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Do enterprise customers actually buy from startups?

I am considering shifting my sales model to sell to larger (1000+ FTE) companies but currently have a beta product with only a handful of small (less than 10 FTE) paying customers. After some initial conversations with larger companies about their technology purchasing process, I'm concerned that larger companies wont buy from a startup because they are concerned that (1) we may not be scalable - different languages, customized settings, (2) we may not be able to support them with our limited staff, (3) we may not exist in 6 months - who wants to take that chance. Thoughts? Does my business or product need to reach some milestone(s) to even be considered a possibility by a larger enterprise?

33 Replies

Rob Gropper
1
1
Rob Gropper Entrepreneur
Director at PetHero, SPC - Member at Eastside Incubator - Principal at Tuxedo Technologies Group
Mamie, enterprise customers certainly have different evaluation criteria than SMBs... or at least they think they do. 1) did you design and build your product for use by enterprise scale customers? 2) what is your product? - easier to provide actionable feedback if we know what you are building. 3) who (which group(s) are you talking to at these enterprise-scale companies? The objections you list are pretty commonly expressed by enterprise IT people and procurement. You can't ignore them, but unless they are your user-buyers you need to be talking to others - USERS FIRST. The typical process for a startup to grow in the enterprise space is a trojan horse approach - get a small group/division of USERS to try your product. Users drive the bus, not the mechanics. The mechanics will have input to purchase decisions (they can say 'no'), but they don't drive purchase decisions. The push back you are hearing is common and every startup has to learn to handle these objections. So, how do you address them?.... carve out a small group of USERS so that scale is no longer an obvious issue - this lowers their perceived risk. Money is rarely THE issue - more commonly it is looking bad to management. So help them look good. understand their needs. Smother them with support. work with them on a small scale to address all of the issues you are hearing then leverage them as internal champions to grow to new groups/divisions. as long as your product (code? ) doesn't need to be installed in their data center (yes, many still roll their own) then you don't need IT support to work with a small group of users. Once the users and their management are sold they will help you overcome the issues from IT and/or procurement. Remember, IT and purchasing can rarely drive a deal, but they can always kill it. Don't make them your enemy, but don't let them drive the bus either.
re: "Does my business or product need to reach some milestone(s) to even be considered a possibility by a larger enterprise?" I
t's not that binary. This is an organic process at this stage. Once you have a few enterprise customers under your belt then it will be more binary - either you have the bases covered to support them at scale or you don't. for now you clearly don't, but don't let that stop you.
Bob Fucci
0
0
Bob Fucci Entrepreneur
Sales and Revenue Growth, Strategy, Advisor, Speaker

Absolutely, although it often depends on the ability to repurpose and scale the original investment. It would appear that your solution delivers a productivity advantage - if you license it correctly you certainly can sell this to enterprise clients and partners.

Zhenya Rozinskiy
1
4
Partner at Agile Fuel
One approach might be to give it away for free or a deeply discounted rate. Once you have few big names to talk about it might be easier.
Marianna Zaslavsky
5
0
COO @ SolarKal | Product @Eyeview | Business Development @ HookLogic | Consultant @ Bain & Co. | Columbia MBA
Hey Mamie - Ive been at two startups now selling to large companies. It is not true that large enterprises "wont buy from a startup". Many will and many wont. It depends on the company. One large retailer I have worked with, for instance, is a company that is very willing to test and learn and has a special group dedicated to vetting new technology. And yet another very similar large retailer has a long and lengthy procurement process and, while not against buying from startups, tends to look for traction and ability to provide highly custom solutions. In both cases, the sales cycle as an early startup is long (anywhere from 3 months to over a year). After you get some traction in a vertical / industry, sales cycles shorten significantly to 1-2 months. You need a steadfast enterprise sales team and you may want to look at affiliate (i.e. commission based) intros if you cant get in via your own connections.

To address your specific concerns: 1) scalability - you need to determine whether you are a custom solution provider or not. If you are custom, then you will have fewer but higher paying customers. If you are not, then large enterprises will be challenging and you should offer a very specific point solution that doesnt need customization. 2) support - fake it till you make it. Theres nothing to be said here besides that :) All hands on deck when there is an issue. CEO / other execs should play account manager until you have money to hire a full time enterprise account manager 3) existing in 6 months - if you have some initial large customers and strong backers (investors or advisors) you can ease the fears.

The first large customer will be the hardest to get. Once you have one marquee client, the rest follow. Pro tip: focus on one vertical at a time in this case to scale out faster. Happy to help further if you need.
Logan Kleier
0
0
Logan Kleier Entrepreneur
Founder/CEO at SecondSight. We tame application sprawl with simple, actionable SaaS application usage data.
Yes, they do. Particularly, if you have something that cuts against the grain of all the established vendors that they do business with. Usually, larger enterprise accounts think "how can my current vendors solve this problem." You'll need to offer something their current vendor can't or won't offer.

I would say that getting that 1st larger enterprise customer as an anchor is important to deal with concerns that you can't scale. But, I'd say that isn't a deal breaker.

I'd be happy to talk with you about my experiences. We only sell to larger accounts, so I live in this space every day.

Feel free to message me.


Rob Edenzon
0
0
Rob Edenzon Entrepreneur
Acting Vice President, Sales at Armorway Inc.
The answer to almost every question you pose is "yes". I know, that doesn't help. But I've been doing what you're attempting for many years.

Yes, you can sell it. Yes, they'll push back because of being a start-up with limited funding. Yes you need a referenceable customer.

You need someone like Bob Fucci. I don't know Bob, but it seems like he and I do the same sort of work.

This is going to be like pushing a rock up hill but don't get discouraged. You only need one Fortune level company to believe. After that you just use that success to build more.
Fred Orensky
0
0
Fred Orensky Entrepreneur
IT Strategy and Enterprise Architecture Executive at New Realities Consulting
Mamie,

Absolutely, but the profile your looking for enterprise companies os best called in Geoffrey Moore's Crossing the Chasm.You're looking for the early technology adopters, the business futurist who sees the true value in your company. Probably, not at the same point, but when as Head of Enterprise Architecture at a 5Bn Revenue company, I suggested we buy 15,000 seats from a startup with 40 employees where we would immediately be 15% of their numbers, folks were ready to hang me.

But their initial product and future vision were there. They proved out and are now a Unicorn about to IPO.
Peter Johnston
4
2
Peter Johnston Advisor
Businesses are composed of pixels, bytes & atoms. All 3 change constantly. I make that change +ve.
First rule of any business is empathise with your customer. From your words, it sounds like you are being self-centred and only thinking of the sale.

What if you go bust? What if you can't provide support?
These are valid concerns.

Imagine you as your customer going to their boss and telling him/her - "we don't know they're going to be there in six months and they don't have enough people to guarantee support.

Would you think it reasonable for him/her to send you away to rethink?

I've you haven't covered all the objections, you haven't a right to think you deserve a sale.
Peter Johnston
7
1
Peter Johnston Advisor
Businesses are composed of pixels, bytes & atoms. All 3 change constantly. I make that change +ve.
But there is a simple answer. Don't treat it as a sale. Involve them in a project.

I call this my one, ten, one hundred strategy.

Identify a market with a hundred companies. Pick the top ten - the ones the others look up to and who define that market.

Find one of them who is receptive and pitch your idea that they get involved with you in developing something which will set them ahead of everyone else in that market. Make it clear that there will be problems initially with lack of support etc. but that they have the chance to shape the product around their needs and you will work with them exclusively for six months. Don't make a big thing of it, but make sure you are allowed to talk about the work you do together.

Their people will help you develop the product far faster than you would on your own. They give you a 3D view, with lots of different opinions. And you overcome roadblocks together which you wouldn't have foreseen.

At the end of the trial, hopefully you have a customer. They know you, like you, treat you as part of the family. But you also write up the benefits you've seen and make it public.

Then pitch to several others in the top ten. Use the fact you have done work for the first company and you'll find the doors are open.

Of course, once you have a track record of working with several of the big boys in that market, the little ones are clamouring to have you work for them. That's where your real money is.

Oh - and at least one of your top companies is in other markets too. They will take you across into them, where you can do the same again.
George Parrish
1
0
George Parrish Entrepreneur
Founder/President

Total Cost of Ownership. Every Fortune 100, 500 or 1,000 is always on the lookout for a better, less-expensive, more robust product, Enterprise, ap, platform.

And if they're not, you don't want to do business with them whether you are in StartUp mode or an Established player.

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