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Inside Top SMB Startups
The NFX Team ·@NFX
Jul 2019 ·Marketplaces

Today, NFX hosted a summit with GGV Capital for top startups in SMB tech. For those that missed out, we’re sharing highlights and videos from the summit below.

Building Your Brand as a B2B Business

Scott Cook, Founder and Chairman of the Executive Committee at Intuit, says that what separates the winners from the losers in terms of products are three things: 1) does it address a giant, unsolved customer problem? 2) is it a problem you can solve? and 3) can your solution build a durable competitive advantage?

The mother of durable competitive advantages is a network effect. If a network effect is possible in your business, it’s essential you own it. If you don’t, you’re dead. – Scott Cook

Lessons for Founders

  • It’s so easy to copy products now that you’ve got to assume that everything you do will be copied. Get a durable competitive advantage.
  • Network effects are the mother of durable competitive advantages.
  • Understand the customer’s problems deeply. It’s not always what you think it should be, learn what they believe their problems are.
  • Don’t trust what the customer tells you they’re doing, see with your own two eyes what they’re doing.
  • Learning comes from the things you didn’t expect. The human brain is not set up to see surprises.
  • You’ve got find a way to trick the mind to see past its cognitive biases and look for the unexpected.
  • Everyone running an experiment has to put a numeric hypothesis down. Learning happens when you understand why the outcome differed from the expectation.
  • Nothing is better for creating fanatical word of mouth than by taking a great pain out of your customer’s lives, solving a real problem for them.

The SMB Tech Opportunity

Anne Raimondi, Chief Customer Officer @ Guru says people undervalue meeting customers and prospects in person in the early days and that face-to-face is critical.

Customers are often happy to come to your office, and it really rallies your organization behind happy customers and solving a real human being’s problems. – Anne Raimondi

Lessons for Founders:

  • Stay in cross-functional pods as long as you can, and don’t build out specific functions early on.
  • The reason for this is that some teams and functions are more set up to be iterative and adaptive, while others aren’t.
  • Example: if you hire a lot of sales people who are paid on a quota, expecting them to experiment is a sure way to fail early on.
  • Hire people who are inherently curious, who don’t come in with an established playbook or right answer.
  • Sometimes your best hires are customers who are really passionate about your product.

The Power of the Merchant

Ilir Sela, CEO & Founder of Slice, emphasizes the value that can be had for SMB tech businesses that align themselves closely with their merchants and champion their brands. He believes in creating economies of scale for small companies to match the infrastructure advantages of the giants.

We bootstrapped the company to $40 million GMV by aligning closely with SMB customers. – Ilir Sela

Lessons for Founders

  • A lot of value can be created if you align yourself closely with your customer, particularly for B2B companies
  • Empower the supply side of your marketplace and pass on the infrastructure and cost advantages you get at scale
  • Champion the brand of your suppliers and they will become your fervent advocates. Become an indispensable layer of their business.

Customer Segmentation

Sarah Schaaf, CEO of NFX Company Headnote, reminds herself constantly that the name of the game is perseverance. She advises startups to stay alive long enough to win and to segment early to make a go-to-market machine.

Make sure every person in your company knows their role in the funnel – Sara Schaaf

Lessons for Founders

  • Your job is to stay alive long enough to win, to get enough tactics so that you know more than the competition.
  • If you’re a B2B startup, customers at all sizes don’t deserve the same sales or customer success resources.
  • Customer segmentation is important so you can prioritize resources.
  • Segment early on to make a go-to-market machine.
  • Make sure that every person in your company knows their role in the funnel. If you do this, you can adapt quickly.

Lessons Learned in SMB Tech

Dane Atkinson, CEO of Odeko and former CEO of Squarespace, talks about the quandary of serving SMB customers who want enterprise-level solutions but that have adoption habits that resemble consumers. For Dane, curing a problem for customers is about making it as simple as possible.

Find one person’s very particular problem and get so deep in it that you change their lives. – Dane Atkinson

Lessons for Founders

  • Curing a problem for customers is about making it as simple as possible and consolidating solutions.
  • Learn your customer’s biggest problems by spending physical time with them and in their shoes.
  • Stand out in a way that shows you really care about your customer’s problems.
  • You can get a lot of momentum from a fanatical first cohort of customers.
  • Affecting the customer’s lives in order to really make a difference is the only way to make sure you’ll stick around.

B2B & B2C Synergies and Positioning

Lee Fan, CFO of Grubmarket, says that there’s a lot of synergy between B2B and B2C because consumers can be such huge advocates of your product in their workplace.

We think of our business like a tree. Our B2B business is like the roots of the tree, and the B2C business is the leaves and branches on the trunk – Lee Fan

Lessons for Founders

  • There’s a lot of synergy between B2B and B2C. Consumers can be huge advocates of your product in their workplace.
  • Most B2C companies tend to go to the demand side first, but in some cases suppliers are more important. Make sure you have a high value add to supply.
  • If you’re in a space where customers are reluctant to adopt new tech, that reluctance can often translate to high retention if you can get past the hump.

The Market Network

James Currier, Managing Partner at NFX, talks about the evolution of market networks four years after initially identifying them in his original essay. By adding a SaaS software tool for SMBs and allowing them to draw their offline relationships online, he says that you can create a market network.

If you can get multiple people collaborating around a project, it has natural vitality and network effects, positively impacting both growth and retention. – James Currier

Lessons for Founders

  • You can start in a vertical to find the white hot center and get your business going, but from there you want to bleed out horizontally because the same principles will apply across service layer.
  • Most of the time you can’t just stay vertical and build an iconic company.
  • If you can get multiple people collaborating around a project using your service, it has natural vitality and network effects, positively impacting both growth and retention.
  • People really care about their status and how they look, which is why networks with identity and reputation management are so powerful.
  • Offload the demand generation to your supply if you’re a marketplace.

Other Sessions

  • Lisa Pearson, CMO of Big Commerce. says that when product management meets really smart product marketing, that’s when the magic happens. She also emphasizes that there’s no one-size-fits-all exemplary product marketer. You might need someone different at every stage.
  • Dave Vasen, CEO & Founder of Brightwheel, says they repeat our mission statement at the start of every meeting we have and share stories and pictures that show that mission coming to life.
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