Selling to startups is not the same as selling to SMEs.

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If you are selling one big contract for one client or many smaller contracts for many clients? It is easy to make an argument in favor of any of them. Selling one large account means fewer sales cycles and fewer customers to maintain on an ongoing basis. However, selling to smaller customers reduces the risk that a folded account could be a significant barrier to growth.

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There has long been a wisdom in venture capital that B2B startups should move to a higher market as they grow. The idea is that as startups build their product or service, they can acquire larger and larger customers.

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Of course, this can lead to income concentration, which in some cases can prove financial concern. But because software customers tend to buy more over time, acquiring enterprise-scale customers has often been a way for startups to not only generate new revenue in large volumes, but also generate sustainable, self-expanding gross revenue.


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SMBs, by contrast, have more limited potential when it comes to account expansion. And they may not be as interested in yearly churn limited contracts compared to monthly access. Many software companies eventually went public through sales to large companies. Startups focused on small and medium businesses also have, but they are less common.

Expense management services provider Expensify is one such SMB-focused startup that went public, but it wasn’t easy to get there. Before the IPO CEO Dave Barrett told TechCrunch how much backlash he got in the early days of Expensify when he realized SMB might be his best target:

There was so much enthusiasm in the SMB sector that I was always told was terrible. It’s like, “Oh, yes. You can’t do SME business. They are impossible. They are terrible clients. They spin fast. They will not pay any money,” and the like. “Enterprise where it is.” I’m like, I don’t know. Everyone who is excited about my business seems to be running a small business. They don’t look like they’re churning. It doesn’t look like they don’t want to pay. I dont know.

Subscribe to TechCrunch+Be that as it may, our goal this morning is not to test the traditional view that startups should eventually avoid small customers and sell them to large corporations. Instead, we want to talk about what SMB is and why not all small accounts are the same.

Brex’s clarifying move

Brex’s recent decision part of the exit from the SMB market made several waves.

The fintech decacorn has had a history of serving small accounts and charging exchange fees on their transactions, aggregating small chunks of transactions that it has fueled rapid revenue growth.

Investors loved the company, and its resounding success attracted fierce competition. Airbase competes with Brex by historically focusing more on software than most so-called enterprise-spend startups, while younger rival Ramp is following part of an early Brex scenario with its own software.


Credit: techcrunch.com /

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