Selling to the Enterprise as a Startup

In my last post I gave some rules for Enterprise startups. Once started the technology (no matter how complex) is the easy part – the hard part is getting noticed,  then closing the deals and getting the sale. This is where most startups (not only enterprise
startups) fail.  Of course some failure modes are simple – the technology just doesn’t work, the startup doesn’t have a
large enough sales pipeline, or the average selling price is too low to justify an enterprise sales model. There are a number of “failure” modes that are more insidious – they start by looking like success, but then turn into a quagmire.

These are more problematic since they tend to happen after quite a bit of money has been invested and management commitments have been made to the board. Once commitments are regularly missed the board starts losing trust in the executive management – and the board\investors feel the need for some drastic action. Here are some examples of those kinds of failure modes:

  1. Early elephants skew the numbers – the startup starts selling and lands a couple of elephants – $1M deals that look like they represent a replicable sales process. Everyone pats themselves on the back, and spent lots of money on scaling sales and marketing (and maybe even development) to make sure no opportunity falls through because of lack of resources. The sales forecasts spiral upward since the additional expenditures need to be justified (and based on recent sales history the numbers make sense).  Then the well dries up – it turns that those sales aren’t repeatable and the company can’t make its numbers.
  2. Deals start easily – but close verrrry slowly. Even under the best circumstances enterprise software deals take a long time to close so people are willing to wait – but sometimes it starts dragging out into forever – a deal taking 6 months to close can be OK, but over a year is a stretch. The problem is that until you know those deals aren’t closing, at best 6 months have passed – forever in the life of a startup.
  3. Personnel changes at the customer. Even if the startup knows their customer and why they buy (I am always startled by how many don’t really understand that) – reorgs can make your sponsor disappear. So you’ve invested 3 months in selling to someone that is no longer relevant – and it isn’t clear that now anyone cares.

There are ways around each of these scenarios – but the key is to be vigilant and as Andrew Grove puts it – paranoid. The problem is that in many cases this goes against the optimistic outlooks that many entrepreneurs naturally have…

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