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Selling Outside the Startup Box

Last spring, HR automation platform Zenefits realized it had a problem: It was too reliant on other young tech companies as customers to keep up its growth rate. Not wanting to be typecast as a service provider for startups, Zenefits deliberately looked outside of tech for new business.

While finding non-tech firms harder to sign up than technology ones, Zenefits still made inroads. About 75 percent of new customers are now non-tech and non-Californian, says Parker Conrad, the CEO of Zenefits, compared with 90 percent tech companies mostly in California previously.

“We just changed who we were going after,” Mr. Conrad said. “It turned out there wasn’t much we needed to do.”

Startups often sell their products and services to other startups to gain initial traction. But an over-reliance on startups can pose a risk for future growth—especially if venture capital funding dries up and startups go out of business. That’s what happened during the dot-com bust of 2000, magnifying the impact of the downturn.

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