How early-stage startups should sell to enterprises
You have decided to quit your job and start something on your own, congratulations! Welcome to a new way of living, as our little green friend told us some years ago “do or do not, there is no try”. Resilience and perseverance will be your two new best friends now; we all know that starting a company is not hard at all, but something hard at the beginning of the journey is finding product-market fit, especially if you are selling to enterprises (if you are an open-source founder, make sure you prioritize project-community fit first).
Having worked for companies like Amazon Web Services & O2-Telefónica connecting enterprises with startups around the world, there are some best practices that I would like to share. We just have to remember that enterprises are conformed by groups of people, and every person is different. So please, don’t expect the secret sauce or the “right way” to do it. Even though each case will be unique, always look for the patterns of what works best for your company. I like to use the process DIA (Discover – Imagine – Act) to overcome challenges, so let me take you through it.
Discover
First, you have to understand the problem that you are solving. Is it really a problem or are you just in love with a good idea? Asking many times “why” will help you understand the hidden problem (the real one), and it will allow you to understand the needs that the enterprise has. Once you understand the needs of the enterprise, it is time to focus on understanding the needs of your user and your buyer, most of the time these are two different stakeholders within the organization. Is the need of the user a priority for the buyer, or is it just a distraction? You will see that in some organizations they are aligned and in others, they cannot even stand each other; so you must take the time to understand the dynamics between these stakeholders, and the culture of the enterprise itself (how they make decisions).
Sales cycles are indeed long if you look at them from a startup’s point of view. Remember that this is the standard speed for enterprises. Startups speak AGILE and Enterprises speak SECURITY, and for many people, these two terms can’t go together (don’t worry, we are proving them wrong @BoxyHQ). Enterprises have got plenty of software they already depend on that needs to work with whatever your product can do for them. Their technology is usually old, I have seen many enterprises with Frankensteins, they think they need to create a third leg to run faster and they end up building unnecessary technologies that affect the quality and the speed of their solutions. You need to focus on the cost of the enterprise (time and resources) to integrate your solution, and to do that you have to make sure that the impact is big enough to be worth it.
To make sure the impact you are generating is relevant to the enterprises focus on a few potential customers, as Jason Lemkin mentions “Almost all big companies now have innovation departments of some sort, as do many divisions and groups. The general idea is to bring in 1–2 new vendors a year that don’t risk taking the core business down but could have a material impact on the bottom line. If you truly can change the way they do business, you can often get a meeting. I’ve done this in both my start-ups in the earliest days with 10+ F500 companies in the first 90 days.”
This Discovery stage is also perfect to understand what your solution needs to have to be compliant; security is key for them. Startups that are not compliant with the enterprises’ requirements could delay the sales cycle, or what is worse they could lose the deal.
Imagine
With all the information that you now have, it is time to visualize the future. Does your solution need some changes? Do you need new features to be compliant? Or could it be that maybe the enterprise doesn’t need all the features that you had in mind? Take some time to readjust your product as necessary, including how you are going to package it and how you are going to distribute it. Apply all the insights collected in the Discovery stage to test, measure, and iterate.
A common error that I have seen from startups is not focusing on selecting the right partners, and just moving forward with inbound opportunities. Some of them could be good but overall is a distraction to say yes to anyone that wants to resell your solution, you need to plan ahead.
Talking about planning, once you know who your internal sponsor is you need to facilitate the job for them. That is the person that will take your fights internally, so make sure you are giving them the right tools. If they see two concerns about integrating your solution, you should think of additional concerns and imagine how to mitigate each of them. You need to train your sponsor for unexpected scenarios that the decision committee will bring. Usually, enterprises ask for a “request for proposal” (RFP), the more you know about it, the better you will be prepared.
As an imagination exercise, I love Amazon’s Working Backwards process and the PRFAQ - you can learn more about it here. It is helpful to visualize the impact you aim to have and work backwards from your customer needs to create a solution. It is similar to the Design Thinking process, but the PRFAQ adds the manifestation piece.
Act
Now is the time to act! But be careful, another mistake that many startups make is not executing at the right time, they spend too much time thinking (doing research) or they reach out to enterprises before making sure they are ready, burning your bridges. Timing is going to be key for you.
They need to trust you and your solution, every contact point is an opportunity for them to trust you, so make sure to go to these meetings well prepared, doing the right questions but at the same time with some insights on the market, their competitors, technologies, etc. You should be an expert in your niche but at the same time, you should be smart enough to listen. The more you know about them, the better you can adapt your solution and at the same time influence them.
Make sure you have the right metrics for your success cases, it doesn’t matter if you were selling to SMEs before or if you already had a few Proof of Concepts (POCs) with enterprises. Large companies don’t want to feel they are a guinea pig, if you did a POC and you didn’t move forward afterward most executives will not see it as unsuccessful, period.
Be patient, agile enterprises could spend between 6 to 12 months in conversations before signing an agreement, but many could take years (I’ve seen one company spending 3+ years). While you are waiting, make sure you are at the top of their mind, always adding value, not asking for unnecessary coffees. Key people will resign, will get fired, will change roles, so make sure you find a way to navigate these transitions, you don’t want to start from scratch.
Each enterprise is a different world, and there are more things you will find out while spending time with them, but I hope you find this blog post insightful. If you have any comments or questions you would like to discuss, please feel free to reach out. We have free Enterprise-Ready office hours to help startups be compliant and accelerate their sales cycle with enterprises.