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Can your customer base be too big?
An issue that some founders don’t seem to grasp at the pre-seed stage is that your customer base can be too big. Numerous founders I’ve worked with have bragged about how they are reaching people of all different demographics, showing that they can have a massive market potential and make millions.
While it is great that you are finding customers and it is great that you can see the mass adoption potential of your products, the reality is that very few companies go from launch to mass adoption. Instead, they grow in a niche before expanding into other areas.
Facebook started as a networking site for university students. They onboarded schools one at a time and required a university email address. It took years before they launched to the general public for mass adoption.
So before bragging to investors about your wide base you need to think about how they will interpret that. For many investors it will concern them that you don’t have a specific niche to target. Here is what they want to hear…
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Niche - Investors want to see that there is a niche that you have dominated and demonstrated an ability to capture. As long as this niche is big enough to get you from pre-seed to seed this is all they want you to focus on in the short term.
Growth Potential - If you have a very small (under 5%) of your users in other industries, this can act as evidence of your ability to expand to other verticals once you get to Series A and beyond.
Channel - Investors love companies that have found a single marketing channel to connect them directly with their niche. This is a pipeline that you can funnel money into until you have captured a significant portion of the niche.
If you can nail these three points, then you will have a top pitch that interests investors!
Does your company hit these three points? |
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Onwards and Upwards,
