ask for referrals 2-3 months in.
The best pre-seed companies have over 50% of new customers from referrals. Make it easy for your customers to refer their friends and have your SDRs ask for referrals 2-3 months in.
8
- Bottoms up to Enterprise vs Top Down
When your product can deliver value to an individual contributor or a team immediately, then expand in the enterprise later. Not every product can be sold this way (systems of record come to mind), those that can (see Slack) have a much faster time to market. After you get 1000 customers this way, hire Enterprise sales people to mine the database and call the CIO when their team is already using it.
When your product can deliver value to an individual contributor or a team immediately, then expand in the enterprise later. Not every product can be sold this way (systems of record come to mind), those that can (see Slack) have a much faster time to market. After you get 1000 customers this way, hire Enterprise sales people to mine the database and call the CIO when their team is already using it.
9
- Build in Public
Yes, even for B2B software, building in public can get you noticed. Build, post about it, and comment on other people talking about a similar problem set.
@mattshumer_ crushes this for @OthersideAI
Yes, even for B2B software, building in public can get you noticed. Build, post about it, and comment on other people talking about a similar problem set.
@mattshumer_ crushes this for @OthersideAI
10
THE WORST distribution wedges for Pre-Seed B2B software startups.
You will be tempted to try all of these and you may even find success, although after investing in over 250 companies, these strategies have been the least successful during pre-seed.
You will be tempted to try all of these and you may even find success, although after investing in over 250 companies, these strategies have been the least successful during pre-seed.
11
- Paid Advertising
High costs, low click through rates, high agency costs to get it right. Anyone can advertise. It is not a strategic advantage. You should do some small campaigns to test the waters, but you will not have enough marketing to run large campaigns till the Series A, so wait.
High costs, low click through rates, high agency costs to get it right. Anyone can advertise. It is not a strategic advantage. You should do some small campaigns to test the waters, but you will not have enough marketing to run large campaigns till the Series A, so wait.
12
- Channel Partnerships
It can be appealing to have some else with a sales force sell your product for you. Unfortunately big companies are not good at partnering with small companies and they will always prioritize their products and not understand yours well enough to sell effectively. Wait till you raise a Series B and can support these relationships.
It can be appealing to have some else with a sales force sell your product for you. Unfortunately big companies are not good at partnering with small companies and they will always prioritize their products and not understand yours well enough to sell effectively. Wait till you raise a Series B and can support these relationships.
13
- The Great White Whale problem
Sometimes, success can kill you. Like a huge "company making" customer (The Great White Whale) coming along just after the MVP is launched. They love the product, but just need "a few tweaks" to roll it out enterprise wide. You end up doing lots of custom work for them, their committees take long to decide, they don't pay NRE for the work. I have seen more of these deals fail than succeed. They divert resources from other customers. Beware.
Sometimes, success can kill you. Like a huge "company making" customer (The Great White Whale) coming along just after the MVP is launched. They love the product, but just need "a few tweaks" to roll it out enterprise wide. You end up doing lots of custom work for them, their committees take long to decide, they don't pay NRE for the work. I have seen more of these deals fail than succeed. They divert resources from other customers. Beware.
14
- Book a Demo as only option on web site.
Pushing potential customers to talk to sales before they understand your product or can try your product is friction you don't need. Provide demo videos, trials, case studies, etc. prior to engaging sales. Customers hate talking to sales especially when they don't understand your product.
Pushing potential customers to talk to sales before they understand your product or can try your product is friction you don't need. Provide demo videos, trials, case studies, etc. prior to engaging sales. Customers hate talking to sales especially when they don't understand your product.
15
- Long term contracts too soon.
I have seen companies with an MVP offering multi year contracts out of the gate. This always fails. Do not offer a contract longer than your funding. Focus on M2M or 3-6 M POCs for first 1-2 years.
I have seen companies with an MVP offering multi year contracts out of the gate. This always fails. Do not offer a contract longer than your funding. Focus on M2M or 3-6 M POCs for first 1-2 years.
16
- Multi-channel before nailing one.
You have a horizontal solution that can be used by tons of different ICPs. Ok, but one or two of them will get more value sooner and buy faster than all the others. Fosuc on them. Supporting too many ICPs early will dilute your marketing and product development resources. Avoid.
You have a horizontal solution that can be used by tons of different ICPs. Ok, but one or two of them will get more value sooner and buy faster than all the others. Fosuc on them. Supporting too many ICPs early will dilute your marketing and product development resources. Avoid.
17
- Any customer is a good customer.
In pre-seed when you are scrapping for every dollar of revenue, it can be tempting to take any customer and treat them all with the same attention. But they will all have different requirements, etc. Don't dilute yourself. Focus on best customers, fire the worst.
In pre-seed when you are scrapping for every dollar of revenue, it can be tempting to take any customer and treat them all with the same attention. But they will all have different requirements, etc. Don't dilute yourself. Focus on best customers, fire the worst.
18
- White label
Similar to the Great White Whale, sometimes a customer comes along and says "I love your product, but I want it under my brand as a white label". Now if that is your core strategy, ok. But you are giving up lots of brand value. I was an early investor in @DocuSign, FedEX showed up early and offered a white label license that was multiple times their annual revenue at the time. Tempting. But they turned it down to preserve the brand. FedEx came back later for a deal under their brand since they won the category. Pay attention to long term value.
Similar to the Great White Whale, sometimes a customer comes along and says "I love your product, but I want it under my brand as a white label". Now if that is your core strategy, ok. But you are giving up lots of brand value. I was an early investor in @DocuSign, FedEX showed up early and offered a white label license that was multiple times their annual revenue at the time. Tempting. But they turned it down to preserve the brand. FedEx came back later for a deal under their brand since they won the category. Pay attention to long term value.
19
- Services first, software second
If you have a software solution that requires integrations, customization, configuration services, etc., it can be appealing to have a services arm to collect that revenue as you grow. While the margin is appealing, it takes your dev focus off the product and slows it down. Decide up front what you want to be. Software of Services. You can't be both.
If you have a software solution that requires integrations, customization, configuration services, etc., it can be appealing to have a services arm to collect that revenue as you grow. While the margin is appealing, it takes your dev focus off the product and slows it down. Decide up front what you want to be. Software of Services. You can't be both.