De-Risked Mirage: When AI Startups Pitch Consulting as a GTM Strategy
What Questions to Ask During (AI) Diligence to Evaluate Scalability
What was once a dirty word in startup strategy (and pitches), consulting as a GTM strategy seems to now be back in favor… But, as with everything else in a startup’s pitch, consulting services with the help of AI as a de-risking GTM strategy may not actually result in a (SaaS) product that’s a venture-scalable business. Here’s what to consider asking during (AI) diligence to help you evaluate where consulting services come in and how scalable and profitable (if at all) they are.
Why Consulting Services Can Be a De-Risking GTM Strategy
As you know, when offering consulting services, customers will pay the startup to answer their business questions, which should help the startup identify the jobs-to-be-done, to then pitch (and sell) this offering to their next customer(s). By consulting with many customers, the startup can identify what resonates, pinpoint the actual pain points that customers are willing to pay for, and recognize repeatable patterns/requests/workflow steps, packaging them up as a product/service for sale. Thus, consulting extends their runway, provides them with information on what’s working and not, and informs the next pivot on their road to product-market fit.
When Offering Consulting Services as a GTM Strategy Falls Flat
Fail #1: Solution is a One-Off
As you know, custom consulting services are easier to pitch to customers, since they’re tailored to moving the needle on their customers’ outcomes; yet, they are, by definition, they’re unique to each customer.
Fail #2: Missing Expertise
Consulting may also be a great strategy if the startup already has a team with the required expertise in place. When it’s so great, it’s when the startup is missing this expertise on the team, and is then either:
Fundraising to hire for this expertise. (I wish I were kidding! I had to clarify their GTM strategy in diligence, and came out that this is the primary use of funds… )
Oblivious that they need this.
As you know, this is not the right team.
Fail #3: Not the Path to Product-Market Fit
Earlier this month, at Mucker Cpaital’s panel at LATechWeek on the topic of “Building an AI Startup”, I shared (YouTube recording here) that identifying what’s resonating with customers (from usage insights) nicheing into that, and making sure that things works as seamlessly as possible, is what helps (SaaS) startups unlock product-market fit; it’s not consulting services, not AI, and not pitching one more shiny tool to prospective customers.
When Consulting as a GTM Strategy is a Grey Area
At its core, a consulting GTM strategy is a combination of internal and customer-facing processes/tools designed to help customers gain actionable insights.
During diligence, we need to evaluate the scalability of the offering. That is, what’s custom, what’s repeatable, and the degree to which it is.
One startup was trying to pass off an indefinitely-internal tool as a venture-scalable SaaS product. (I wish I were kidding! This came out in my diligence of their product.)
What Questions to Ask in Diligence
