How to Build a Massive Technology Business that Serves SMBs

Lessons learned from BLVD and Shippo + some news sprinkled in too!

👋🏾 Welcome back! Here’s what to expect in this month's newsletter:

• We are so excited to present our third installment of the SMB Syndicate newsletter. We are playing around with a new template and hope you like it! We have a lot of ground to cover, so let's get started:

📜 What's New With the Crew?

Exciting news for The SMB Syndicate - we hosted our first event last month! The event was led Matt Danna, CEO and Co-founder of Boulevard. Boulevard is a vertically integrated SaaS platform that better enables salons and spas to handle booking and scheduling, payroll, commissions, inventory management and payments along with customer relationship management. Over lunch, Matt walked a small group of pre-seed founders through a workshop on "Accelerating Product-Market Fit."

We came away with 5 key insights:

1. Start with the market

   • Spend a ton of time with your target customers to develop an intimate understanding of their lives and businesses. If you come from the target industry then maybe you need to "unlearn" some assumptions that don't broadly apply.

2. Find your unique insight

   • Use the information you've learned from customers to identify problems that may not show up on the surface. In Boulevard's case, a common misconception from the tech industry was that salons aren't sophisticated enough to use technology. The Boulevard founders learned that salons were actually using tech, it was just broken.

3. Pick an insanely specific ICP (Ideal Customer Profile)

   • Concentrate on a tiny niche and expand from there. Get comfortable saying no to lots of other potential customer profiles. Focus is key.

4. Do the work

   • There's no such thing as too much time or attention given to early customers. Talk to them constantly. Accelerate feedback loops. Give your own demos and onboard those customers personally. Tell prospects and customers when you shipped something based on their feedback. In the early days you ARE the product.

5. Choose speed

   • Prioritize speed and time to value. Build for your next customer, but only once you've sold it and confirmed that it's broadly needed. Don't overbuild - code has a 2 year max shelf-life.

📰 SMB News Roundup

• A fantastic SMB overview by our friend, Tessa Flippin - the post focuses on the importance of SMBs in marginalized communities as well as venture backed companies in this space

• How Shopify has led to a proliferation of startups aiming to serve small businesses by The Information

• How the new round of PPP loans is addressing some of its earlier challenges via Forbes

• Zapier, whose dominant customer is small businesses who can't afford to build tools in-house, raised a round that valued the company at $5B via Forbes

• FP&A technology for SMBs is growing significantly, helping finance managers within small businesses operate just as effectively as enterprise level CFOs via Revant Gupta

• Snapchat is helping SMBs get more foot traffic with their new tool via dot.la

✍🏾Deep Diligence

Last fall, Laura Behrens Wu, CEO and co-founder of Shippo, did a great interview with Talia Goldberg and Jeremy Levine of Bessemer on their podcast This Is Series A. For those that aren't familiar, Shippo is a modern shipping platform for e-commerce businesses.

The business was born out of Laura's own frustration in creating her e-commerce business. She appreciated that the digital experience for a small merchant had been streamlined – Shopify enabled easy creation of a storefront, Stripe removed all the friction from accepting payments, etc. But once something had to happen in real life, like moving a product from warehouse to consumer, the entire merchant experience became quite clunky.

Shippo created an easy way for merchants to streamline, optimize, and scale their shipping operations - and created a company worth half a billion dollars in the process. But more importantly, two key themes from the podcast episode stood out: How to create something of value for SMBs + How to find your "North Star" metric.

How to create something of value for SMBs:

Shippo's first idea was to build something akin to Stripe or Twilio - an API-based solution that connects to all the different shipping providers. The challenge was that most small business customers didn't know what an API was and certainly didn't have the dev resources to figure it out. In response, the company tried to go for bigger customers with more resources; however, those bigger companies weren't comfortable moving all their shipping operations to an early startup.

Laura quickly realized that small businesses were Shippo’s only customer option, which meant that the product had to be simple to use in order for it to be widely adopted. This led to building a dashboard on top of an API, allowing SMBs to easily and efficiently print shipping labels. The product took off. When building for SMBs, the Shippo team learned that they couldn't just create tech solutions. They had to create an end-to-end solution that immediately delivered value for the customer.

How to find your "North Star" metric:

In the early days of demand for Shippo, shipping volume was the best "North Star" metric to track. If shipping volume was increasing, that was a clear indication that things were going in the right direction for the business.

Eventually Laura and her team realized that even though their shipping volume was growing, it was becoming decoupled from net revenue. Attempts to grow shipping volume led the team to go after increasingly larger customers, which were more costly to acquire and service. Gross margins slipped, but luckily the team and their investors were able to eventually recognize and course correct by shifting the attention back to SMBs. They realized that while net revenue was their north star metric in the early days, they would need to update it constantly in order to ensure the metric they tracked actually aligned with the goals they needed to hit.

Setting a single metric to track is a tremendously effective way to narrow your team's focus. Your operations will optimize toward making that happen. The most common north star metric is some indication of demand, usage, or product satisfaction. However, the lesson here is to constantly evaluate your metric holistically and ensure that your drive to hit that one metric isn't coming at too high a cost. Always keep unit economics top of mind in order to build a sustainable business.

It's always great to hear a founder success story, especially when they are in the middle of still building it. If you want to check out the full podcast you can listen here.

📅 Upcoming Events

• We don't have any events officially planned just yet, but the wheels are turning! We'll keep you posted on the next one.

Thanks so much for reading folks, until next time!

Jennifer, Austin & Sydney