November 30, 2010
I spent the morning today visiting with the team at Quantcast, which is up to some pretty exciting stuff, and ended up discussing with co-founder Paul Sutter what Paul calls the “5-50-500” rule. I found it pretty instructive not just as a lens for evaluating Quantcast’s progress, but more generally as a useful way to think about the phases of a startup.
The idea is that startups go through distinct phases that are marked by the number of customers it serves. [Note, this is oriented towards B2B businesses]. The “5” phase is marked by very high touch relations with the first 5 customers, typically beta customers who are helping inform you of product requirements and product-market fit generally. The “50” phase is where you more or less have product market fit and you shift focus toward go to market strategy and tactics. And the “500” phase is where you focus on building a scalable model for selling and delivering your product/service.
While, of course, there are other metrics by which to chunk out the phases of a business (no. of employees, revenue and profit levels, amount of risk reduced/remaining, to name a few), it is a very worthwhile exercise to ask yourself what will be required to sell and service 5, 5o and 500 customers. You may be surprised by the answers…