How To Create A Winning Go-To-Market Strategy For Startups

“Build it and they will come!”

… Is quite possibly the number one attitude that kills great ideas and early stage startups.

By virtue of you reading this, I have confidence that you have come up with a great idea, you’ve convinced a partner to jump in and build some form of product with you and…

… you don’t want to unintentionally build a product that no one gives a crap about.

In this guide I’m going to provide you with a way to validate and build your product while you acquire your first customers, giving you a far better chance of long term success. 

The technical name for this is a go-to-market (GTM) strategy, and this will help you achieve the mission critical product-market-fit as quickly as possible.

Let’s get into it.

First up, what is a go-to-market strategy for startups?

Put simply, a GTM strategy is a tactical plan that outlines the steps necessary to succeed with a new customer persona or in a new market. An effective GTM strategy will help you find and sell to your ideal customer profile in the most efficient way possible.

This is different to a marketing strategy, which is used on an ongoing basis once you’ve achieved a level of product-market fit. The best way to think about your GTM strategy is to frame it as the plan you and your team will execute to launch your startup, launch new products, pivot and enter new markets. Whereas your marketing strategy is what you execute once you have proven some degree of success with the GTM strategy. 

The GTM strategy is the “before”, and the marketing strategy is the “after”.

Broadly speaking, a great GTM strategy does the following:

1. Defines your initial ideal customer profile/persona (ICP)
2. Includes tactics to convert your initial ICP into customers
3. Allows you to build, measure and learn with your ICP to the point where the ICP becomes a raving fan!

If your goal is to build a venture-backable business, you do not have the benefit of time.  You’re on a treadmill and building your startup is a race against the clock i.e. until your runway dries up). If you want to stay in the game, your GTM strategy is your ticket to hitting product-market-fit in the shortest amount of time.

Why do startups need a go-to-market strategy?

A GTM strategy is a time and capital efficient way to make sure that your product actually solves a real problem for your customer, and that they’re willing to pay for it.

In addition to this, your GTM strategy will help you achieve the following:

1. Detailed characteristics about your ideal customer profile 

Up until this point you are likely working with a number of assumptions. Your GTM strategy will help provide hard data so you can narrow your focus. And, as you should already know, a clear focused customer type is critical to product-market-fit.

2. Reduce the risk of your product launch

With qualitative user testing you will have ‘validated assumptions’ regarding what elements/features of your product are the most impactful. By executing a GTM strategy you will also quickly gather hard data on whether your assumptions are correct and/or if there are other features that are mission critical to turning customers into raving fans.

Hey, you might even find that the product you’re building solves an even bigger problem than you initially thought!

3. How to market, sell & serve your customer 

In order for you to bring on X number of early customers you are going to have to communicate, message and pitch what your product actually is. It will likely take a number of iterations and a bunch of people saying ‘I don’t get it’ before you start to notice a pattern that seems to work, which you will be able to apply to your future sales and marketing strategies. You will also need to serve these early customers, which will inform what type of customer success strategy you will need for your full launch.

4. Attract better funding terms

As a pre-seed company with no revenue and no users you have very little leverage (a requirement for a great investment deal). But, with a well thought out GTM strategy that encompasses something like a ‘beta customer waitlist’ who are itching to get their hands on your product, you’ll put your startup into a position where you can raise money quickly and on founder-friendly terms.

Let me be super clear. Point 4 is vital to your survival. I have personally been in a position with no leverage going into a funding round and guess what? 

That startup failed. And it freaking hurt.

Just in case you still need convincing that a GTM strategy is worth your time, Harvard Business Review has an excellent example of what happens when a startup launches with a poorly calibrated GTM strategy: 

Harvard case study

A five-year-old software company was breaking even operationally after a couple of rounds of funding. However, its salespeople were not able to expand deals with customers beyond a trial stage. The problem was that the company was pitching a product but hadn’t really considered the customer pain points that the software was meant to address. Things only started to turn around after consultants told the startup’s leadership to focus on three large enterprises and describe the business challenges that those organisations were facing. Then, armed with a renewed GTM strategy, the salespeople were able to start identifying some large opportunities and convert these opportunities into paying customers. 

You may be thinking that this sounds like sales 101. That’s because it is! Yet thousands of startups get this wrong every single year. Don’t be one of them.

This example highlights exactly why the GTM strategy is so important for every startup: you could end up with an incredible product to sell, but if no one knows it exists or if it doesn't adequately solve their problem, the effort put into product development will have gone to waste. 

A GTM strategy allows you to better align with your target audience, iterate on early feedback and ensure that real customers care about your product as quickly as possible. 

What are the five elements to include in a go-to-market plan?

GTM strategies will differ from startup to startup. Regardless of what approach you’re taking, a strong GTM strategy will need to include following key components: 

The Market Definition: 

Start with this. What market are you going to target with your product? Who are your competitors?  How does your customer currently solve this problem? In an earlier article, we looked at total addressable market, serviceable addressable market and serviceable obtainable market (TAM, SOM, SAM). That information can inform this market definition. 

The Ideal Customer Profile: 

Your customer profile is a comprehensive overview of your ideal customer. This profile is reflective of the people who are most likely to benefit from and purchase your solution. This should include their demographics, firmographics (if targeting a B2B audience), as well as their psychographic information. 

Lastly, you’ll need to have a sound understanding of what motivates them and how they make purchasing decisions. Once you have a clear picture of your ideal audience, you can start developing messaging and tactics that will resonate with them

Product Messaging: 

Effective product messaging comes down to communicating the value of your product or service in a compelling way.  

In  previous articles, we discussed the elevator pitch and how you can uncover your unique value proposition (UVP). Adapt these ideas and materials into your GTM strategy. 

This means you can define what you are selling, what makes your product unique, and how it is able to solve the challenges of your target customers.

Pricing Strategy: 

One thing is certain. At the pre-seed stage, you will get your pricing strategy wrong, which is a-ok!. Defining your pricing strategy isn’t easy when you don’t have any/many customers and you will likely change this a number of times over the course of our startups life.

You should aim to charge a small fraction of the cost of your customer's problem. Your issue is you likely have limited data on the cost of that problem (hence why this is hard to get right!). 

Take some time to try and understand the size (and cost) of your customer's problem. Research different strategies on how to price your product and determine the most suitable approach for you. Whatever approach you take should be evidence-backed and have a strong rationale behind why you chose it.

You want to get this as right as possible, however it’s even more important to sign early adopter customers, so if you have to leave some money on the table to begin with then that is ok.

Distribution: 

How are you going to get your product or service to customers? At this stage of your business, you and your team are the best people to sell it. It is very easy to get distracted with sexy distribution agreements and/or partnerships with huge multinational companies, but when your startup is in its infancy there is huge risk in spending time on this (see Where go-to-market strategies can go wrong). 

Define your ideal customer, create the appropriate messaging and sell the heck out of your product.

How to craft an effective go-to-market strategy

The above definitions and associated tactics by themselves mean nothing. You also need to have a proper plan with detailed objectives and time bound key results. Hopefully you have heard of OKRs. If not, here’s a useful article by Asana.

To illustrate this point, here is an example of how to put the GTM plan together.

Let's create a fictitious pre-seed B2B software company in the IT security space that helps companies catch and prevent cyber risks. Let’s call the company McDees.

The McDees team have previously conducted pre-product user research where they have validated the problem they intend to solve and they have also validated the conceptual solution they plan to build. They have also been given an indication that their ICP will pay something for the McDees product when it’s ready.

Through this research, McDees has identified that their ideal customer is a company with ~200FTEs and the team believes the average deal size of a yearly contract is going to be about $10,000 ARR. Here’s how to structure your high level plan:

Objective 1: Prove that the McDees product is extremely valuable to our target market and that they will pay money for it

Key result 1: Sign early adopter agreements with 20 SME businesses

Key result 2: Covert 10 of these early adopter agreements to full time customers

Timeframe: Three months

Objective 2: Validate the core McDees feature set

Key result 1: 80% of our early adopters sign in once a week for three months

Key result 2: 50 security risks were found and prevented

Timeframe: 3 months

Following the above OKR framework, McDees would then address how the company plans to achieve these objectives. 

Here’s how McDees could go about putting their GTM strategy together:

The market definition for McDees:

• There are many ‘budget’ competitors, however these take the form of agencies, not cyber risk automation platforms
• The TAM in the USA is $20 billion dollars per year
• McDees believe the SAM in the USA is half of that - $10billion dollars per year
• And McDees believe they can obtain 1% of that - $100million dollars per year.

What does this information achieve?

Well, it tells Magus and future investors that the market is huge, and there is a problem that is being addressed in a cost ineffective way.

The ideal customer profile for McDees:

• McDees plans to target companies with more than 200 employees.
• These companies are struggling to address cyber risks autonomously
• They have a technology team of at least 50 employees.
• They have a full time Chief Risk Officer.

What does this information achieve?

This highlights exactly who McDees is planning to target with their product. This will help inform future product, sales and marketing teams and will help investors understand who McDees is for.

Product Messaging for McDees:

• “Does your company spend a huge amount of time and resources on trying to prevent cyber risks? Are you also unsure if you’re actually successful in doing so?” 
• McDees is a platform that automates the prevention of cyber attacks. If the above questions resonate with you and your company, then maybe we can help.

What does this information achieve?

Simply put, this highlights the problem McDees solves and outlines what McDees is. It does not give too much away (which is the point) so that the McDees ICP is intrigued to have a conversation about the product.

Pricing strategy for McDees:

• Through user research, McDees has found that the current cost of this problem for the ICP is $100,000 per year.
• McDees knows that the product increases in value as the customer's company increases in size. McDees also wants their pricing strategy to scale, so…
• McDees is aiming to charge $5 per employee, per month.
• McDees is looking to provide a 75% discount for the first three months for each early adopter.

What does this information achieve?

McDees is using a ‘value based’ pricing strategy. It’s simple to understand and it scales with customer size. This also shows us the pricing strategy that will help acquire the first 20 early adopter customers.

Distribution for McDees:

• McDees is still in the pre-product phase. So going directly to the customer is absolutely necessary.
• Outreach channels: current contacts, second degree contacts, and outbound efforts to ICPs only

What does this information achieve?

That McDees is not going to waste time and money trying to get someone else to sell its conception product. They will do it themselves.

—-

Are you starting to get the incredible value of a GTM strategy? If we continue to play this example out and McDees achieves these objectives, then the company will now have early product success AND ~$100k in ARR AND 10 customers! At a high level, that is enough to raise a pre-seed round of funding on.

As always, every business is different. If you’re building a Direct-to-Consumer (D2C) business then your objective might be to grab 1000 early adopter customers, or if you are selling to enterprises then maybe you only need two early adopter customers to capture enough data to show product success. 

The point here is to have a time bound plan that helps you to understand if your business is working (or otherwise) as quickly as possible so you and your team can make informed decisions about what to do next.

Where go-to-market strategies can go wrong

The biggest GTM strategy mistake is, of course, not having a GTM strategy!

By now I’m going to assume (or hope!) that you understand the importance of this. Below are some other common areas that trip startups up, causing them to take longer to get to the product-market fit threshold, or fail to get there altogether.

1. Lack of focus on a defined  ideal customer profile 

One of the biggest mistakes that a startup can make is getting too caught up in the process of building your business, that you lose sight of properly defining your first customers and why they will use your product. 

The GTM plan is an excellent opportunity to double-down on customer centricity, and it will actually form the core of how your business will be perceived in its infancy, as those first customers are going to be the ones talking about it and spreading the word.

2. The startup focuses on growth too soon

At this stage of the business, your startup has the capacity to target one territory and market segment. You do not have time, nor the runway, to muck around with any other customer types at this point in time. Try and do more and you will likely fail to deliver the necessary customer experience to reach your GTM plan objectives, which could lead to your startup failing.. 

Remember, Facebook started out as a tool for university students in America. They weren’t ageist on purpose. Rather, the path of least resistance was the hyper-connected, online, and highly social university students.

3. The startup thinks other companies can sell their solution better than they can

Time and time again early stage startups spend a heap of time trying to develop partnerships/distribution strategies before they have sold anything to anyone. A partnership with a large multinational company sounds sexy, but there is a high chance that any form or partnership will take longer than the amount of runway you have, and even if you do manage to ‘sign the dotted line’ with said multinational before you run out of money the partnership will likely produce zero customers.

Why? Because your partner doesn’t know how to sell your product. You and your team are the best people to sell your product. Until you raise a decent whack of cash, keep it that way.

4. No one gives a crap about your product

A common mistake early stage startups make is they believe their product is revolutionary and that people deeply care about the technology they have created. 

News flash - your ideal customer does not care what your product does or what technology it uses. 

They care about what problem your product solves. 

They care about how it makes their lives easier/better. 

In every conversation with prospective customers and with almost every piece of messaging you create, you must lead with an understanding of their problems. From there you will be given the freedom to talk about how your product solves said problem, but only after you have successfully shown that you understand your prospective customers’ problem. In doing so, your early adopters will feel ‘heard’ and if they see the value in the solution you have built, they will then buy.

Lead with the problem. Not your product.

Key Takeaways

By now you should understand that a solid, thought out GTM strategy is essential for your startup. Some founders allow their GTM strategy to distract them. It becomes overly complicated with multiple buyers and they ultimately end up wasting a tonne of precious time.

Your GTM strategy when you’re pre product has one objective:

Acquire the right customers and validate your product as quickly as possible.

Keep it simple. Keep it flexible.

Build, measure, learn… and sell the socks off your product.