Mid-market is no man's land

In a recent LinkedIn post I caused an immune-system-like response when I described the mid-market as “no man's land.” Some folks who build for the mid-market wanted to know what I meant.

It takes very different skills to build for and compete in SMB versus Enterprise. The mid-market is the transitional segment between the two. Of course, businesses, including TigerEye, build and sell into the mid-market. I just believe it should not be a startup's initial target market. I define mid market as companies with 100 to 999 employees, but how companies draw their mid-market lines will vary depending on their segmentation needs.

In my experience, mid market has three distinct flavors:

  1. Ramping: Mid-market companies that still behave like SMBs.

  2. Graduating: Mid-market companies in the process of, or those that have already spent millions in preparation for, scaling to the next level and aspiring to match their enterprise counterparts.

  3. Autopilot: Mid-market companies that have hit a wall in terms of total addressable market and rapid growth. 

If you want to sell to the first two mid-market categories I've defined above, it's best to pick one outer lane first, either SMB or Enterprise, which will automatically include either ramping or graduating mid market, respectively.

What we don’t want to do is compete on two fronts, against well-resourced incumbents on one side and hungry startups on the other. Additionally, these different segments have different buying behaviors, so it's best to focus and excel at selling to one segment, refining the sales process before adding more complexity to your business.

Ramping mid-market companies, which have recently graduated into this segment, often experience growing pains. As a result, they are not afraid to make decisions quickly, and adopt new technology to make their days less painful. Most startups can successfully build for ramping mid-market companies by solving a single pain point really well then broadening their feature set later on. In most industries, there are usually more potential customers in this segment at lower average contract values. For these ramping mid-market companies, features such as freemium and trial offerings, along with in-product tool tips that promote self-onboarding, are must-haves.

In contrast, graduating mid-market companies have more decision-makers across multiple departments, with a greater number of internal processes. These factors often create a kind of red tape that can slow down the evaluation and deployment of new technology. To successfully sell to this group, there are minimum table stakes requirements that you have to meet to get past the front door. This includes security and compliance certifications like SOC2 Type2 and ISO27001 and ISO270002. Additional requirements may include role-based access control (RBAC) and admin consoles for the non-user buyer. These technology deployments are usually departmentwide or companywide, which will require some form of customer success and/or professional services. At five-to seven-figure average deal sizes, companies will expect hands-on training, especially if customization has been built to make their environment work.

Autopilot mid-market companies often have sufficient revenue to place them in the mid-market segment, but their growth has slowed. Typically, these companies are in cash conservation mode, focusing on strategizing new ways to accelerate their growth. When a company faces high-risk challenges like slow growth, it will be more cautious about every penny spent.

To build for the mid-market, early-stage companies need to determine who they want to serve: SMB or Enterprise. It's all about focus and strategically choosing the sweet spot. This doesn't imply ignoring the mid-market's potential; it simply shouldn't be the starting point.