The operational and cultural differences between startups and enterprises are vast. Startups are nimble, making important decisions without having to navigate a lot of red tape. They offer a casual culture of hoodies and bean bag chairs. When was the last time you walked into a startup office and saw someone wearing a suit?
But for most successful startups, there comes a day when they need to turn big companies into customers, and they’ll need to grow up – at least for a little while. It may be uncomfortable, but when faced with a potential big-money deal, startups need to trade in the flip-flops and hoodies for oxfords and button-downs. And they’ll need to adapt their nimble mindset to accommodate the long and involved enterprise decision-making process.
Let’s start with some of the key factors in the enterprise decision-making process:
Risk. This is often the most important factor in decisions. Contrary to popular belief, it is not money or value but the amount of perceived risk to the enterprise. If a startup can prove that its product or service reduces the risk to the enterprise, it may have a value proposition. If the corporate customer perceives that the product or service would create risk, the deal is likely dead on arrival, despite any actual value it could deliver.
Budget cycles. Most enterprises will allocate money on an annual basis based on their budget cycle or fiscal year. For example, if an enterprise’s year end is Dec. 31, then planning will often start at the end of the previous summer and decisions will be made well in advance of the year end. If a startup is pitching in January or February, it may have good value but bad timing. Finding out the year end of the enterprise is usually pretty easy, just ask. Even better, take the initiative to find it yourself. With a little searching, it’s easy to find the fiscal calendars for all publicly-traded companies and many large private companies.
Relationships. People buy from people they trust and like. Building relationships with key people in target enterprise organizations can pay dividends in the long run. Startups need to spend some time getting to know their key stakeholders, attending the same conferences and going to the same networking events. Startups need to find a sponsor or champion within the enterprise who will introduce them to decision-makers and go to bat for them when times get tough.
Alignment. This is relevant if the product or service being pitched affects multiple parts of the organization. If a startup is selling a technology to support the marketing department, then IT and marketing will probably both be involved in the evaluation process. IT and marketing will have to be aligned on priorities and budgets to buy this product. Startups need to be prepared to sell to both or reduce the risk to one or the other. Good salespeople think ahead about all aspects of the organization that would be affected by their solutions and how to avoid reasons for secondary departments to oppose them.
These are often foreign concepts to startups. They’re used to environments where everyone sits within earshot of one another and big decisions can get made by shouting across the room. But while challenging, these are the realities of bigger companies and they are designed to protect the enterprise. There is no avoiding them, so here are some ways to overcome – and even take advantage of – the enterprise culture:
Do some homework. Selling to an enterprise is more than features, benefits, and feedback. It’s about positioning the product or service as a differentiator in the market. By understanding the buyer’s industry, goals, competition, and overall market economics, the startup can use the enterprise’s own weaknesses to provide value. Read quarterly and annual reports available on the company’s website or through the Securities and Exchange Commission, listen in on earnings calls, read media coverage. These are big, free intelligence opportunities that aren’t taken advantage of often enough. Be prepared to explain why they should move forward with you rather than an established brand name.
Help your ‘sponsor’ win. Look at the person you’re selling to as your champion or sponsor within the organization. Sponsors will often be required to get through the gauntlet of processes and people to get the deal done. In many cases this sponsor will have to support the startup’s product or service in the face of doubters. The startup needs to ask how they can help that sponsor win support. By providing a free trial, an extra license, or some supporting information when asked, it may secure a long-term relationship with that sponsor and the enterprise. And, as a bonus, sometimes those sponsors move to new enterprise organizations, and their memories tend to be long — both positively and negatively. That is also a good reason to find a couple of internal sponsors. There’s nothing worse than having an enterprise champion helping you navigate the system only to have that person change roles or leave the company before a deal is consummated. Then you’re back to square one.
Know your value proposition. I wrote above that it’s important to understand the enterprise’s alignment and needs before trying to cram the startup’s product or service down their throat, but that’s not to say your value proposition isn’t relevant. The key is to make sure it’s relevant. I’ve seen a lot of startups go in talking about how great they are and how innovative their product is. The challenge is to make it relevant to the enterprise. Startups should be bold with their value prop, but they also have to align it to the customer’s situation.
Act like a grownup. Back to my point about flip-flops and hoodies. Anyone selling their product needs to know his or her audience. If the enterprise organization is more formal at the office, dress formal during the presentations. If hierarchy matters within the enterprise, the startup needs to respect that. Startup culture is great for speed, creativity, and new ways of thinking, but it doesn’t always translate well into an enterprise setting. Enterprises want to partner with someone they can trust over the long term. Be that partner.
There are good reasons why big companies open corporate innovation labs to learn from startups and incorporate some of that nimbleness into their own organizations. At the same time, many of the whimsical characteristics that make startups fun places to work can be either a help or hindrance to selling to an enterprise. The key is striking the right balance and using the enterprise’s obstacles to the startup’s advantage. That’s what leads to the win-win situations that both types of organizations want.
Craig Haney heads corporate innovation for Communitech, a startup accelerator based in Waterloo, Ontario.