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Based on required growth rates and measurement intervals (5-10% per week), there would seem to be a pretty heavy bias towards the consumer space. B2B or so-cal

by nwenzel 14y ago

Based on required growth rates and measurement intervals (5-10% per week), there would seem to be a pretty heavy bias towards the consumer space. B2B or so-called Enterprise Companies, especially industry-specific new companies, would have a hard time qualifying on several fronts (market size, growth rate, growth interval). I am particularly interested in the B2B style of startup because I run an Enterprise Startu-er... Enterprise New Company focused on serving the insurance industry. A B2B Startup, it would seem, would have to link customer charges to something that can grow without a new sales contract. I guess, the trick to achieving high growth rates is to create viral growth inside an existing account. Growth in the B2B space will be large jumps (with a new contract) followed by organic growth or not (within the bounds of the existing sales contract). It seems to follow then that since the purchase agreement is the painful and tough and slow part, a B2B Startup would want to have a Freemium or some other type of contract with low/no startup costs and higher per user/GB/account/server/unit costs. Gives me some new direction on pricing. On an unrelated note, I'll disagree with other comments of "favorite pg essays" and say that "Wealth" was the best by an order of magnitude. http://paulgraham.com/wealth.html http://paulgraham.com/wealth.html

dirtyaura 14y ago
Selling expensive enterprise products does have a longer sales cycle than cheaper consumer products, and increments to your revenue come in more discrete blocks. But that doesn't invalidate pg's argument about growth: you just have to use other proxies to estimate your trajectory. For example, instead of active users you track a number of leads and how interested they are. Even without a single closed deal, you can measure your sales pipeline. It is an imperfect proxy for potential revenue growth, but so is daily active users for consumer internet startups. Thus, if you are planning to sell an enterprise solution costing $100000, and you think you are going to make these kind of deals a few times a year in the beginning, then you use your sales pipeline measurements to estimate your growth with a finer granularity than a big sale now and then.
- pbharrin 14y ago
  An estimate of your sales pipeline isn't proof you have traction, it's an estimate: not worth very much.
- nwenzel 14y ago
  From my experience selling services and products to large companies for the past 10 years, "interest" doesn't mean much. Everyone is interested. You don't have anything until you see the signature. And I don't mean the signature on the contract. I mean the signature on the check. I agree with you that pg's point about startup growth is not invalidated by the realities of enterprise selling. But I think te way past those realities is to change the rules of the game. The "sale" should be a low-friction agreement to do business at some cost per unit/user/GB/etc. Growth is the. The ability of the product to go viral within the account. Essentially, it becomes the same process as a consumer sale with the one additional step of getting approved to sell into that batch of consumers. While that might seem to be a big negative against starting an enterprise business, the advantage is that you're then convincing people to spend someone else's money which is easier than convincing them to spend their own. How else could a $.99 app look, feel, perform better than a $100,000 peice of enterprise software.

by nwenzel 14y ago

dirtyaura 14y ago

Selling expensive enterprise products does have a longer sales cycle than cheaper consumer products, and increments to your revenue come in more discrete blocks. But that doesn't invalidate pg's argument about growth: you just have to use other proxies to estimate your trajectory. For example, instead of active users you track a number of leads and how interested they are. Even without a single closed deal, you can measure your sales pipeline. It is an imperfect proxy for potential revenue growth, but so is daily active users for consumer internet startups. Thus, if you are planning to sell an enterprise solution costing $100000, and you think you are going to make these kind of deals a few times a year in the beginning, then you use your sales pipeline measurements to estimate your growth with a finer granularity than a big sale now and then.

pbharrin 14y ago
An estimate of your sales pipeline isn't proof you have traction, it's an estimate: not worth very much.
nwenzel 14y ago
From my experience selling services and products to large companies for the past 10 years, "interest" doesn't mean much. Everyone is interested. You don't have anything until you see the signature. And I don't mean the signature on the contract. I mean the signature on the check. I agree with you that pg's point about startup growth is not invalidated by the realities of enterprise selling. But I think te way past those realities is to change the rules of the game. The "sale" should be a low-friction agreement to do business at some cost per unit/user/GB/etc. Growth is the. The ability of the product to go viral within the account. Essentially, it becomes the same process as a consumer sale with the one additional step of getting approved to sell into that batch of consumers. While that might seem to be a big negative against starting an enterprise business, the advantage is that you're then convincing people to spend someone else's money which is easier than convincing them to spend their own. How else could a $.99 app look, feel, perform better than a $100,000 peice of enterprise software.