How some startups try to boil the ocean

Learn what happens when startups don't use a wedge strategy.

How some startups try to boil the ocean

Last week I shared how Assembled, Welcome to the Jungle, and DigitalOcean successfully used a wedge strategy.

And I claimed that a wedge strategy was simple.  As long as you:

  1. Remain focused.
  2. Start small and can scale. 

Admittedly, this is over-simplifying it.

Those two elements are necessary, but they are a bit high-level…so they are not sufficient.

The idea of how you define your market, where you start, and how you progress is actually fairly complex.  I shared a real-life example of this recently in a LinkedIn post by Enzo Avigo from June.so.

As that post highlights, making these decisions is not straightforward.  Each business is unique both in its product offering and (hopefully) in the problem it’s solving.

Plus, markets are dynamic. They are constantly evolving, changing.

When you put all this together, these are tough decisions that every startup will struggle with a little bit.

At least, I hope you struggle with the question. It’s a good sign that you’re being thoughtful about your business.

So, let’s tackle the complexity.  Let’s make it a little more accessible.

You can do that by asking a few questions to assess if you’re nailing the high-level elements:

  1. How to know if your defined market is focused: 
    1. Does your solution solve a specific problem for a specific user group?
    2. Is your solution easy to adopt?
  2. How to know if your defined market is small and can scale:
    1. Do you have the right level of resources to deliver value quickly? (i.e., is it feasible for you to deliver?)
    2. Does your initial market generalize to a bigger market or is there an adjacent market? 

It’s time to move beyond the hypothetical.

One of the best ways to understand what these things should look like is to identify when they are very clearly missing. 

I have three examples to help bring these to life.

How Calixa stumbled on adoption hurdles

Calixa launched in March 2021 to help product-led growth (PLG) companies use data to close sales.  Specifically, they wanted to build a new tool to help with a bottoms-up sales motion.

Their original vision was:

“To build something that democratizes [ … ] running a bottom-up company by not only giving all customer-facing teams the ability to see what’s going on with customers, but also take action.”

However, after a few years of fighting the good fight, Calixa announced in 2023 that they would close shop on Jan 1, 2024.

In their announcement, Calixa cited two main reasons for closing:

  1. GTM teams function in silos. They need organizational change, not just a new tool.
  2. The PLG market is too small and not growing fast enough.

While these two things are true, they are hardly insurmountable.

When I read that GTM teams are too dysfunctional to use a single tool, I interpret that to mean the tool was too difficult to adopt.

And Calixa confirms this in their announcement when they say,

“implementing the tooling wasn’t the most challenging thing. It was rearchitecting the go-to-market strategy and aligning teams on a new operating model”. 

But one of the biggest reasons the Calixa tool was difficult to adopt is because they weren’t solving a specific problem for a specific group. 

They were trying to solve a general problem for multiple groups.  You can see this in their messaging:

March 2021

Calixa's Homepage - March 2021
Calixa's Use Cases - March 2021

March 2022

Calixa's Homepage - March 2022
Calixa's Use Cases - March 2022

March 2023

Calixa's Homepage - March 2023
Calixa's Use Cases - March 2023

When you build a solution that requires multiple groups to buy-in, adoption will not be easy.

This doesn’t mean you can’t eventually get to that vision.  But it’s near impossible to start there.

So, what can you do instead? Start by solving one problem for one group.

Calixa’s CEO originally found this startup idea because his experience at Twilio showed how difficult it was to use data to sell self-serve tools to developers.

What if they had started by focusing on a solution to sell self-serve developer tools?  Developers notoriously don’t like to buy from Sales. Calixa might have found more success building a tool Developer Relations could use to grow a self-serve dev tools business.

That approach is focused on one problem for one group. And it’s inherently easier to adopt.

Certainly, more so than trying to fix all of GTM for any SaaS business with a product-led experience…

Although this was Calixa’s vision, it was just too big of a surface area to attack out of the gate.

How Visor bit off more than they could chew

Visor is another example of a company trying to fulfill their vision right from the start.

But they did it in a different way.

When Visor launched in 2017, they set out on “a mission to transform the tax-preparation industry.”

They believed people had two general options to do taxes. Someone could choose either an inexpensive do-it-yourself experience or a highly skilled, expensive advisor. Neither option was great. 

So, Visor offered something in the middle. The best of both worlds.

Their original offer was $99 for a dedicated tax expert who was available to you 24/7 for one year.

The vision behind this offer is stunning. It’s ambitious. 

But think about the operations needed to fulfill this. It’s massive. 

It’s also unlikely that a $99 price point for this offer would last long.

As it turned out, Visor didn’t last long…

Their 2018 tax filing season (in early 2019) turned into an ulcer-inducing cluster f*&k for most of their customers.

This blog post does an amazing job of detailing the whole sordid affair. I highly recommend taking the time to read it. It’s brain candy for business nerds.

The short story here is that although Visor had raised $15M in funding, they just didn’t have the resources to pull off something as audacious as they were offering. 

And hundreds of customers paid the price. 

Yet, Visor could have avoided this by starting small and planning a natural growth path.

Maybe start with a huge offer in a smaller geography?  Or try slimming down the breadth of their tax offering to focus on specific tax needs?

The takeaway is don’t try to deliver against your entire vision from Day 1.  It’s a recipe for disaster.

How Lumina Networks hit a dead end

Lumina Networks provided open source software for telecom providers.

They launched in April 2017, raised a $10M Series A in May 2018, and closed in August 2020.

Lumina’s Head of Product wrote a tell-all blog post, explaining why he believes the company went out of business.

The short story is that AT&T and Verizon were two of Lumina’s biggest investors. They also happened to be their two biggest customers. 

So, a LOT of resources went into ensuring those two investomers were happy.  Like, designing a product that was useful and adopt-able by Tier 1 Telcos.

The catch to this approach is there are only around a dozen or so Tier 1 Telcos in the world.

This means Lumina had to sell to Tier 2 and Tier 3 Telcos to grow the business. The problem was these smaller telcos didn’t have the resources to adopt and implement Lumina’s solution.

Without a larger market to sell to, Lumina closed shop.

And this is why it’s so important that if you start small, you see a natural growth path. You should understand how your small, initial market generalizes to a much larger market.

This should be a plan. Not a hope (or dream).

When Stick-to-itiveness leads to trouble

Each of these examples highlight a thorn topic for many startups.

That is, the ability to know when to adjust.

Entrepreneurs are often told that no one will see their vision the way they do. They need to be steadfast. They need to be optimistic. They need to believe when no one else does…

It’s you against the world.

Marge Simpson Against the World

So, many entrepreneurs stick to their original vision for too long. They believe if they continue to believe, they’ll breakthrough. They’ll be rewarded.

This leads to companies repeatedly trying to push their vision on the world. Even after the world has provided feedback that the original version isn’t going to work as expected. 

And this is yet another reason why it’s so important to start small and make certain you have a natural growth path.

When you start small and it doesn’t work, you can gather this feedback faster. But it’s also a little easier to let go of the original vision. Because you don’t become quite as invested.

This is also another good reason to have good, honest, straight-shooting advisors on your team.  You need a steady dose of reality checks to ensure you’re moving in the right direction. 

So, start small. Stay focused. Find your natural growth path. Then grow!

Until next week, keep growing!

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