Lead with a program and then monetize with a product
While I was CEO at Gust, and especially since I left, I have had a number of companies and consulting firms reach out to me to ask for my expertise in understanding the early-stage startup market. These requests typically come from larger companies who want to launch an initiative to get more startups to use their products. These companies have typically been around for a while, have a couple of successful product lines and now want to spend some time attracting startups to use their products. Their understanding of these potential customers are the same, which is to say not very much nor very accurate. It surprises me how companies think of what a startup actually is and how to best reach them. So I figured I would save them all some time and money, and me a bunch of boring consulting calls, by writing down a very high level take on this very specific market and what a large company would need to be aware of in order to make something appealing to this customer.
Below is the beginning of a talk I recently gave to a large bank on how best to build for and acquire startups as customers. While this talk was for a bank the lessons apply to others as well, so if you are payments company, sell software or infrastructure etc these lessons are equally relevant to you as well.
Programs>Products
The financial services industry is largely product-centric, offering solutions — be it bank accounts, mortgages, credit cards etc — crafted to meet explicit customer needs at specific moments. These products, while essential, are often largely undifferentiated in a saturated market, leading to intense competition and diminishing margins.
I firmly believe that the key to winning in this competitive landscape lies not in selling products but in selling programs that engage customers before the need for a product solution even arises. This requires not only offering products but also providing advice, community, and delivering guidance and support to help them arrive at the point they would need a financial product. For example, instead of directly selling a banking product to college students, a more effective approach would involve assisting them in finding part-time jobs, applying for scholarships, and preparing for interviews etc. The banking product — a tool for managing and growing their finances — becomes relevant and desirable once they have a need to manage incoming funds. This nuanced understanding of customer needs ensures that when they do seek a banking solution, they are more inclined to choose the ecosystem they are already engaged with.
I refer to this strategy as “Lead with the program and monetize with the product.”
This approach, when implemented correctly, forces companies to establish deep, lasting relationships with their customers, engaging them continuously rather than solely at the point of transaction. Such engagement nurtures a loyal community, enhances the value of products, and distinguishes a company in the marketplace. Effectively implemented, it significantly improves Customer Lifetime Value (LTV) and reduces Customer Acquisition Costs (CAC), thanks to enduring relationships and advocacy.
An Example of selling to startups
This was the philosophy behind the transformation I led at Gust. Initially, Gust’s focus was on selling products to startups. My tenure marked a strategic pivot to a program-centric model, fundamentally redefining the value we delivered. We shifted our objective to:
We did so by making tasks they dealt with as founders:
- cheaper,
- more accessible,
- easier to understand,
- quicker/easier to implement & scale
This approach enabled founders to allocate more resources — be it time, money, or focus — towards their core product development, thus enhancing their chances of success.
This required us to create new tools and resources that, while not directly revenue-generating as standalone products, were integral to building a comprehensive program. This program positioned us as the go-to advisor for startups, guiding them from inception to significant funding rounds. By understanding the lifecycle of a startup and identifying key inflection points, we matched our offerings to meet founders’ needs at each stage, supporting them towards achieving these milestones.
For instance, recognizing fundraising as a critical juncture, we provided support and education around this challenge, indirectly promoting our incorporation and cap table management solutions. This approach not only facilitated immediate needs but also prepared startups for future growth phases, establishing a seamless path from one inflection point to the next. And once they arrived at the next one, we would have an offering ready to sell to them.
How to sell to startups
The best way to sell this value prop to potential users requires us to meet founders where they are. That means taking our platform and product to them as they navigate their entrepreneurial journey. This means having a presence at all of the inflection points on their journeys. It requires hands on interaction with startups as well as creation of specific content for them. Their goal, from our perspective, is to help establish us the trusted advisor to startups. When a founder is faced with a question regarding their startup that starts with “How do I….” their first impulse should be to turn to us. When they do, we help them articulate their issues, show them how to find solutions and eventually guide them to internal products/content or external trusted partners.
Doing this will allow us to build effective on-ramps into our larger ecosystem and become an important part of a startups operating stack. Having an extensive set of offerings for yet-to-be-encountered inflection points will allow us to continue serving these users and not lose them to other competitors.
Measuring Success
It is vital to measure track success when building a program like this. At Gust we knew of the natural company churn in the startup space and that real monetization lies with the companies that ‘breakthrough’ and make it. YOU HAVE TO FOCUS ON YOUR WINNERS. That is the only way this model works.
However knowing who has ‘broken through & made it’ takes time. Startups are a long game. In the short to medium term we implemented 3 simple metric to make sure we were on track
Simple, yet scalable
This approach of leading with a program and monetizing with a product is straightforward and may not come across as entirely unique. However its true adoption, especially among larger financial institutions, appears to be remarkably rare. This observation underscores a significant opportunity within the fintech industry for those ready to embrace this philosophy. Moreover, the universal applicability of this strategy across all customer segments that banks and financial players target is one of its most compelling attributes. Regardless of the diversity in financial needs and behaviors among these segments, the fundamental principle of cultivating deep, value-driven relationships holds the potential to revolutionize customer engagement and loyalty. By effectively implementing this approach, financial institutions cannot only differentiate themselves in a crowded market but also unlock new avenues for growth and customer satisfaction across the board.
