I chatted with a late-stage SaaS investor last week about her love for horizontal SaaS startups that target many customer personas. I remember telling her how this was one source of misery for early-stage investors. I reflected on that conversation today.
Pre-seed and seed investors are underwriting for, among many things, founders’ ability to focus and win over a very narrow set of customer personas first.
Late-stage investors are underwriting for, among many things, TAM expansion that might come in the form of persona expansion later.
In the earliest stages, startups don’t usually die from starvation; they die from indigestion—by trying to do everything all at once. Trying to sell to multiple personas, especially personas or teams that don't roll up to the same function, is one of them. Startups should concentrate efforts to prove product-market fit and adoption in one persona category or pivot quickly to another when things aren’t working out. When resources are scarce, focus on as few things as possible.
Over time, with additional resources, you can sell to multiple personas concurrently, e.g. via multiplayer features, integrations, new features, different positioning, new teams, etc. Persona expansion could expand your TAM and build a moat, and this appeals to later-stage investors.
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