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The startup shorthand for the year-old G8 Rocket (pronounced “gate rocket”) is SAP meets Square—an enterprise platform designed for local vendors. In G8 Rocket’s case, those vendors are typically high-school athletic departments, which rely on the business to provide digital ticketing and other gate-related event services. The company—which formed in late 2014 in a merger of a ticket-selling operation and a youth sports–focused custom commemoratives business—currently works with about two dozen schools in California, has revenues “in the six figures,” and is in the midst of closing a $250,000 seed-funding round.

Cofounder and consultant Jen Rottenberg (MBA 1996) estimates that the high-school athletics market alone is worth $2 billion in annual transactions. And the market hasn’t proved overly competitive: Other companies that work in the local sports space (for example, active.com) tend to focus on participants rather than attendees, and the larger ticketing companies such as Ticketmaster have shown no interest in breaking into smaller markets with thinner margins.

The Question:

G8 Rocket’s near-term goals include acquiring 200 customers for the main ticketing and collateral business. For long-term strategy, the company is weighing two options. One, invest in expanding their client base and extending it beyond the sports market, targeting all kinds of community events like fairs and festivals. The other option? Take those existing 200 customers and sell them a platform of options beyond ticketing, including licensed merchandise sales and CRM for sporting events and dedicated event feeds that will ping relatives and friends about upcoming games and recitals. Expansion is a question of dimension: go horizontal or go vertical?

The Answers:

Given the untapped $2 billion market, I would go vertical for the next year or two. I would go deep and learn along the way to master the business fundamentals and identify parallel/complementary markets you can expand into. This will prepare the firm to go horizontal with strategic partnerships and offer tangible value propositions to a new customer base.
—Cindy Park (PLDA 12, 2013)

Stay with the current target market and own it—don’t be distracted by other rabbits to chase.
—Peter Anderson (MBA 1981)

According to the California Department of Education, there were 1,325 regular public high schools in California in 2013–2014. I would attempt to get 40–50 percent market penetration before someone else gets the idea. That’s 500–600 customers. Then start selling the ancillary services. You have a geographic advantage in California, and there are lots of open spaces going east until you get to densely populated states again, so build market strength in your home market.
—Richard Bland (MBA 1971)

Seems to me that between the two choices, going horizontal is the better strategy. I’d imagine that high-school athletic departments don’t have very big budgets, and extracting more from the 200 clients on an incremental basis will be challenging.
—Steven Chien (MBA 1996)

I would go vertical. When I walk through the gate and have a digital experience, I want the rest of it! After conquering the “total customer delight” experience, I would expand.
—Jeannette Galvanek (PMD 56, 1988)

Let’s not forget that long-term “strategy” is fun to talk about but rarely works out the way you planned it. I would focus on proving out the revenue (and profit) model and trying to get to cash flow breakeven by delighting the 200 customers. After executing on this first step, the right long-term strategy may become obvious when you see what kinds of dogs are eating the dog food.
—Uli Riebe (MBA 2011)

The company has a chance to become an ecosystem. By focusing on what it has, it can plug into other companies to form value chains and achieve vertical integration. This value chain orchestration would normally require high collaboration, working together to win against other competing value chains. However, G8 would bring a further competing factor: the power (Michael Porter’s “five forces”), the clients, and few competitors.
—Garry Lloyd (GMP 8, 2010)

Go deeper in your current vertical. You have a focus on a client base you understand and that values your ability to address their needs effectively. Small businesses often make the mistake of trying to scale horizontally before they’ve fully explored or satisfied demand in their current target market—sometimes to the detriment of their existing customers. It’s tempting to want to go after as many customers as broadly and quickly as you can. However, once your new service is out there, you need to learn about opportunities to serve current customers better. Profit from the core.
—Anita Lynch (MBA 2008)

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