Grouping Leads at an Early Stage API Company
This is an image that I find helpful when thinking about where a customer fits into the early stage graph.
The Y axis is API Volume and the X is Company Size with larger companies to the left. The assumption here is that there is a high correlation between API volume and company size.
This is a vast generalization, but it’s still helpful. We’ve found that there is a power law here as well. In that the largest companies will make exponentially more requests than smaller ones.
There are 4 Zones: Never, Elephants, Self Service and Marketing.
If your API is too core to the business, it’s highly unlikely that a company will ever rely on you. We will never sell product to Google, Facebook or Twitter because their technical expertise is too high and they will always build it themselves.
Never sits right next to Elephants, so sometimes it’s hard to tell them apart. It’s important to look at their business early before spending too many cycles on a Never.
The catch here is that they would be your largest paying customers.
Large organizations that will take 6-12 months from initial contact to when you start seeing revenue. When you do see revenue, it will be 10x-100x of a self serve plan. One elephant could make you profitable overnight.
Sadly, going after elephants is super high risk and will probably crush you if you invest too much too early. These are high touch environments and if you have never done it before you will lose a bunch along the way (we’ve been there).
An Elephant is a large organization with more than 150 employees and they also will use your API at a high volume. That last part is important as we have some very large companies that use very few requests. If we go in there with a $20k contract, it’s never going to happen. We generally view this as a way in the door for a larger organization.
This is by far the best market to sell into when you are first starting. Low touch and can generate a significant amount of revenue to keep you going in the early days.
They are generally pretty technical, so they don’t require a ton of support.
The common trait is they will be small shops with less than 50 employees. Generally a startup with little revenue, but your product fills a gap that they are unable or unwilling to build themselves.
Self service will start out as 100% of your revenue, but as you grow, move closer to 50% or 40%. You will get better at bagging elephants.
You will find that a bunch of users will want to use your product, but will never pay. The idea of Freemium in the API market is getting developers to try the product. When they hit production they “should“ hit your usage limits and start paying.
There will still just be a ton of users that will never hit this limit, so your goal should be to turn these users into Marketing material.
Mixpanel does this with the “Powered by Mixpanel” and CrazyEgg attributes some of it’s early growth to that same concept.
Build tools that rely on your product that hit a larger market.
Embedly has a Wordpress plugin that has been downloaded almost 50,000 times. We also built a chrome plugin for Twitter that got us a ton of press coverage.
The break points will change for every company, but it’s worth taking a good look at where a customer lies before approaching them.