Scaling First Revenue: Industry Focus.

Short answer: Don’t.

Don’t worry about your industry focus (yet), unless you are clearly a vertical solution for a very specific industry; unless you and your first sales team only have experience in selling into one specific industry and have no other contacts and you are determined to keep only this team for a while or can’t change it; unless you are a proven hero of that industry and can sign up lighthouse customers within the first six months and can clearly demonstrate that this is a large market with many prospects (versus a large market dominated by few enterprises or a finite small market).

I actually often see enterprise startups getting held back by their industry focus: They feel comfortable with a specific industry, either because they have worked in it for a long time, or the culture at the buyers is very similar to theirs, or the professional background of the buyers is very similar to theirs, or because they have been that exact buyer themselves and understand the buyers’ sales motion.  That’s all great and should give you a better win rate than not understanding an industry at all.

But: What if your favorite industry’s sales cycle is 12 months at $200k initial ACV with an 18 months time-to-expansion, while another industry are moving within 6 months at $120k initial ACV with a 3 months time-to-expansion? And because you have long sales cycles it will take you a few quarters to change course you will have lost almost a full year of bookings. If you believe you have a superior product and a compelling event for buying your product, how long would it take you to figure out the sales motion in that second industry? How would that change your bookings ramp and cash-flow position?

True, you might end up with reference customers all over the map — from finance to entertainment to retail — don’t worry about it just yet. They could all become great reference customers. You are not yet an established enterprise, with different partner and channel strategies, or different sales teams for different industries. Stick to your core personas of target customers. Do keep an eye out for cultural differences, different terminology, different processes, or different attitude of your buyers. But it’s OK if they span different industries.

Don’t worry about VCs asking you: “Why are these customers all over the map? What do they have in common?!”

You will answer: “What’s common to all of them: They all had choices. They all could have bought from [Cisco, Oracle, Microsoft, Salesforce, F5, Palo Alto Networks, SAP]. But they chose to buy from us. A small startup. Someone is betting their career on us. Someone took budget that they had earmarked for them and gave it to us. They are all large enterprises, and they are betting their competitive advantage and success on us because we have a vastly superior solution for them.  That’s what’s common to all of them.”

Thoughts? Opinions? Comments? Corrections?