Traction speaks louder than words and pitch decks. Even more so in 2023! And not just any traction.
In 2023, your traction must be the result of a capital efficient go-to-market strategy.
Regardless of your specific product and market, there are 4 keys to executing capital efficient go-to-market in 2023.
All too often, founders find themselves chasing “growth” without a clear definition of how much growth they need and by when.
When you can tangibly define traction, then you are empowered to reverse engineer the steps, resources and timeline to get there. For example:
- What does success or growth actually look like?
- How many customers do you need and at what average contract value?
- By when do you need to hit this traction milestone?
Imagine that you plan to fundraise 12 months from now. Think about the traction narrative that would be the most attractive to VCs and that you can actually achieve.
You might want $500K in revenue by December 31st, but how many customers and at what average contract value is that?
Do you have the capacity to achieve that number of customers and is there any data to suggest that it’s even possible? If not, you need to rework your traction around what you know and not what you wish.
By being strategic and intentional about your traction milestones you’ll be in a much better position to fundraise from VCs that are on the lookout to invest in companies with real traction, not just the potential for it.
Headwinds: Opportunities in Disguise
Armed with a tangible definition of and deadline for traction, now you need to think about how to contextualize your target market within the macroeconomic reality of 2023.
Many target markets are facing significant headwinds. Rather than perceiving that as a challenge, it can be approached as an opportunity.
Take the enterprise technology market, for example. Despite the significant layoffs happening across the industry, these companies still need to grow.
In most cases, fewer workers need to do the same amount of work that a bigger team was doing yesterday.
In this example, a founder could position their technology as a tool that amplifies the work of a current – or downsized – team and helps them hit their targets with fewer people. This is a very real pain point for any manager being told to maintain or grow with less resources.
Economic headwinds can be an opportunity for you to reframe the context and thinking around your solution and its impact on your customers.
Generally speaking, budgets across the board will be tighter in 2023. The price point you could sell at the top of the most recent boom cycle will now get highly scrutinized across multiple decision makers.
In my work with many founders across multiple industries, we’re seeing 2-3 month sales cycles come to a screeching halt with more decision makers carefully evaluating every dollar of budget.
This shift in buyer sentiment is important because longer sales cycles have a direct impact on your runway.
However, don’t take the shift as an invitation to dramatically cut your price. Rather, instead of going straight for the C-suite and a 7-figure deployment, focus on acquiring smaller budgets and smaller deployments from the same target customer.
We call this a Pilot-Led-Growth Strategy.
Enter with a price point that a director or manager can sign-off on without needing to ask for permission or take on too much risk.
For example, if you’re trying to sell an AI risk assessment tool to financial institutions, you would be making the shift from selling a large, annual contract to the CISO, to selling a small, 3-4 month limited deployment to the Director of Compliance for consumer banking products.
Building a more targeted entry point and aligning your price to that specific person’s budget enables you to acquire revenue as you continue to work through the longer sales process of a seven-figure deal.
If these pilots are successful, your customers won’t let you walk away when it is time to renew 3-6 months later. As your success continues, you can then expand and deploy your technology to a wider audience in the company.
By the time you reach the C-suite ready to pitch your 7-figure deal, you’ll have an established track record as the incumbent instead of the unproven stranger asking for a big slice of the budget.
Revenue (not Lead) Generation
The most common go-to-market mistake that wastes valuable runway without producing necessary traction is spending limited money and time generating leads that don’t actually convert to revenue.
Spending capital on tools, sales people, marketing campaigns, and branding might feel like a good investment.
But, if those investments only produce leads and not revenue then you’ll be in a much worse position than you were before.
Every day I have the opportunity to jump into the sales funnels of early stage founders that have lots of leads, but not revenue. In these situations, I tend to ask founders one simple question: “Does your bank accept leads and a legal form of currency?”
Leads only exist to fuel revenue.
All too often, founders rush to spend capital on lead generation when what they really should be focusing on is revenue generation.
This may seem counterintuitive – “I need leads in order to get revenue!” – but there is a practical reason that this makes sense.
Spending money to fill the top of the funnel with leads before understanding the characteristics of the leads that are most likely to efficiently result in revenue creates a massive signal-to-noise problem.
Shift your thinking from quantity to quality.
Instead of stretching a dollar of runway ultra-thin to reach out to hundreds or thousands of potential customers, take a fraction of that same budget and target a small but highly-qualified audience with persistent, personalized and effective outreach.
The key to a capital efficient go-to-market is to take a disciplined approach to investing in customers and revenue.
By recognizing that not all customers and revenue are created equal you empower yourself to move away from thoughtless spray and pray while moving towards intentional and surgical go-to-market.