Why your GTM strategy matters (or, Minimizing your capital needs by honing your strategy)

Nothing keeps founders up at night as much as the fear of running out of money. How much capital does your company need, and how much is too much? The answers to those questions have a lot to do with your go-to-market strategy (which I’ll abbreviate to “GTM” here).

The more thoughtful and targeted your strategy, the less it will cost you — in both time and money — to win early customers and establish a cash-flow positive business that allows you to control your own destiny.

A thoughtful, capital-efficient GTM strategy requires a narrow, almost obsessive focus on solving one painful problem for one specific group of customers. Yet the headiness of our current fundraising environment and the rise of ever-bigger VC funds push founders of many young companies in exactly the opposite direction.

Companies are encouraged to grow big as quickly as possible, tackle disparate customer segments simultaneously, and stake the success or failure of their companies — not to mention years of their working lives — on a moonshot to create yet another massive platform to compete in the league tables with Amazon, Google, Salesforce, and Facebook.

Lost in our current moment is the fact that many large platform companies started by focusing on solving just one problem at a time. Facebook launched as a photo directory for undergrads at a single school, Harvard, before rolling out to other Ivy League schools, then other universities. All stepping stones, all much smaller than the final target market. Before Amazon became the Everything store, launched AWS and Amazon Studios, and acquired Whole Foods, it focused on doing just one thing well — selling books. Amazon raised only $9 million in venture capital funding before it went public.

Sure, there are lots of companies raising lots of money right now. But are any as successful as Veeva? Maybe you haven’t heard of Veeva. It’s the cloud platform for the life sciences industry. Veeva raised a total of $4 million in venture capital financing before going public. Today, it’s public, highly profitable, and worth over $20B.

Veeva got there capital-efficiently by solving one problem it knew well — CRM for the pharma industry. Its strategy focused on one application and one sub-segment to get started and grew from there. Veeva added new segments and new applications. But it did so strategically and thoughtfully, so the founders of Veeva were able to keep massive ownership of their company while their investors still made home-run returns.

By contrast, unfocused GTM strategies are costly and time-consuming. It might not be obvious why, though. Here’s the thing: winning customers in even a single market area requires making lots and lots of little linkages between your products and your customers. To forge these connections, your company has to invest time and money in identifying customers, reaching the people who make buying decisions, understanding their business challenges and regulatory environments, and integrating your products with the systems and work processes your customers depend on. Every tiny tweak of customer type or use case means slightly different processes will need to be forged.

Creating all of these linkages always means investing time and often means hiring people. Even the most focused GTM strategies require significant investments of time to be successful. When you target multiple customer segments or multiple business problems in the same industry, the costs of your GTM strategy also multiply. Even if your company’s underlying technology is similar, your efforts have to be duplicated for each of these customer segments, industries, or business problems.

So, keeping to a tight, well-thought-out GTM strategy is the core of a capital-efficient approach. I think of it as a trade: using a better strategy instead of more money. But your plan has to be well-executed, too.

How do you know if you have a good GTM approach? That’s a big topic. I’ll start to unpack that for you in my next post.