This Startup Should Have Fired Uber, Tinder, Pinterest, Dropbox, Evernote, Tumblr, HootSuite and Instagram

A version of this article previously appeared in Forbes.

Jazzhr logo 4_17
Despite the fact that JazzHR was a nascent startup in 2012, it boasted an impressive customer roster, including: Uber, Tinder, Pinterest, Dropbox, Evernote, HootSuite, Tumblr and Instagram. Surprisingly, it was these same customers that caused the company’s focus to blur, and therefore temporarily lose its way. NOTE: I am a Board Member and an investor in JazzHR, thus I share responsibility for the company’s target market missteps.

Customer Chasing

As shown in the graphic below, it’s a natural for a company to iterate on its product and bolster its infrastructure to better serve larger customers. It makes even more sense when a company’s most demanding customers are high-profile tech ventures which are scaling quickly from SMB startups to enterprise companies.

JazzHR graph 1 4_17

The reasons companies sprint up the enterprise path are many, including:

Sexy Logos – Let’s face it, most people place inordinate value on a customer webpage of tech darling logos.

Bigger Deals – Enterprise deals are typically larger than purchases made by SMB companies. Thus, it is enticing to close a handful of multi-six figure deals, as opposed to battling for numerous smaller deals.

Losing Customers Sucks – Closing sales is always hard, so it is especially painful when a customer departs for a new solution.

Service Oriented – Great companies have a service mentality and a desire to satisfy all their customers’ needs. As customers’ evolve, it is natural to attempt to modify your product to meet their new requirements.

Chasing Gazelles

All is well if you can revise your product and its underlying infrastructure commensurate with the minimum requirements of the enterprise market. When this occurs, you can readily retain those customers which transition from SMB to enterprise status.

However, in many instances, companies cannot travel the enterprise path at the same rate of their fastest growing customers, which are often venture-backed startups flushed with growth-fueling cash.

As shown below, a potential Death Trap exists for companies which are unable to satisfy the demands of enterprise users. In an effort to keep up with the growth of their most aggressive customers, such companies add features that alienate and confuse their smaller, SMB customers who were initially attracted by the product’s ease of use.

JazzHR graph 2 4_17

Products in the Death Trap are not feature-rich enough for most enterprise buyers, yet they are too cumbersome for smaller companies which have less robust requirements.

Know Thy Company

Ego drives many companies up the enterprise path. However, not every company is well suited to sell into the enterprise market. It is normal to equate company success with deal-size growth. However, pursuing revenue in a market segment in which you have a poor product/market fit is a losing strategy.

Be honest with yourself regarding which customers your solution is best suited. Don’t try to satisfy all users and don’t chase customers which are growing faster than your ability to service their evolving needs.

According to Don Charlton, JazzHR's Founder, “I started the company with a mission to give small businesses a magnified voice in the market to attract top talent. We were extremely successful in the early days with emerging tech companies because we provided a robust, yet affordable recruiting platform that gave these small startups an outsized megaphone in the highly competitive San Francisco talent market. But as these companies grew larger, we failed to realize they were no longer our target customer, and as we focused on satisfying their needs with ever expanding features in an effort to retain them, we were underserving 99% of the SMB market that simply wanted a simple, SMB-focused solution.” 

Modulating your feature and infrastructure growth to match the needs of your core market does not preclude you from traveling the enterprise path. You can still build an enterprise company, even if you are unable to do it quickly enough to retain your fastest growing customers.

By re-orienting its attention to the SMB world, JazzHR may have said goodbye to a handful of high-profile, enterprise customers, but it regained a laser-focused mission that has generated over 40,000 loyal, happy users and established the company as the dominate player in the SMB hiring market.

You can follow John on Twitter: @johngreathouse

John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.

Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.

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