Edited excerpt from Startup Best Practices 13 – Patience With Unit Economics by Tomaz Tunguz:
Mark Roberge, Chief Revenue Officer at Hubspot, recently shared with me how he instills patience in unit economics in his teams. He has three go-to-market principles:
1. Adopt before you buy – develop a bottoms up product that people can try out and ultimately upgrade themselves without having to contact sales or support.
2. Product before people – focus on improving the product before hiring additional customer support or salespeople. The product has to stand on its own.
3. Individual before team – The initial product experience should focus on the individual or single player experience first, and the broader team second.
(1) “Focus on improving the product before hiring additional customer support or salespeople”: A frequent VC error is to push companies to scale prematurely. If VCs want the money they put into a company to be deployed immediately and aggressively, and they have no experience of how to measure product quality, VCs may push to add sales people before the product is good enough.
(2) See Don’t scale before you have product-market fit and The three steps to building a great company, and why most startups fail on the first step.
(3) This post is characteristic of Tomaz Tunguz. His focus on the unit economics at the heart of SaaS companies’ business models makes him highly sensitive to capital efficiency. Rightly so. See Tom Tunguz’ five keys to building a successful company.