Both Sides of the Table - Latest Comments in Most Startups Should be Deer Hunters

Re: Most Startups Should be Deer Hunters

msuster — Tue, 17 Nov 2009 01:40:59 -0000

Hmm. Not sure why you didn't get an email notice - maybe check your Disqus settings and/or your spam filter? But maybe it's a nice excuse to come back to the blog to check out the comments ;-)

Re: Most Startups Should be Deer Hunters

msuster — Tue, 17 Nov 2009 01:38:38 -0000

thanks, Paul. That's good enough - it's nice just to get feedback.

Re: Most Startups Should be Deer Hunters

Rahul — Mon, 16 Nov 2009 22:13:09 -0000

Mark, It is great that you reply to a lot of comments on your blog. It creates a very engaging audience! I went back to this post as a 'refresher' and saw you commented on my post a month after (thanks for the comment. it makes me more confident in what im doing)...though Im not sure why I didnt get an email notification after subscribing to the comments.

Re: Most Startups Should be Deer Hunters

Harry van der Veen — Mon, 26 Oct 2009 03:04:53 -0000

Love your comparison with the animals.

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.

Re: Most Startups Should be Deer Hunters

Paul Stamatiou — Thu, 22 Oct 2009 23:02:32 -0000

Nothing to say - just wanted to let you know I thorougly enjoyed this post!

Re: Most Startups Should be Deer Hunters

jennifer — Sun, 20 Sep 2009 05:13:08 -0000

I like this.. very informative.
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

Re: Most Startups Should be Deer Hunters

giffc — Sat, 19 Sep 2009 20:53:05 -0000

ah gotcha, you're putting the mid-market in the rabbit category for SAP/Oracle in that stage of the ERP market. Yes, I guess you cannot define size explicitly -- it all depends on context.

Re: Most Startups Should be Deer Hunters

msuster — Sat, 19 Sep 2009 20:51:20 -0000

When I first heard about it I thought FNAC. But at 6.5 million users I'll have to register and understand what it's all about.

Re: Most Startups Should be Deer Hunters

Vaibhav Domkundwar — Sat, 19 Sep 2009 17:47:13 -0000

Apt.

Do you think DailyBooth is a feature or a company?

Re: Most Startups Should be Deer Hunters

msuster — Sat, 19 Sep 2009 17:28:49 -0000

agreed on all points. My analogy of a rabbit is that they seem plentiful but are hard to catch - probably even harder than deer. And when you get them there's less meat.

Re: Most Startups Should be Deer Hunters

msuster — Sat, 19 Sep 2009 17:27:34 -0000

Exactly.

Re: Most Startups Should be Deer Hunters

msuster — Sat, 19 Sep 2009 17:27:02 -0000

thank you. we have a name for those feature co's. We call them FNAC (feature not a company).

Re: Most Startups Should be Deer Hunters

msuster — Sat, 19 Sep 2009 17:25:48 -0000

I think it's a segmentation exercise for any company to determine the exact value but let me say it this way:

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.

Re: Most Startups Should be Deer Hunters

giffc — Sat, 19 Sep 2009 13:39:15 -0000

Enjoyed the post. I've personally seen two bad results from elephant-obsession: 1. a startup I rep'd at Broadview which basically sold it's product dev team to a big customer -- they got lots of revenue, but essentially had a market of 1 company, and thus no exit potential at all; 2. over-concentration of revenue among big customers, with the loss of one leading to a nasty spiral of layoffs and death of morale.

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.

Re: Most Startups Should be Deer Hunters

msuster — Thu, 17 Sep 2009 18:08:38 -0000

Sometimes it is good, but it's not necessary. And it can be limiting.

Re: Most Startups Should be Deer Hunters

Mike Su — Thu, 17 Sep 2009 13:26:07 -0000

Yes! Exactly. And those spreadsheets, of course, are built by 22 year old college grads who worked 90 hours a week to get it done who have never had to live with the consequences of those decisions. The partner reviews it for typos and then passes it along to the client along with a six to seven figure invoice. These irrational realities of the business "game" are often overlooked by startups who are passionate about building great software and believe quality and rational minds will win the day.

Re: Most Startups Should be Deer Hunters

Rahul — Thu, 17 Sep 2009 13:19:32 -0000

Great analogies Mark. I think its helpful to make some assumptions to decide on the size of the customer to focus on. If my marketing and development costs so much and I expect x% success of all prospects I approach I must sign so many customers... so I must go after deers or elephants to make it worth my while. I can see deers to be the ideal customer in most cases because of the overhead (making rabits not profitable)...i also think elephants tend to have long sales cycles which increases the sales cost.

Re: Most Startups Should be Deer Hunters

Vaibhav Domkundwar — Thu, 17 Sep 2009 13:16:19 -0000

I couldn't agree more and I think this is the best articulation of a common problem that every smart entrepreneurial salesperson realizes.

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.

Re: Most Startups Should be Deer Hunters

Jason — Thu, 17 Sep 2009 13:01:46 -0000

so Homestead, in your firm's portfolio, aims at rabbits? and when you say "how easy or not", you mean how capital intensive? now i have something to think about...

Re: Most Startups Should be Deer Hunters

traviscooper — Thu, 17 Sep 2009 12:28:36 -0000

totally agree.

Re: Most Startups Should be Deer Hunters

Andrew Warner — Thu, 17 Sep 2009 12:09:16 -0000

Mark, do you have examples of deer customers?

Re: Most Startups Should be Deer Hunters

Scott Wheeler — Thu, 17 Sep 2009 10:32:02 -0000

Another thing that is easy to miss in the excitement of an elephant showing up at your door is that if you're an early stage startup, they're probably not looking to buy your product; they're looking to buy your company. If you don't know the ropes and what that looks like it's easy to get caught up in thinking you're going to do a big sale only to find out that that's not what you were talking about.

Re: Most Startups Should be Deer Hunters

msuster — Thu, 17 Sep 2009 08:59:21 -0000

re: elephants - I would argue that you need to be careful even if they come to you. The problem is that just serving them can have a negative impact on your business. Depends on the kind of business, but for many it's a poisoned chalice.

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.

Re: Most Startups Should be Deer Hunters

msuster — Thu, 17 Sep 2009 08:56:35 -0000

Thank you. I've been there.

Re: Most Startups Should be Deer Hunters

msuster — Thu, 17 Sep 2009 08:56:12 -0000

Depends on your definition of small business. Soho for example are rabbits. The top end of SMB might be rabbits or deer. Depends how much $$ they are willing to part with for a solution like yours and how easy or not it is to reach them.