The SMBTech economy is very different from enterprise software, and there is massive opportunity to capture it. There are over 400M small businesses worldwide. That’s more than 90% of companies and 40-50% of GDP.
At this week’s Workshop Wednesday — held every Weds at 10 a.m. PST — Jeff Richards, GGV Capital Managing Director, and Tiffany Luck, GGV Capital Partner, share what it takes to win as a SMBTech startup in today’s economy.
Rewind The Clock — How Did We Get Here
Most small businesses in pre-2010 didn’t have computers in their store or restaurant. Most didn’t even have internet. Can you believe that? We’ve come a long way in a short amount of time.
And then the iPhone changed everything. Suddenly, people had computers in their pockets all over the place. Throw in the rise of social media and mobile web payment systems like Stripe and Braintree, and something revolutionary was at our doorstep.
Instead of walking into places or calling on the phone to speak to someone, businesses could reach customers through social media and other software. The market continued to expand and grow into what it is today.
Fast Forward To 2020
The pandemic happened. Companies were forced to transition from pen and paper to digital solutions quickly. Everyone was stuck in place and online was the answer. And there’s no going back once you’re “turned on.”
2020 wasn’t the only reason small business owners adopted software solutions, but it sure sped up the process. This mentality has stayed around and has become a core part of running a business, and the trend will only grow.
How To Capture This Global SMBTech Opportunity
There is massive market opportunity to sell to SMB businesses. Instead of selling to enterprises, which is entirely different, your primary product, packaging, and the way you go to market is geared to serve small business owners.
The current public market value of SMBtech is $400B, which doesn’t account for the tens of billions that are private. Companies like Intuit, Bill.com, Square, Hubspot, Monday, Shopify, Toast, and Zendesk all cater to this space.
SMBTech is primed for growth.
What It Takes To Win
With small businesses, you will have more churn and business volatility than with an enterprise. It’s part of the deal. That said, you can still create a strong SMBTech company, especially with multiple tech products to grow with you.
The 4 things you need to win as a SMBTEch startup are:
- Efficient GTM
- Commitment to customer success
- Product strategy that drives strong net dollar retention and grows your existing customer base
Of course, this is by no means comprehensive. But get these things right, and you’re setting yourself on a good potential trajectory.
Efficient Go To Market
There are a lot of ways to GTM as an SMB. One thing is for certain. You want to ensure you’re touching enough people with a massive top-of-funnel and spending enough time or resources from a cost and person perspective regarding where you are in the funnel.
Shopify is a great example of this very self-serve experience. Anyone can open a store and go through the process without talking to anyone.
The key to reaching hundreds of thousands of merchants is community building and getting the right marketing materials in front of customers.
You can cast this wide net by focusing on ICP early to use your precious resources best.
- Create a huge top-of-funnel
- Ensure the right mix of self-serve, sales-assisted and inbound, and outbound for your product and customer
- Don’t underestimate the power of a community-building motion
Customer Success Is Everything
Customer success is vital for any tech company, but it’s incredibly important in the SMB world.
The keys to customer success are:
Most small business owners aren’t super tech-savvy. Often, founders think their software is easy to use, but it’s not always that simple. It’s essential to drive the onboarding process so SMBs have a great experience.
- Driving adoption and engagement
Help your small business owners be successful. There are a lot of tools nowadays to help you monitor what functions and features customers use.
- Delighting SMB customers and their end customers
If something is driving value for your customers’ customers, it’s going to be hard for them to rip that out from under them. Delighting your customers and their end users means sticky customers and great retention.
- Optimizing time to value
Small business owners don’t have a lot of money to throw around. This makes them a bit trickier than enterprise. People want to see the value of your software quickly because the money comes out of their pockets, so deliver on that time to value.
SMBTech Companies Take A Long Time To Build
Richards and Luck have been investing for quite some time, and early on, they learned that not everything works right out of the box. Things are hard to predict, and in SMBTech, there are a whole host of different buyer behaviors to understand.
That’s why patience is key. You’re in the long game.
With enterprise software, you’re selling to fewer people for a greater amount. With SMB, you want hundreds or thousands of little merchants to pay you every month. This takes time to build.
So be passionate about the customer you’re serving and the problems you’re solving because it’s going to be a long journey.
Adopt A Growth Mindset Product Strategy
There’s always money available for good companies. A growth mindset product strategy can help you drive NDR (net dollar retention) over time and make you a company worth investing in.
You start with one product to understand your customers’ needs, and as you learn about their actual needs, you add more products over time to solve for them.
If you have good customer relationships, you’ll be able to:
- Anticipate their needs
- Determine the next best product for them
- Offer them solutions before they seek them out from another software provider
The SMB market is hard and will never not be hard, even for those north of $100M ARR. It’s a fragmented customer base.
The key takeaways for SMBTech companies to scale in today’s economy are:
- Now is a great time to build for SMBs.
- Nail an efficient SMB motion before trying to move upmarket.
- Know Your Customer and be choosy as you scale.
- GTM + customer success + product strategy has to tie together.
- Building community can be a superpower.
Published on April 1, 2023