Building for SMBs is deceptively hard. On paper, it looks like a dream: a massive market, fast sales cycles, and low-friction adoption. But the reality? High churn, small deal sizes, and a brutal need for GTM efficiency. Many small businesses shut down each year, creating a natural ceiling on retention. And unless you master acquisition economics, the math breaks quickly.
Still, durable, venture-scale companies can absolutely be built by targeting SMBs. In our portfolio, we’ve seen BILL, HubSpot, RingCentral, and Motive scale to hundreds of millions in revenue while serving hundreds of thousands of SMBs. They didn’t get there by accident—they built machines: repeatable, measurable, and optimizable GTM engines designed for volume. The GTM needs to be a machine because selling to SMBs is a numbers game. The entire system must scale through efficiency: optimizing CAC, acquisition channels, and retention levers at volume.
AI doesn’t change the fundamentals—it adds rocket fuel. Everything’s now faster, cheaper, and more automated.
We created a playbook of strategies and real world examples from four portfolio companies that helped them not just survive, but thrive in the SMB market. It benefits from the insights of two of our Executives in Residence who’ve helped shape some of the most iconic SMB platforms: Sanjeev Kriplani, a product and marketing leader at BILL, PayPal, and Intuit, and Ryan Azus, who served as CRO at Zoom and a sales leader at RingCentral.
Get ICP right, or nothing else will matter
Your Ideal Customer Profile (ICP) is the foundation of everything. It determines who you acquire, how you onboard, what you build, how you price, and even how your customers talk about you. Get it wrong, and the entire GTM machine misfires. CAC skyrockets, churn creeps in, and expansion stalls. As companies expand, their ICP can evolve, starting with the smallest of organizations and selling directly to the owner at first vs. expanding upmarket where you sell to a department head. Great companies revisit and refine their ICP constantly, treating it not as a one-time positioning exercise, but as a core operating discipline.
Mitigating SMB retention challenges: Strategies for success
Even in well-run SMB businesses, annual customer churn can reach 20% or more. This is often due not to dissatisfaction, but to shutdowns, budget shifts, or staff turnover. The key isn’t to eliminate churn—it’s to design around it. That means lowering customer acquisition costs (CAC), maximizing gross retention wherever possible, and ensuring expansion revenue from your retained base more than offsets the losses. When the GTM machine is built to absorb and outpace churn, the business can still compound.
Reducing CAC: Build the GTM machine
- Optimizing between sales and marketing: Depending on the industry and end customers, companies need to figure out the best way to reach their customers efficiently. Having a GTM machine is a must, but the shape of the machine varies. At the extremes, enterprise is a sales game and PLG is a marketing game. Businesses must figure out what the optimal mix is. RingCentral utilized a hybrid approach, leveraging marketing to drive top-of-funnel volume, while relying on a large, cost-efficient inside sales team to convert leads at scale.
- Become the default for new businesses: Businesses targeting SMBs must continually acquire new customers as existing ones churn. Becoming the default platform for new businesses ensures a steady pipeline of fresh customers without excessive CAC. If you have a leaky bucket, you need to be constantly filling it up! HubSpot nailed this by offering a free CRM and marketing tools that made it the go-to for new businesses, ensuring consistent top-of-funnel flow at nearly zero CAC.
- Word of mouth and organic acquisition: Strong organic acquisition channels can significantly lower CAC. News of being a solution that brings joy to their customers or solves a specific pain point can spread fast! This also includes both grassroots community engagement and industry influencer amplification. Motive benefited from fleet managers recommending the product to their peers, thanks to its intuitive design and strong ROI.
- Channel partnerships = leverage: A powerful channel can provide GTM leverage. Rather than acquiring thousands of SMBs one-by-one, winning companies use trusted partners to drive scale. Companies working through resellers, consultants, influencers, industry associations, or industry-specific platforms can maintain steady customer inflow. Channel success often (not always) peaks in mid-market, where deal sizes justify the coordination cost. At the lower end of SMB, self-serve and PLG often remain more efficient. BILL leveraged the trust of accountants and bookkeepers to gain new customers at a low cost. RingCentral built a massive partnership channel with over 16,000 different service providers and resellers in their network.
- Network effects multiply value: Businesses with network effects can reinforce retention and reduce CAC (often by increased organic acquisition). Platforms that gain value with each additional user (such as communication tools or marketplaces) can make it difficult for SMBs to switch away. For every payee that is a part of the BILL network, it creates that much more value for the payer.
Increasing retention
While some churn is inevitable in SMB markets due to business volatility, increasing gross retention is essential to building a durable business.
- Deep workflow integration: The stickiest products are those that customers rely on every day to run their businesses. If your product is part of a core workflow or holds all the data to your organization, it becomes much much harder to replace. When was the last time you replaced your CRM? There’s a reason why Hubspot has been able to grow with customers so well.
- Fast onboarding = faster value = lower early churn: SMBs don’t have time for long setups, but given limited ACVs, it’s challenging to have a white glove onboarding experience. If onboarding isn’t fast and the SMB doesn’t realize value, they are an immediate churn risk. Some go further with pure freemium or product-qualified lead funnels, maximizing volume with minimal human touch. HubSpot optimized for self-serve setup, with extensive educational content and automation to reduce friction.
- Drive engagement through product value: Continued product usage correlates strongly with retention. Features that encourage frequent logins, ongoing input/output, and team collaboration increase stickiness. RingCentral enabled teams to use messaging, video, and phone in one interface, making it a central communication hub for their customers.
- Integrate with essential systems: When your product plugs into other tools customers already use, it becomes harder to leave. If you rip it out you have to deal with consequences across all the other tools as well. Motive integrates across transportation management systems, fuel card platforms, and payroll solutions, so ripping out Motive has big implications downstream.
- Compliance is a must have: Many startups see regulators as headaches, but when they tell your customers that they are required to have the solution you’re selling, they can be your best friend. Motive saw explosive adoption after ELD regulations required electronic logs, turning their solution into a regulatory necessity.
Offsetting churn with expansion revenue (NRR>100%)
- Grow with your customers: Even if many SMB customers churn, businesses that serve a mix of SMBs can benefit when some of their customers grow significantly. Price strategically so that you can grow with your best customers, often in the form of usage, seats, features. BILL monetizes on the underlying usage of bills, payments, and users on their platform and has been able to grow with their customers.
- Cross-sell and upsell opportunities: SMBs hate managing a tech stack and actually prefer buying a bundle of functionality. Once you have a foot in the door, it’s incredibly effective to layer on adjacent products and services to your SMB customers. This can help boost net revenue retention (NRR) above 100%, ensuring the business grows even with normal SMB churn. HubSpot has been a master of this strategy, starting in marketing and expanding into sales, customer service, CMS, and operations.
The march upmarket is easier than moving downmarket
One of the most overlooked advantages of starting in SMB is that it gives you a strategic wedge to earn the right to expand upmarket over time. SMB isn’t just a market—it’s a launchpad. By first winning in high-volume, low-touch environments, companies build discipline: products must be intuitive, onboarding must be fast, and GTM must scale without relying on large contract values.
Once the SMB product and GTM foundation is nailed, it’s far easier to scale up, layering on advanced functionality like SSO, audit logs, compliance, and deep integrations to serve mid-market and enterprise buyers. You gain not just product maturity, but brand credibility through proof at scale. The reverse is rarely true. Companies that start in enterprise often struggle to move downmarket: products are bloated, pricing is inflexible, and sales motions are too heavy for SMB economics. Starting small gives you the right to scale up with your customers and expand your market as you go.
That’s exactly what BILL, HubSpot, RingCentral, and Motive did. Each began with SMB roots but now count large enterprises among their customers, with six and even seven figure deal sizes. The march upmarket is the reward for the SMB victors.
AI is changing the game
It used to take years to develop the playbooks, build the tooling, and optimize as much as possible to create the GTM machine. AI is now a cheat code. It’s far easier to build the machine and it’s way more automated. AI helps reduce CAC by refining who and how you target. Models can prioritize leads based on conversion likelihood, personalize outreach at scale, and adjust sequences in real time based on behavioral data. On the retention side, AI can proactively flag accounts at risk of churn and trigger interventions before it’s too late. Support is handled by AI agents before a ticket is even filed. Tools can surface upsell signals based on usage, recommend features or tiers, and even drive in-app prompts that boost NRR without human involvement. An automated, personalized GTM at scale.
What used to require a $200k rep can now be driven by $50k in AI tooling. What used to require a ten person GTM team can now be run by three, layered with the right automation. Even offshoring can no longer compete with pure automation. The machine is not just more efficient—it’s more intelligent, compounding learnings and improving as it scales. AI doesn’t change the rules, but it provides the players tools that are exponentially better. The SMB GTM game is a magnitude easier to win now.
Where things get even more interesting is when you’re selling AI to SMBs. Every SMB would rather buy a solution that automates the work than a tool that requires them to do the work. Time is their scarcest resource. They don’t want knobs, dashboards, or power user features; they want results and outcomes.
Selling AI can be challenging, especially to SMBs. Instead of selling a tool, sell fewer hours running payroll, faster invoices sent, or more leads converted. Simplicity will win. The interface should feel effortless. The activation should feel instant. The value should feel obvious. In SMB, the best feature will be no feature—the job just gets done.
SMB success isn’t an accident—it’s engineered
Building a venture scale business in the SMB segment isn’t just about product-market fit. It’s about mastering the economics of churn, acquisition, and expansion. The best SMB focused companies don’t eliminate churn; they design around it. They find ways to acquire customers efficiently, integrate deeply into workflows, and grow revenue within their existing base. The ones that succeed here use their SMB roots as a foundation to move upmarket over time.
Companies like BILL, HubSpot, RingCentral, and Motive show that it’s not only possible, but repeatable, to turn SMB volatility into long-term durability. Whether through channel leverage, product-led growth, regulatory hooks, or integration moats, they’ve created flywheels that keep spinning even as individual customers come and go.
As AI continues to progress the opportunity for technology within SMBs couldn’t be more exciting. The leaders of tomorrow will be AI first and likely selling AI as well. The fundamental challenges and complexity of GTM in this segment haven’t changed, but AI is a force multiplier, it’s never been easier to build and automate the GTM machine.
If you’re building here, give us a shout!
