As an early-stage startup, it can be tempting to chase any customer meeting whether your goal is getting your first Design Partner or closing deals on your way to $1M ARR.
From my previous experience as an Account Executive at Segment, Databricks, and Sumo Logic, and now helping our portfolio companies at Unusual Ventures, I’ve seen how companies that don’t take the time to define a clear ICP (Ideal Customer Profile) from the outset face serious challenges in both the short term and long term. In the short term, these companies struggle to hit critical ARR targets, which can jeopardize future fundraising. Others might experience moderate success without clearly defining an ICP early on, but then struggle down the road with customer churn, acquiring new customers, and battling a backlog of requested features. In a worst case scenario, startups attempt to build every feature that big, early customers request, while still trying to uncover what value their ideal customers are getting from their product!
The best way to avoid failure early in your journey and set up a repeatable process for earning revenue instead of just one-off deals is defining an ideal company profile (ICP) and being disciplined about disqualifying those who don’t fit that profile. Strong execution of the Customer Validation process will allow you to more effectively define your ICP because you will start to pattern match the attributes of a potential customer against someone who is unlikely to ever buy your product.
Keeping a laser-focus on your company’s ICP can help you better identify customer needs, clarify priorities for your team, and pursue opportunities for expansion down the line.
In this guide, we’ll discuss how to narrow in on your ICP and User and Buyer Personas, the right questions to ask when you’re qualifying deals against your defined ICP, and how to iterate on this process over time with your team as your company scales.
ICP stands for Ideal Company Profile, or the attributes of the “ideal customer” who will get the most value from purchasing your product. Put simply, it’s the answer to the questions: “What types of companies need your product enough that they would pay for it? What is it about their size, vertical, tech stack, or business model that makes them ideal?”
It’s important to keep in mind that you’re seeking companies that will become advocates, help expand your product in the broader market, and become paying customers now or in the future.
To give an example, Kloudio (an Unusual portfolio company) was initially going after all spreadsheet users as their ideal customer profile. While there was some truth that anyone using a spreadsheet could benefit from their product, it was too broad to identify the exact companies that would pay for it right now. Through our Get Ahead Platform (GAP) engagement, we worked with them to narrow in on companies in a specific industry, geography, revenue band, and tech stack which accelerated their product-market-sales-fit.
Now that you know the specific types of companies that are in an ideal situation to benefit from your product (your ICP), we will dig a level deeper to determine who exactly at those organizations are relevant to target — your Buyer and User Personas.
Your Buyer Persona represents the person with the influence and authority to make a purchasing decision. For instance, it might be a manager or business executive, or even the user of the product him/herself.
A simple question to ask in order to find out who a Buyer is in a potential deal is, “Who will sign the order form / contract?” This is a good indicator of who has the authority to make a purchase.
Your User Persona represents the direct consumer of your solution. Remember, User Personas want to use your product to make their lives/jobs easier. Having empathy for the user and building that into your messaging is critical to ensure strong adoption whether you’re selling to teams with developers, product, salespeople, or another persona.
For example, a developer typically becomes an advocate for a tool when it improves the quality of their job. It may be that your tool makes their job easier or offers a 10x better experience than alternatives, but they won’t become fans of your tool simply because management is excited about saving 10% a quarter on AWS costs. Put another way, a developer doesn’t use a security product because it saves their organization from data breaches and corporate liability, but because preventing data breaches is part of their job and your product makes that job easier.
Note: In the ideal scenario, your buyer is the same person as your user, but that’s not always the case. These can be different individuals (i.e. a manager approving the purchase for an engineer who will ultimately use the software). That means your user and buyer may have entirely different motivations and thus, will require different messaging and tactics to see the value of your product.
One common mistake founders make when defining Personas is too loosely defining their ICP. A job title (i.e. DevOps Engineer) is a good starting point, but it’s worth digging deeper so that you’re able to answer: What makes a DevOps Engineer at your Ideal Company a better fit than a DevOps Engineer at any ordinary company? The more specifically you can pinpoint why, the easier it will be to relate to this person through your messaging and outreach. This in turn shortens your sales cycle because you have a crystal clear understanding of what challenges you can solve for them.
Another mistake founders make is conflating their ICP and their Personas. They’re separate concepts and should be kept distinct. The easiest way to distinguish between your ICP and Personas is by answering two separate questions: “What problem are you solving?” (ICP) for companies that would benefit most from your product and “Who you are solving the problem for?” (Persona) and how does what you offer align with their traits and attributes?
This will allow you to build a scalable and repeatable process around lead generation (marketing), shipping the right updates (product), closing more deals (sales), and improving net retention rates (customer success).
Clearly defining your ICP, Buyer Persona, and User Persona gives your whole team a “true north” they can refer back to when making decisions, increasing your likelihood of making it past the seed stage. Some examples of how having clear ICP/Personas can benefit your startup:
Focused Product Roadmap: You can prioritize your product roadmap based on the needs of your ICP, rather than building any requested feature that comes from customers who might not fit the ICP profile as well. Occasional customizations should be an exception, not a distraction from what your target customers need. Engineering will have the bandwidth to ship more by knowing what is expected, why they are building certain aspects of your solution, and for whom. Knowing what not to build, even if one non-ICP customer is asking for it, is just as important.
Reduced Customer Acquisition Costs: Instead of spraying and praying on a broad set of profiles, you can better allocate spend to target specific companies and personas based on the data you’ve collected from your ICP/Personas. This also helps you better qualify leads and reduces the number of meetings/resources required to close a customer.
Consistent Messaging: You can use a consistent narrative in external marketing to ensure your ICP clearly understands what you do. For example, Account Executives and Marketing should use the same external messaging that targets the same ICP. This is especially important if you’re creating a new category. At Databricks, we got stuck being compared to solutions that were not competitive to ours. To separate ourselves from the pack, we made sure we were consistent in calling ourselves a “Unified Analytics Platform” to appeal to our ICP. HubSpot also did this with creating "Inbound Marketing" as a category and built a ton of content and messaging around the same narrative for their ICP/Personas (see here).
Improved Customer Success: Finding the Ideal Customer early allows you to build operational playbooks around what your customer will need to be to be successful and expand adoption of your product. Doing so prevents the likelihood of churn risk in year 2.
Strong Champion Development: Building a focused solution that solves real pain for a specific ICP and Persona paves the way for advocacy (enabling Buyers/Users to evangelize your solution on your behalf), testimonials (case studies, whitepapers, webinars, etc.), and referrals that will lead to organic inbound leads.