Learn the five keys to scoring a powerful deal for your business.
A deal with a large, well-respected corporate is a major milestone for any startup targeting the enterprise space. It brings scale, revenue, increased market credibility and a higher valuation. It also makes it easier to raise further capital and can ultimately lead to a successful exit. However, many startups struggle to land those prized enterprise contracts. Here are five guidelines to maximize your chances of success.
1. Bring morphine, not aspirin.
Your startup's product or service should address a known problem that is causing prospective customers serious pain. Hopefully, this product or market fit was established back when the company was founded. The greater the pain your offering relieves, the greater your likelihood of winning corporate accounts.
The key here is that the issue needs to be something the corporate customer is actually experiencing and genuinely cares about, not something your startup believes they should care about. If this is not the case, you may need to consider pivoting to a different strategy, which targets a significant and immediate pain point.
Sometimes a strong startup idea is simply too early to the market. A blockchain offering two or three years ago would likely not have achieved the same traction it would today, as large businesses were only just starting to take note of this new technology and its implications.
Another lens through which to view this is the way corporate purchasing decisions are made. While one person will ultimately put pen to paper, the process to get to this point requires a wide range of stakeholders to agree to support the proposal and allocate precious capital and human resources to it – resources that will no longer be available to other initiatives. This is far easier to do if the proposed solution addresses a significant problem or opportunity that everyone in the business is already aware of and highly motivated to address.
2. Tap into the macroenvironment.
One way to achieve this alignment is to understand the corporate zeitgeist. Every market, industry and business has issues that have bubbled up to the top of the board agenda, and these invariably trickle down into the organization.
Some of the issues that are top of mind at corporates around the world right now are the impact of big data, machine learning and blockchain. In Australia, a string of high-profile corporate scandals has made large businesses hypersensitive to regulatory and compliance risk. And specific industries and organizations have their own hot topics. For example, the question of how to respond to Amazon's impending launch in Australia is being discussed in retailers' boardrooms across the country.
Startups should figure out the hot-button issues in the organizations they are targeting. A simple web search is a useful place to start. For example, if a company has just announced plans to cut 20 percent of headcount, you can be sure efficiency improvements are top of mind for everyone there, and capex will be scarce. CEOs and other leaders often give speeches, such as at chamber of commerce events, and these can be a great way to learn what an organization's focus is. Also, if you have connections to people in an industry or business your startup is targeting, you should consider inviting them out to lunch to ask them about the key issues their industry or business is facing.
Finally, you need to build collaborative relationships with your corporate counterparts. As the saying goes, people buy from people. You also need to understand what the individuals you are dealing with in the customer organization really care about. This allows you to make sure your offering is aligned at both the individual and organizational level.
3. De-risk the proposition.
One of the biggest problems startups have when selling into corporates is that they have a limited track record. Most corporates have a low tolerance for risk – far lower than the typical startup. The fact that the fledgling business has either no or relatively few other large reference customers may be an area of concern. What can founders do to address this?
In the corporate world, credibility matters, which is why founders in the enterprise space often bring a strong and relevant background themselves, even if their product is new. You should ask yourself whether you bring sufficient credibility to the table in the eyes of the people you are selling to. If not, it might be a good idea to bring someone on board who does.
For example, you might hire a talented executive who has an extensive track record buying the kind of service you offer, from precisely the kind of organization you plan to target. You might offer this person equity to compensate for a lower cash salary and can bring them on board as an executive, a director or an advisory board member. The members of your board should bring gravitas, experience and connections – to prospects and/or to sources of capital. A great product that meets a real-world need will make it easier to secure these blue-chip board members.
4. Map out the buying process.
People tend to focus on the sales process, but in complex enterprise sales, the buying process is equally important. You must map out which key stakeholders and departments will need to sign off on the deal. Who has the budget? You should also understand who the key influencers are and what they care about, as they can slow down or even scuttle a promising deal. There will likely be multiple workstreams required, including the corporate's product, commercial, technical, legal, risk and PR teams. Work with your key counterparts in the organization and have them help you understand the process you will need to navigate together in order to close the deal. Then map out the critical path, including any dependencies.
5. Productize your offering.
One of the most important things a startup can do to de-risk its offering is to have a fully developed product. It is tough for a corporate to sign off on a half-baked solution, no matter how great the idea behind it is. When they ask, "OK, so if we signed this deal, what would happen next? What would we actually get?", you need to have a crisp answer and demo ready that shows just how easy it will be to implement your solution. Make it easy for them to say yes.
It is important to recognize that even with all of these elements in place and the best will in the world, corporates tend to move slowly, and you should factor this into your business plan. It will likely take longer to get the deal across the line and then implement than you – and even the people you're dealing with in the corporate – would like. Work closely and respectfully with your corporate partners to speed up the process as much as possible, and find a balance between urgency and patience.
There will be frustrations along the way, but the outcome is worth it. A deal with a Fortune 500 business will have a major impact on a startup's valuation and can be life-transforming for its founders and staff. By following the guidelines above, you will be well on your way to maximizing your startup's chances of success.