This week I talked to an early-stage founder I’ve known for a few years. So far, he has bootstrapped his company. It started as an agency, and he’s now built software that he sells. His target market is micro SMBs that drive revenue by engaging in outbound sales. The founder has some traction, and he’s looking to raise funding from venture capitalists to scale the software.

He shared with me that he’s considering targeting enterprise customers because that’s a clear path to raising from VCs. The micro SMB market doesn’t have a clear path to acquiring customers. He’s found that it’s tough for VCs to understand the potential in that market and to see how capital raised would lead to new customers. With enterprise, the path is clear, and they get it.

This founder is in a tough spot. As I shared earlier this year (see here), micro SMBs isn’t a market that VCs easily understand. The process for acquiring customers lacks a defined playbook, which makes investors hesitant to back software founders targeting this market.

I’ve watched this founder work for some time now, and I think he’s on to something. I’m not sure that enterprise is the right market for him to go after at this time; that’s something he’ll have to decide. If he decides to stick to the micro SMB market, I suspect he’ll raise from VCs only after he has derisked the customer-acquisition process. Once he can show that he has figured out how to find and acquire micro SMBs repeatably and that the product is valuable to them, I think VCs will get on board and cut checks. Heavy product usage by paying customers is a strong signal that a savvy investor never ignores. They may not agree with going after micro SMBs, but they’ll never argue with data like that.