Why Startups Should Start with SMBs: Faster Sales, Stronger Foundations
The case for targeting small and medium businesses first—before chasing enterprise whales.
Here’s something I’ve been seeing pop up over and over again with early-stage B2B founders: they get dollar signs in their eyes about going straight after the biggest enterprise whale they can find. It’s easy to understand why—it’s tempting to imagine signing a massive deal, high-fiving everyone on the team, and bragging at the next meetup that you’re now an “enterprise” startup. But in reality, starting with huge customers can be a painful and expensive lesson in how quickly a startup can burn through its runway.
There’s a far better starting approach for most early-stage B2B startups: serve small and medium businesses (SMBs) first. Why? Because it’s simply easier and faster to get initial traction, prove product-market fit, and scale up from there.
David Sacks at Craft Ventures summed it up nicely:
“The Old School view says that the larger the customer, the more valuable the customer. Hence startups should seek to go upmarket as soon as they can. But the New School view is less focused on contract size and more focused on contract speed. SMBs…are the best customers because they are the easiest to close. Velocity trumps size.”
In other words, smaller deals that can happen fast will beat out the possibility of one big deal that takes a year (or more) to come through—especially when you’re still trying to prove your product actually solves a real problem. Below, I’ll break down all the reasons why going SMB-first is, nine times out of ten, the right call.
1. You Get Faster Sales Cycles (a.k.a. Revenue Sooner)
When you’re an early-stage startup, you need to start bringing in cash. Plain and simple. SMBs typically have relatively straightforward purchasing processes—often a few emails, a brief demo, and boom: you’re in. Enterprises, on the other hand, have multiple layers of procurement, legal reviews, security audits, and committees who each have their own requirements. That can stretch your sales cycle to 6–12 months (if not longer).
During all that time, you’re burning cash on overhead and payroll. For an early-stage startup, that’s like trying to do a marathon without having eaten breakfast—you’re going to crash. SMBs can give you that quick breakfast boost of revenue to keep going and iterating on your product.
2. Build a Credible Foundation That Unlocks Larger Deals Later
The best way to enter big leagues down the road is to show that you’ve absolutely crushed it at the minor league level. If you have 50, 100, or even a few hundred SMB customers who adore your product and rave about your support, you suddenly have social proof. Larger companies see all those case studies, user testimonials, and success stories, and their ears perk up.
It’s a lot easier to walk into a Fortune 500 pitch and say, “We already have 300 paying customers who’ve used our product to solve X, Y, and Z. Let me show you some results…” than to show up with hypothetical claims about what your product could do if you’d just be given a chance.
By first landing a solid base of SMB users, you’re proving you can deliver real value. That track record will smooth out a ton of friction when it’s time to go after big fish.
3. Your Product Is (Probably) More Aligned with SMB Needs
Odds are that your earliest MVP (or even your robust V1) is simpler and more flexible than the feature-hungry monster that enterprise deals demand. SMBs often need enough functionality to solve a specific problem, but they don’t require an endless list of advanced features, deep customization, or intense compliance certifications.
When you start with SMBs, you can keep your product scope laser-focused. You can iterate rapidly, gather feedback, and refine the experience without the complexity of enterprise-level requirements. Later, once your core solution is stable and you have resources to add those heavier enterprise features, you’ll do so from a position of strength (not desperation).
4. You Avoid a Skyrocketing Burn Rate
If you decide to chase enterprise customers right out of the gate, your expenses will balloon. Enterprise sales typically demand specialized (and expensive) account executives, robust customer success teams, compliance advisors, security audits, and so on. Meanwhile, you might not see meaningful revenue from those enterprise deals for a year or more.
For many early-stage startups, that’s simply not sustainable. The math doesn’t pencil out when you have a relatively short runway and an unproven product. An SMB-focused, product-led growth strategy keeps your burn in check. You don’t have to ramp up a giant enterprise sales team or respond to the demands of multiple committees. You can let your product do the talking.
5. Remote (and Scrappy) Selling Favors SMB Acquisition
Let’s be real: selling into an enterprise often requires personal relationships, traveling to on-site meetings, and a name brand that resonates with executives. If you’re a new startup, those might not be in your arsenal yet.
But SMB customers are more likely to discover and purchase products through digital channels—search, social media, newsletters, word-of-mouth among founders, etc. You don’t need face-to-face lunches in three different geographic markets just to get a deal signed. A compelling website, a clear trial sign-up, and a straightforward pitch can go a long way in closing SMB customers remotely.
6. The Dangers of Starting Enterprise-First
While the allure of big enterprise contracts can be tough to resist, going after them too early can lead you into some real trouble:
Long, unpredictable sales cycles can drain your resources before you see a single cent of revenue.
Enterprise-level teams (sales, customer success, compliance, etc.) require huge upfront investment.
Complex feature demands can warp your roadmap before you’ve even nailed down product-market fit.
Failed attempts leave you with a battered reputation and a dwindling bank account.
Tough contract negotiations can erode your margins because large enterprises know they have leverage.
Honestly, it’s like diving into the deep end of the pool with no life jacket. If you’re not absolutely sure you can swim, you’re setting yourself up to sink.
7. Benefits to Your Product Development Cycle
SMBs are often far more forgiving and collaborative than massive enterprises. They have clearer, more straightforward needs, which means:
Shorter feedback loops to quickly iterate on and refine your product.
More opportunities to experiment with features, packaging, and pricing without fear of losing a seven-figure contract.
SMB feedback tends to reflect the broader market’s fundamental needs. Enterprise feedback might push you into niche features that only help a small segment.
In short, SMBs help you get to true product-market fit without all the bells, whistles, and compliance forms that come with Fortune 1000 demands.
8. Current AI Tech (Often) Fits SMB Use Cases First
For startups building on or around generative AI, there’s a unique twist: advanced AI features often thrive in environments where the end user is a generalist or a small team wearing multiple hats. That’s typically more common in small or mid-size companies.
Large enterprises can have entire departments dedicated to very specialized tasks—meaning off-the-shelf or general AI solutions can feel less transformative. Plus, big companies have more red tape around data security, compliance, and auditing. For a young AI startup, that’s a big burden to take on right away.
9. Don’t Copy Enterprise-Focused Competitors Blindly
Look, it’s natural to see a competitor signing enterprise deals and think, “We should do that too—those deals are huge!” But context is everything. Some competitors may have:
Deep connections (e.g., a founder who came from a top enterprise in your industry).
Massive funding that lets them hire expensive sales teams from day one.
Hyper-specific timing where the market was newly hot, and they captured big logos right at the peak of the hype cycle.
If you don’t share those advantages, you could be walking into a landmine. Focus on your own path, your own early wins, and your real strengths—often, that’s going to be an SMB base who needs your solution now and can make decisions fast.
VC Perspectives
A16Z
“The single biggest mistake I’ve seen companies make when moving upmarket is mistaking initial enterprise interest for product-market fit. In reality, you need a far more robust offering to serve large enterprises well.”
Craft Ventures
“SMBs…are the best customers because they are the easiest to close. Velocity trumps size.”
Unusual Ventures
“Small companies can get overwhelmed by ‘whales’ as they request feature after feature. Meanwhile, the market keeps moving. You end up with a chunk of revenue but a product only good for laggards.”
The consensus is clear: don’t chase enterprise deals for that big logo on your website until you’re truly ready.
Bringing It All Together
For most early-stage B2B startups, the logical go-to-market strategy is to begin with SMBs. You’ll:
Close deals faster – validating product-market fit and generating revenue before your runway vanishes.
Build social proof – gather testimonials, case studies, and references that will help you crack bigger accounts later.
Keep your product focused – no blowout on your roadmap to appease heavy enterprise requirements prematurely.
Control your burn – scale up your organization in tandem with the cash you’re bringing in, instead of speculating on giant deals that might not land.
Iterate quickly – leverage regular feedback from smaller customers who don’t require a 24-month rollout plan.
Once you’ve mastered the SMB segment, you can think about creeping upmarket. But by that point, you’ll have stronger fundamentals: a refined product, testimonials galore, and enough revenue to invest in the specialized teams required for enterprise success.
Of course, there are exceptions—some products are just inherently enterprise-focused. But for the vast majority of B2B SaaS, especially if you’re incorporating generative AI or any cutting-edge technology, SMB is where you’ll find your footing and start building momentum.
So if you’re tempted by the promises of those big corporate deals, take a deep breath. Shorten your sales cycle. Get that first wave of happy SMB users who absolutely love you. Then use that momentum to move upmarket on your own terms, when you’re truly ready to knock on the enterprise door.
Sources
Craft Ventures, Enterprises vs SMBs:
A16Z, Getting Ready to Move Upmarket: https://a16z.com/getting-ready-to-move-upmarket/
Lean B2B, Why B2B Startups Should Target SMBs First, Not Big Enterprises: https://leanb2bbook.com/blog/b2b-startups-should-target-small-medium-businesses-not-enterprises/
Bessemer Venture Partners, Moving upmarket and the ascent of SMB SaaS: https://www.bvp.com/atlas/moving-upmarket-and-the-ascent-of-smb-saas#GTM-strategies-for-SMB-SaaS
Thanks for reading! If you have thoughts, experiences, or war stories about selling to SMB vs. enterprise, drop a comment—I love hearing the inside scoop from fellow founders.