Summaries Business and Entrepreneurship Selling Software to Startups: A Successful Strategy for Scalable Products

This is a summary of a YouTube video "The Better Customer–Startups or Big Enterprise?" by Y Combinator!

4.8 (89 votes)

The key idea of the video is that selling software to startups can be a successful strategy, but it requires a scalable product, a sales strategy, and learning from successful companies.

• 💻
  00:00

  Selling software to startups can be a successful strategy, but it also comes with challenges.
• 💡
  01:14

  Founders should avoid selling enterprise products to startups and small businesses, as they often don't need them, and instead focus on products like Snowflake for companies with massive amounts of data.
• 💡
  03:53

  Selling to customers without the problem is worse than selling to slow decision-makers, while startups can be demanding without wanting to pay.
• 💡
  05:55

  Selling to early stage companies doesn't guarantee customer retention, especially in high-churn categories like HR, so it's crucial to have a scalable product like Stripe to avoid losing customers as they grow.
• 💰
  07:13

  Stripe's payment service remains valuable for companies of all sizes, while Salesforce is the go-to for scaling sales teams.
• 💰
  09:28

  Startups need to sell their product and change people's behavior to succeed, starting with self-serve and personal networks is a good place to start but a sales strategy is crucial for success.
• 💼
  12:00

  Selling to startups can lead to success in building a big company by creating a path to larger enterprises and training people on how to use cloud software.
• 💰
  14:18

  Selling software startups requires a sales team, even with developer and evangelist support, and learning from successful companies like Gusto, AWS, and Stripe is key.

Key insights

• 💡 Selling software to startups has been a successful formula for many top companies, such as Stripe and PagerDuty, who initially focused on serving other startups as their early customers.
• 😬 It can be painful to see founders with insights on solving problems for large companies try to sell enterprise products to startups instead.
• 💼 Early customers of big enterprise companies like Workday often make significant deals, indicating that these companies target customers who already have a substantial number of employees.
• 💼 Selling to startups can be a successful business model if you have a product like Stripe that can grow with the companies and retain them even when they reach thousands of employees and generate billions in revenue.
• 🔄 The needs and constraints of big enterprise customers can differ significantly from those of startups, often requiring the development of a brand new product to cater to their non-technical end users.
• 💡 "What you build is just as important as what you build to get customers."
• 💰 Selling to startups can be a powerful strategy for creating value and generating billions of dollars of revenue, as demonstrated by the success of YC-funded company Gusto.
• 🤔 Understanding and studying successful companies in the same industry can provide valuable insights and strategies for startups, saving them from making the same mistakes.

Detailed summary

• 💻
  00:00

  The discussion is about the benefits and challenges of selling software to startups, which has been a successful formula for some top companies like Stripe and PagerDuty.
• 💡
  01:14

  Founders should avoid selling enterprise products to startups and small businesses, as they often don't need them, and instead focus on products like Snowflake for companies with massive amounts of data.

  • Founders sometimes make the mistake of selling enterprise products to startups because they assume it's the best move, but it's not always the case.
  • Startups often try to sell enterprise-grade products to small companies, despite the fact that they don't need them, which is a problem that tiny companies don't have.
  • Snowflake is a product suitable for companies with massive amounts of data, and not for startups or small businesses.
• 💡
  03:53

  Selling to customers without the problem is worse than selling to slow decision-makers, while startups can be demanding without wanting to pay.

  • Selling to customers who don't have the problem is worse than selling to customers who have the problem but take a long time to make decisions.
  • Startups are not necessarily easier customers than enterprise customers as both can have high maintenance and demanding end users, but the difference is that big companies pay more and startups can be demanding without wanting to pay.
• 💡
  05:55

  Selling to early stage companies does not guarantee customer retention as some categories, such as HR, have high churn rates as companies grow, and it is important to have a product like Stripe that can grow with the companies to avoid falling down.
• 💰
  07:13

  Stripe's payment service remains valuable for companies of all sizes, while Salesforce is the go-to for scaling sales teams.

  • As companies grow and their needs change, they may require a completely different product or service, as seen with examples such as Perfect Audience, Heroku, and Triplebyte, but Stripe's payment service remains valuable regardless of company size.
  • Startups often choose lightweight CRM tools, but when it comes to scaling sales teams, Salesforce is the go-to, highlighting the difference between tools that scale with people versus revenue.
• 💰
  09:28

  Startups need to sell their product and change people's behavior to succeed, starting with self-serve and personal networks is a good place to start but a sales strategy is crucial for success.

  • Startups often avoid sales and think they can rely on self-serve flows, but in reality, they need to sell their product and change people's behavior to succeed.
  • Starting with self-serve and leveraging personal networks for sales is a good place to start, but there's much more to sales than that.
  • Building a great self-service interface is not enough to get customers, as it is equally important to have a strategy for reaching out to them.
• 💼
  12:00

  Selling to startups can lead to success in building a big company by creating a path to larger enterprises and training people on how to use cloud software.

  • Selling to startups can be a powerful strategy for building a big company, as demonstrated by the success of Gusto, a payroll company funded by YC that started with startups and used them as a bridge to the broader SMB market.
  • Selling to startups creates a path to large enterprises and helps in training a group of people on how to use cloud software, which was a big avenue into the enterprise for AWS.
• 💰
  14:18

  Selling software startups requires a sales team, even with developer and evangelist support, and learning from successful companies like Gusto, AWS, and Stripe is key.

  • Bottoms up sales strategies, which involve getting developers and evangelists to help make sales, have become popular, but companies like AWS and Stripe still need to build real enterprise sales teams.
  • Selling software startups requires a sales team despite having a development team already using and advocating for the product.
  • To successfully sell to startups, it's important to know which game you're playing and to learn from successful companies like Gusto, AWS, and Stripe.