Why Moving Upmarket in B2B Works
A very common journey for B2B software companies is to build a product for the low-end (in terms of deal size / market segment), achieve product-market fit (PMF), then scale the business by taking that solution “upmarket” to larger accounts (i.e. enterprises). A lot of ink has been spilled on how to pull of this go-to-market (GTM) motion shift quickly, cleanly, and cost effectively. It usually involves hiring a field sales team, managing accounts in a more hands-on manner, being more targeted in your outbound, relying on intermediaries and proxies that cover the domain/industry for pipeline, and priming accounts for regular up-sells and cross-sells. The industry is full of companies that successfully pulled off this maneuver, to that degree that attempting it is not even seen as risky strategy, but rather a scaling milestone.
I don’t want to rehash how to “move upmarket” here. I’m more curious as to why it actually works. Most of the playbooks you’ll find around going upmarket tell you what you need to do from your company’s perspective; they walk you through how your product, your motion, your messaging need to evolve. But what’s actually going on in the market that makes such a play successful? I’m curious about recurring customer behavior that enables B2B product companies to repeatedly start downmarket and move upmarket once they have PMF.
What’s interesting about living downmarket is PMF is critical. By definition, you’re building something for a high volume of customers, so the problems you’re solving need to be universal (or at least regularly recurring). One-off problems / solutions are not a recipe for repeatability. So when B2B product companies start on the low-end (think SMB or Commercial space), they are forced to identify the most critical and concentrated use cases. To contrast that with going upmarket, your mindset shifts to solving peripheral problems that are more custom, because you’re incentivized to pack more into your existing distribution channel vs finding new channels (i.e. easier to renew / expand existing customers vs landing net new accounts).
So how does this idea of PMF being critical downmarket explain why companies find it easier to move upmarket? Well, if you actually achieve fit downmarket, you’ve likely got some fans. You’ve helped some buyers / users become heroes in their organizations. You’ve manufactured some champions. And these champions are the key.
If you look at things from the perspective of a large enterprise organization, their challenges usually can be summarized as follows:
innovation slowing down
losing share to newcomers
struggling to attract top talent
losing PR battle in market
And what do they do to tackle this?
innovation slowing down → hire from smaller, more innovative companies
losing share to newcomers → lure away top talent from upstart competition
struggling to attract top talent → promise new hires they can change culture
losing PR battle in market → tell a story around new talent, brewing innovation
So the people working at smaller, innovative companies who end up working at larger, enterprise corporations come in with a particular mindset around innovation, expecting to change the culture, looking to utilize the tools and rituals they’re used to. This pool of talent that’s move from downmarket to upmarket is the group of champions you’ve helped manufacture. And the biggest reason that B2B products can start downmarket and move upmarket is that’s how talent flows.
tl;dr if you’re able to manufacture champions with your product and they view your tool as part of their “must have stack”, you’re set up to ride the talent wave.
As always, I’d also love to hear from readers about their attempts to shift their GTM motion - please chime in via comments👇 or join the chat via the Substack app.
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further reading / references
interestingly, it’s rare to find a B2B company go downmarket after having established itself in the Enterprise - one good example is MongoDB
if you’re interested in B2B products, check out my posts on B2B Telephone, Enterprise SaaS Truisms, Skip Step SaaS, Consumerizing Enterprise == Loop Sequencing, and Death & Taxes in B2B
childish drawing / interpretation
