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Still, elephants can provide money, credibility, and PR so can be worth chasing as long as you keep the sales investment within reason and are willing to stand your ground and walk from a bad deal.
My only extra color on "deer" is to warn newer entrepreneurs not to fall into the preconception that smaller companies are always easier to sell. This was a notion a lot of players had in the client/server ERP space, and learned to their chagrin that the mid-market sales cycle was as long and complex, and for a lot less money.
One category that is also relevant is "baby elephants." This would be doing a smaller deal with a very large company. For example, in my company (which has 3 employees), Johnson & Johnson is a customer. But it's very different than the elephant you describe. Our deal is with a division of J&J, and in that company, our product is currently only focused on 1 single product line. The advantage are:
1) It's a small enough deal for us to handle the work while developing new customers
2) We're not being pushed around so we can learn as we go.
3) We can still reference J&J as a customer.
4) most interestingly - 3 other J&J companies have already heard of us through internal discussions, which is a pretty cool way to generate leads.
So, if we can expand to more divisions, we grow and the baby elephant grows.
Just another model for customer development that I think works, in addition to deer hunting.
Inventors of rabbit traps and elephant guns can get mighty rich hunting that game!
One solution is to give clients tools to customize the product themselves. Bigger clients may have bigger needs, but they also have more resources to implement them.
What I'm basically saying is that companies should consider viewing their products/services as platforms.
Take a bit more development pain up-front, to save yourself some of the future grief you described in the post.
http://blogs.zappos.com/blogs/ceo-and-coo-blog/...
OR ... you can build a deep vertical app in a large industry but with no intention of going across multiple verticals. Examples: Healthcare, Financial Services.
But assuming you have a product that can scale, shouldn't start ups with limited resources focus on a single vertical from a sales and marketing standpoint? Don't you think people make decisions based on references, i.e who else is doing it?
Fantastic article, the analogies are really helpful. Unless actually hunting, of course.
To add to your animal analogy, how about, a segment for sheeps. They are passive, who follow you around and can attract other sheeps to build a flock. An ideal customer is also one who can attract/refer customers for you at relatively no cost.
That said, the power of referenceability is enormously important in growing a business. But that's a different post.
Also, here's an interesting thought. Google AdWords is relevant to all these segments, but one could argue that it's more of a killer app for rabbits than bigger companies.
re: AdWords - initially it was for rabbits IMO. In the end once you've scaled you can serve multiple segments - I'm really just talking about during the start-up phase.
Interesting piece. I guess my main question is.. what are we talking about here... building a business that you're going to run for years to come or positioning it for an acquisition/exit?
While they may seem the same, I think there is a case for going after some elephants even if it almost kills you to do so. Why? Because have you ever been around a group of VCs and listed off your sales clients and they had that glazed look of "so what?" LOL Seriously, while bagging elephants might not be a sustainable model for most small companies, you need a few to show you're ready to play with the big boys - don't you think? Plus, elephants attract elephants. No one wants to be the last at the party. If you have too much business and need to scale, that's not a bad thing.... that's called "you're fundable."
Actually, the sheep analogy that @brianli posted below is interesting. Sheeps are ones with built in fan bases and high PR value and they technically can feed and clothe you. :) But they pretty hard to catch. Not sure how smart they are..
Companies like Symantec, IBM, etc can afford to chase after these big deals. Heck, the customer is pre-disposed to pick one of these big brands. CIOs could lose their jobs if they picked a startup whose product failed or went out of business. But who could blame them for going with Cisco or IBM? Unless you have completely defensible IP that solves an urgent problem that no-one else can solve, goodluck. And even if you have all those things, your best bet is to white label as part of a bundle with a bigger partner who hunts elephants rather than selling direct. But even then, you're still dealing with all the backwards compatibility issues and support demands.
Sadly, most of these problems have nothing to do with product or features, but the political realities of selling to enterprises, which is why most entrepreneurs get tempted to hunt elephant - they know the elephant needs it, they know they're better than everyone else, so why wouldn't they be able to bag the big fat juicy elephant?
The deer ones which have stable growth and are eager to watch others grow (as I have learned from Blank to call them early-vangaists) are ones which want to help you but these are few and far inbetween.
Now comes the elephants, these guys wont even touch you even if tis for free and a demo for feedback and take too long to get around the red tape to even get their attention. I have realized its best for these guys to come after you rather than you to them. Hence in terms of your post, for an early stage startup like mine: I would want many deer and few rabbits drinking from my waterhole (product) so that i can attract the elephants :)
Question, what if one does not have the "right conections" from high up to get a call, is it worthwhile to start higher a sales team at that point or one sales guy with a huge Rolodex?
re: hiring senior sales guy - never! I'm writing a future post on that. Please don't think that will solve your problems - it won't. It will just add a lot more costs to your business.
Elephants = very large companies. Large contracts $100k+ but huge demands because they know they're big.
Rabbits = web 2.0 freemium focus. I'll just charge users $5 / months for my product and lots of SOHO customers will pay. a) they seldom convert easily and when you do convert you get $60 / year.
Deer are somewhere in between. It's companies or departments that are willing to spend real money. I can't say what that is because the value of what someone will pay for a product depends on the perceived utility of that product and the ROI to the purchaser (real or implicit). But in my experience for many companies this means getting meaningful money in exchange for using your product.
In my past experience Elephants contracts were $250k+, Deer were $50k-$100k and Rabbits were $5k-25k. Everything between were edge cases. But obviously these price points are not blanket prices across all businesses.
My deer were regional engineering firms, mid-sized construction firms or regional utility companies. My elephants were: BNP Paribas (the largest bank in Europe) who consumed my entire engineering resources for 6 months, The London Underground (similar story), Thames Water, etc.
We had great references and quick cash. But we ended up being a company who didn't pursue the larger strategy that we all believed in.
Hope that adds the color you were after. Thanks for stopping by.
I'd like to add one more point for going after elephants. My first startup ended up selling mainly to elephants (large mobile carriers). As we sold to carriers in Europe and Asia and Africa, and listened "a little too closely" to our customers who had varying requirements as their markets were very different, we turned from a product to a solutions company. And its tough to turn back with all the revenue pressure and promises sales has to make to close accounts.
You warning about going after rabbits is perfect as well. The success of Basecamp has spawned way too many features-being-launched-as-SaaS-products companies (think of how many online invoicing apps are out there) and its impossible for them to build meaningful businesses in the long run. I think building meatier products that you can charge upwards of $100/month and ideally $500/month is much better.
Thanks for spurring such a valuable discussion.
Do you think DailyBooth is a feature or a company?
Thanks for sharing!
Regards,
Jenn
Entrepreneurs World Cup-World-Class Leadership, Sales, Internet Marketing and Wealth Creation Event featuring an All-Star Cast of Speakers
In our case we also have experience of aiming for the elephant and actually getting it. Though the hunt itself was very challenging and in the end not THAT rewarding as we lost a lot of resources on the project (more than initially expected and calculated). So even though hunt was very challenging and satisfying once the elephant was taken down, the meat was not that great. But of course you can use the knowledge that you gained to take down the elephant, to take down deers more easily, as they are more easily to hunt for. Looking back at it, the hunt was more about the hunting challenge itself, than that it was for the meat.