Corporations like to think of themselves as tigers, ready to pounce on their prey, but in reality they are more akin to an elephant — slow, sure and steady (think Louis Gerstner’s book Who says Elephants Can’t Dance about trying to transform IBM’s culture).
This is what makes it hard for corporates to work with startups. They operate on completely different timeframes; startups run at a hundred miles an hour while corporate structures slow down decision making to what could feel like an eternity. Startups have limited timeframes between funding rounds to achieve the next set of goals — meaning delays in corporate decision-making place severe strain on their survival.
So how do you reconcile the two?
During my 30+ year professional career, I have worked on both sides of the fence, initially as an investment banker (BZW, JP Morgan and Lehman) and latterly as a tech entrepreneur with Finboot, which offers big corporates a way to access blockchain applications. At banks I had learnt how to buy technology products from startups, but being on the other side of the fence, with corporates as customers, has been an eye-opener.
Never do just a general pitch, always tailor it
For example, I learnt — through some trial and error — how important it is to really understand who you are pitching to. What is their job role and how will what you are pitching help them perform their specific role as well as benefiting the wider organisation? Never do just a general pitch, always tailor it.
Happily, our very first enterprise sale at Finboot, with Repsol, the Spanish energy major, was a relatively smooth experience. Repsol has a funnel through which early-stage startups can engage — the Entrepreneurs Fund, which is celebrating its 10th anniversary. Some 1,000+ companies apply for the programme every year and a handful are selected to work with Repsol. To oil the process (excuse the pun) Repsol also provides a grant to the winners. But the real value is access to support and the opportunity to pilot your product within Repsol. Finboot was selected in 2017 when we were at an early seed stage, pre-product, and we were eventually able to turn Repsol into a customer, investor and ambassador.
Natalia Alvarez Liebana, open innovation senior analyst at Repsol, says the Entrepreneur’s Fund has been a way for “startups to learn the corporate language” as well as bringing a lot of low carbon, circular economy and sustainability startups into Repsol’s orbit.
We also learnt a lot about how to make a corporate engagement work. My advice to any startup planning to work with a big corporate customer would be to look carefully at these five areas:
1/ Who is your corporate sponsor?
It’s worth spending time to research and identify not one, but a few possible entry points. Once you have connected with an individual, politely but firmly assess whether they have the capability, authority or influence to sponsor your product within the decision-making hierarchy.
Identify not one, but a few possible entry points
If the initial contact is too junior, you risk becoming boxed in a relationship that cannot move further. On the other hand, a senior individual may not have the bandwidth to support your process. The conclusion is to seek multiple entry points, possibly across different geographies.
2/ Prepare for an extended timeframe
Corporates want startups to provide cutting edge solutions to solve real pain points — but will almost always progress much slower than startups expect. Prepare for a long protracted sales cycle — it can take up to a year (or two budget cycles) to close a significant deal. Plan for the worst and hope for the best. Be prepared to be asked about your financial position and runway, recognising that in some cases, large enterprises will not be able to engage with you due to strict procurement criteria and processes.
It can take up to a year (or two budget cycles) to close a significant deal
However, that approach is fast becoming outdated and thankfully we’re seeing things start to change as many corporates recognise the most innovative technology and agile ways of working are being led by startups. Those who don’t adapt their approach and processes in order to work with startups are being left behind.
3/ Research how the corporate makes decisions
It’s important to understand the budgeting approval process. Typically, there will be levels of spending authority within a corporate hierarchy and you may wish to ensure that your sponsor has budget approval capacity for the sums you are seeking. If reducing the price will help secure that first sale more quickly, it may be worth doing that, rather than going for a higher price that will require support from further up the chain. Your next challenge will be to renegotiate pricing down the line, but at least you will have a commercial relationship to start from.
4/ Make sure your product or service works or fix it fast if it doesn’t
It sounds obvious, but I can’t stress enough how crucial this is. The last thing your corporate sponsor wants is to be embarrassed. Having promoted your solution internally, there is an expectation that implementation and integration is smooth and trouble-free.
The last thing your corporate sponsor wants is to be embarrassed
There will be bumps in the road but the startup’s ability to respond quickly, effectively and handhold their sponsor through the fix will make all the difference to the longevity of the relationship and building trust. No one is expecting a completed product but they are expecting a fix even if the fault lies within the corporate’s legacy systems. Without your first successful implementation, you are back to the start with less cash, time and confidence — not to mention a potential bruised reputation and burned bridges.
5/ Test your hypothesis
Before you start marketing to big corporates, it’s always a good idea to test your solution with experts sourced from various business networks. By experts, I mean those coming from the corporate world with wide-ranging experience and a willingness to share their knowledge. Building a strong relationship here could open doors as well as provide credibility to your product. It’s a good idea to create an advisory board including such experts.
It’s a good idea to create an advisory board including [corporate] experts
At Finboot, we tested our enthusiasm for blockchain with a number of people with a corporate background. One bit of feedback particularly stuck out for me: “We love the idea of blockchain, but have never seen anything that works.” We took that as a sign that there was a need for our middleware technology and we knew we had to make sure it was really fit for use in the complexities of a large global organisation.
We were fortunate — our hard work paid off as we won a contract with Repsol. Since then, we’ve gone on to sign deals with Stahl, Desigual, London Chamber of Arbitration, Minexx, and many more in the pipeline.
However, navigating the corporate jungle — with a lot of elephants who think they are tigers — still requires a clear strategy, preparation and resilience. Being prepared and doing your research about the organisation you are engaging with will pay off — it will help you become the tiger not the prey as we enter the Chinese Year of the Tiger. Kung Hei Fat Choy.
