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0/ In my experience “Crossing the Chasm” almost never plays out as written. Rather, it seems as if most b2b startups remain in the chasm through liquidity, or hop from one to the next struggling with multiple shifting markets.
1/ While the “chasm model” is useful as a platonic guideline, founders (or the board) often draw the unrealistic expectations from it that a market will soon mature, and early signs of repeatability mean it’s time to dramatically scale.
2/ While this happens in some (rare) cases. Many b2b companies will continue to struggle with a push-based market through their lifetime -- that was certainly the case with the business I ran — and yet they can still be hugely successful.
3/ In this thread I will discuss some of the common challenges I’ve experienced that keep startups firmly in the chasm and can persist for the life of a startup (through liquidity).
4/ Each geo is a new market : Success in the first geo (e.g. the U.S) doesn’t mean the globe market is now mature. In fact every geo has the potential to be a new market with differing competitive environments, partner ecosystems, buying sensitivities etc.
4.1/ It is common for a company to treat International as an extension of the core market selling motion. It may be, but more often it’s not. So I’d recommend treating it as a “chasm crossing” exercise and set your operating plan (and board expectations) accordingly.
5/ Segment is tough to sell to: Some buyers don’t have a dependable model for buying software. I’ve found the two most common classes of these are (a) non-traditional tech buyers (e.g. state/local, mining, education) (b) verticals being disrupted (e.g. media, retail)
5.1/ While it’s possible to build a business that sells to either class, the GTM challenges have to be shouldered by the startup. This can result in dramatically different (worse) growth or unit economics than a company selling to core IT in the F200.
6/ Product is hard to insert: Many b2b products, particularly in infra, require a lot of heavy lifting to stand up at a customer. For example, data access requirements, retooling of operations, or customer integration. And often this work doesn’t get much better over time.
6.1/ Startups in this situation often end covering the implementation by giving away free services and lying to themselves that it’s part of the sales motion. As a result, sales cycles are long, expensive and unpredictable. Better to just create a services arm.
7/ Initial market is small: Another pitfall is you enter a market and it ends up being relatively small, and the only way to clamor on is to engage another market. If you’re lucky it’ll be adjacent. But often that’s not the case. In which case you hop from one chasm to the next.
8/ The large clouds compete with you: Google routinely disrupts/confuses markets with open source, and AWS competes with its users through new services. As a result, startups in the crosshairs have to continually navigate massive strategy changes.
9/ The point of this thread is to highlight that many startups are in a “pre-chasm-ish" the fight for their life every quarter. And this can go on for years, and hundreds of millions in revenue.
10/ So if you’re many years in, still struggling, and haven’t “crossed the chasm". Don’t worry, you’re not alone. Many iconic companies had to go through the same. And they’re probably better for it.
11/ Thanks for reading :)
