February 26, 2011
For years, VCs have had the refrain of how hard it is to sell to the huge but massively fragmented SMB market. Invoking the curse of the SMB market was a great way to winnow out our email boxes and/or avoid a followup meeting.
Today, though, SMB-facing businesses seem all the rage. Why the turnabout?
It’s simple — the migration onto the Web has flipped small and medium sized businesses from the hardest to reach to the easiest to reach businesses. Today, nearly all SMBs are online — using the Web both for their own business and to find goods and services. As a result, where larger enterprises still require direct sales, SMBs often can be brought into the sales funnel using very highly leveraged online marketing campaigns, whether it be SEM/SEO, email marketing, or social media. Large and very profitable software-as-a-service businesses can be built targetting SMBs without ever raising the type of capital necessary for businesses that depend on a direct salesforce.
At Polaris, we’ve had the chance to see this across a number of our software companies, most notably LogMeIn, which went from tiny startup to billion dollar public company in just 5 years and less than $20 million in capital. With our partner Dave Barrett, who worked closely LogMeIn and its marketing guru Sean Ellis, leading the charge, we’ve since backed a range of companies focused on bringing cost- and -management-effective solutions to SMBs, including the likes of Egnyte (file management), KISSMetrics (analytics), Recurly (subscription management) and a couple other not yet public projects.
OK, so maybe it’s not exactly “sexy,” but it sure is a great way to build highly profitable businesses…