The ICP is a growth killer for early-stage startups

When mentoring Pitchdrive portfolio startups, I often hear founders stressing about their Ideal Customer Profile (ICP) and my first reaction is that they should stop thinking about the ICP immediately. The term ‘ICP’ has gained significant traction thanks to corporate managers and operators who like to juggle it around in boardrooms, telling you to identify the ICP before looking into buyer personas. My experience in the 10+ years of being a founder says the exact opposite - STOP overlooking the importance of understanding your buyer persona first. If you lock yourself on your ‘ICP’ too soon, you’ll miss out on a lot of opportunities. You should be experimenting as an early-stage startup. It leads to misguided marketing and sales strategies from the very beginning.

The opportunity cost of an early ICP

The fun of going to market with your startup is that you’re working with a blank canvas. You need to try out different countries (even regions), different industries, different company sizes, you name it. For example, with our startup Rydoo we opened up our “shop” to the whole world right away, and while being a Belgian company we gained a lot of traction in Germany, Australia, and Brazil. Our response? Grab the opportunity and attack. In Germany, we noticed that new product features were needed in order to grow, but given the huge appetite, we decided to create just enough of these features (eg. per diems) to be able to grow in the German market. We also learned that in Germany not only the CFO but also HR was a decider in the sales traject. This knowledge led to +30% of our business coming from Germany alone.

Imagine if we had defined our ICP as SMEs in Benelux within the recruitment industry, based on assumptions we had made. We would have never been able to grow as soon and as quickly as we had, staying ahead of our competition. This opportunity cost can be huge, especially when you’re in a competitive market.

I often challenge scale-ups by comparing their current customer base with their defined ICP. In a lot of cases, I discovered that a big part of their ARR is NOT coming from their Ideal Customer description.

First Buyer personas then ICP and not vice versa

In most marketing literature, you read that you need to define your ICP first and then look into buyer personas. I strongly believe it’s the opposite. First, it’s important to understand the difference between buyer personas and ICPs. Buyer personas are about identifying the specific needs, challenges, and motivations of individual people who should in the end be your cheerleaders, the ones who actually buy from you. ICPs focus more on the broader characteristics of your target market, such as industry and company size. One very important thing to remember is that you can have different buyer personas in similar ICPs. Particularly in different countries, culture (especially the level of hierarchy) can make a big difference.

You need to experiment with Personas and that lead to a Vital Precursor to the ICP. In the early stages of a startup, it's crucial to embrace experimentation and adaptability. Your understanding of your target audience is likely to evolve as you gather feedback, gain market insights, and refine your product. This dynamic nature makes it challenging to lock yourself into a rigid ICP too early in the game.

By first creating buyer personas, you gain the flexibility to test, refine, and evolve your understanding of your target audience. This experimentation allows you to identify patterns, uncover hidden segments, and make informed decisions about your ICP.

Leveraging Personas to Inform Your ICP

As your startup matures and your customer base expands, you can leverage the insights gained from your buyer personas to develop a refined ICP. By analysing the common characteristics, pain points, and motivations of your most successful customer segments, you can create an ICP that accurately reflects your ideal customer profile.

For early-stage startups, creating comprehensive buyer personas offers several key advantages:

1. Continuous experimenting with personas to understand where to focus first: By understanding the intricacies of your target audience, you can learn where the real needs are for product development and marketing efforts. If you laser focus your ICP too fast, you lose the core advantage as early-stage startup of being able to test the waters to find true product market fit.
2. Personalized Customer Experiences: Buyer personas enable you to create personalized interactions with potential customers. By understanding their unique challenges and goals, you can craft tailored messaging, offers, and support that resonate deeply and foster meaningful relationships.
3. Efficient Resource Allocation: By identifying your most valuable customer segments, you can prioritize your marketing and sales efforts, allocating resources more effectively. This targeted approach ensures that you're not chasing after leads that are unlikely to convert.

In the early days of a startup, buyer personas serve as valuable tools for understanding your target audience, refining your marketing strategies, and building lasting customer relationships. By embracing experimentation and using buyer personas as a starting point, you can lay the foundation for a successful ICP, navigate the path to sustainable growth, and start to focus on it.