Startup Engagement & Decision Making
There are many ways to begin to engage corporate organisations. Some routes, like startup competitions and accelerators, are clearly signposted; others, such as startup scouts, intermediary agencies and non-public facing initiatives, may be harder to find. You might also connect through introductions or invitations directly to the business units you are looking to work with.
A combination of research, networking and using your existing network and advisors will help you find the best entry point. Be aware that corporations may have several startup initiatives, each with different goals and sometimes run in silos, without knowledge of other programmes. To make sure you’re engaging the one that works for you, it’s worth finding references from other startups that have engaged through the same entry point and gather as much information as possible.
Identifying the right stakeholders, decision makers and influencers in a large corporate organisation can be challenging and time-consuming. So when you do find someone who is interested in speaking to you, swiftly gauge their area of the business and their mandate for innovation or engaging with startups. Do they have authority to engage or will they act as a conduit? Once you have identified an internal champion at the corporate organisation, it’s important that you understand their entire role, not just the part that impacts you.
Try to ascertain what the approval path and timeframe might be before you spend too much time arranging demos or meetings. Also consider the corporate’s need for the product or service and the budget they have available for it. Without understanding these factors, you run the risk of a long process becoming virtually open-ended. Using a qualification framework can help you ask the right questions and prioritise leads.
As the project progresses, aim to find reliable, engaged contacts in the other corporate departments you are working with, too.
Ascertain early on what the corporate is looking to get from the relationship and what they are prepared to offer in return. Beware ‘startup tourism’, where startups are passed between departments of the organisation, explaining your proposition to many different stakeholders without any defined direction or outcomes. It’s a common time drain for startups but it can be avoided; if you reach a second or third meeting without a clear path forward, identified budget holder or project sponsor, reassess the situation.
It’s important to enter negotiations with a partner mindset, rather than as a small startup versus a large corporate. After all, the goal is to reach a mutually beneficial agreement that paves the way for a genuine partnership. To do this, be sure to represent your interests in the negotiation and insist that there is a fair value exchange. Overstretching your capabilities or changing your product direction to win one contract may prove to be a costly mistake in the longer term.
Establish boundaries and know your bottom line when negotiating. What constitutes a deal-breaker for you? What are you prepared to compromise on? There are times when it’s better to walk away than to take an unsatisfactory deal. Obviously, negotiations are based on give and take, but knowing your limits at the start will help you remain grounded.
It’s not uncommon for corporates to request sole rights to your technology within their industry. Agreeing to this will inevitably impact your market opportunity and your ability to acquire future customers. If it’s a route you believe is right for you, be sure to calculate the opportunity cost that you are giving up and price the contract accordingly.
For example, if there is a market opportunity to acquire 10 large corporate customers and one of them wants exclusivity, it wouldn’t be unreasonable for them to pay 3-5 times the non-exclusive rate for the contract (discounted to reflect the likelihood that not all of them would sign).
If you want to offer some kind of exclusivity, there are a number of ways to negotiate it in a way that allows you more flexibility with other potential customers, such as:
Time-limited exclusivity (for example, 6 months)
Exclusivity over specific features only
Limiting deals to a number of specifically named competitors only
When negotiating, take your your pipeline and sales cycle lead times into consideration. If your average sales cycle is 6 months and you have no current leads that are competitors to your corporate partner, agreeing a 6-month exclusivity clause is not likely to cause you any considerable loss of value.
Startups keen to win new business may be tempted to offer a free trial or proof of concept (POC). However, moving from a trial to a full contract is a long and complex process. It can take up to 6 months—sometimes longer—if it happens at all. Corporates, on the other hand, require certainty that the collaboration will produce the desired results in order to unlock budget.
A free trial may seem like the easiest way to prove value and seal the deal, but we warn that it can put undue financial pressures on the startup. There are exceptions: where the product or service is a simple plug-and-play product or a standalone SaaS platform that needs no integration or additional work, then this can be a good route as there is little or no overhead on either side to perform the trial. Also, providing one free trial can be an effective strategy for winning the very first client, so that you can reference your work with them in other sales meetings.
Where integration or development work is needed for a trial or POC, you should be paid for it, in addition to use of the product. A paid trial reassures both parties that the trial is being taken seriously. By securing budget approval and authority to go ahead, corporates are committing to the trial; by charging them for your service, you are committing to your part. In free trials, this commitment is nowhere near as strong.
As well as reducing risk in the long-term for both the startup and the corporate, a paid trial also means you’re already registered as a supplier and set up on corporate procurement systems. If the trial is successful, the lead time to a full contract will be shortened.
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