For years, VCs have had the refrain of how hard it is to sell to the huge but massively fragmented SMB market. Invoking the curse of the SMB market was a great way to winnow out our email boxes and/or avoid a followup meeting.
Today, though, SMB-facing businesses seem all the rage. Why the turnabout?
It’s simple — the migration onto the Web has flipped small and medium sized businesses from the hardest to reach to the easiest to reach businesses. Today, nearly all SMBs are online — using the Web both for their own business and to find goods and services. As a result, where larger enterprises still require direct sales, SMBs often can be brought into the sales funnel using very highly leveraged online marketing campaigns, whether it be SEM/SEO, email marketing, or social media. Large and very profitable software-as-a-service businesses can be built targetting SMBs without ever raising the type of capital necessary for businesses that depend on a direct salesforce.
At Polaris, we’ve had the chance to see this across a number of our software companies, most notably LogMeIn, which went from tiny startup to billion dollar public company in just 5 years and less than $20 million in capital. With our partner Dave Barrett, who worked closely LogMeIn and its marketing guru Sean Ellis, leading the charge, we’ve since backed a range of companies focused on bringing cost- and -management-effective solutions to SMBs, including the likes of Egnyte (file management), KISSMetrics (analytics), Recurly (subscription management) and a couple other not yet public projects.
OK, so maybe it’s not exactly “sexy,” but it sure is a great way to build highly profitable businesses…
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