Cracking Corporate Deals Jigsaw Puzzle — Part 1

B2B startup’s journey could be accelerated if they can work with a large corporate as this experience could help them in

  1. Building Enterprise Grade Product
  2. Improve their product functionalities by learning nuances of the domain
  3. Validation of the solution on scalability
  4. Global Expansion
  5. Increased access to funding

However finding an opportunity and cracking it is very challenging , it would require significant amount of preparation and perseverance and once they have cracked the deal , it is going to require even more focused and sustained efforts to execute the Proof of Concept/project and demonstrate that they could scale it up for larger scope.

In this 3-part blog series, I would share few points on

Let us first start with How startups can convert opportunities with large corporates?

To come up with an effective strategy to convert opportunities with large corporates, startups need to empathize and understand the potential entry barriers and risks that a large corporate perceive to work with startups.

Entry Barriers

  • Lack of experience/exposure of working with startups especially within critical enabling functions like Legal & Procurement
  • Business team’s prior experience of working on low touch model with large vendors

Risks

  1. Performance Risk
  2. Stability & Scalability (Tech, Security)
  3. Maintenance — SLA Adherence
  4. Uncertainty about the future of the startups and potential impact on business
  5. Mergers & Acquisitions
  6. Bankruptcy
  7. Product Evolution (Revamp of Technology Stack)

The following are the 6 key elements that you should focus while defining your approach to convert opportunities:

1)Research on Organizational Culture:

It is important to understand the culture of the customer organization e.g. Some organization focus on the speed of execution, some believe in first time right philosophy, while few focus on delivery of business value even if it takes little longer to deliver it.

To get quick insights, you can research on the corporate & leaders communications on their websites and social media channels, reach out to startups who have worked in the past.

Look for alignment with your culture and values to ensure a great working experience.

2)Customize the Pitch:

i) Tailor your pitch for the organizational and the problem context, if you have no prior experience in that sector, research and draw parallels with other industry

ii) Clearly articulate your USPs/Key Differentiators and highlight the business value you would bring in for the customers

iii) If your offering is challenging an existing incumbent or large player, share a benchmarking analysis and highlight points other than the cost efficiencies

iv) Present your pitch, taking into consideration the culture and need of the organization. E.g. If there is drop dead timeline for implementation (e.g. Regulatory Requirement), you should highlight the speed of execution.

v) If the corporate has no prior experience of working with startups and sense that there is opportunity of global expansion it is important to highlight if you work with large system integrators or consulting firm and if customer has an option of large system integrator / consulting firm driving the scale up with your product to minimize the worries related to scalability.

vi) If your product or solution is hard to visualize, include images and short demos (e.g. GIFs) to help the audience to visualize the solution

3)Be Open to Customize/ Improve Product:

While your product / solution may address most of the core requirements out-of-the-box, but each organization has few critical requirements that might need you to extend or improve to demonstrate the value even at the PoC stage. It is important that you demonstrate flexibility to address these requirements taking into consideration the potential impact on your product roadmap and maintenance strategy.

4) Educate Customers:

Many a times if the corporate does not have exposure of working with startups they may struggle to understand the perspective of startups on the terms and conditions that are critical e.g. IP, Indemnity, given that these are also critical from corporate due diligence perspective, please be ready to spend some time educating the customers legal & procurement teams on the importance of these for startups.

5)Attention to Legal Documentation

  • Availability of Documents — Ensure you have all the key documents ready. E.g. If you wish to have better credit terms then ensure you have a MSME certificate
  • Key Clauses — Typically large corporates work with their standard contract templates which would have many clauses that would critical from corporates point of view and they may designed for services/ consulting / product offering from large vendors and hence it is critical for the startup legal counsel and founders to appreciate this and be prepared to highlight the must-have clauses from their perspective and explain in detail the rationale for the same. Also ensure that you provide mitigation approaches and controls to ensure that customer business is not impacted by the M&A, Bankruptcy & Product revamps.

6)Innovative Commercial Model:

Many Corporates would be worried about the risk and potential outcomes while working with startups, hence the startups should think beyond the traditional commercial models.

The following commercial models could resonate well from corporates perspective

  1. Minimal or No Capex Investment: Any capex intensive projects might not be preferred in many companies especially in the current times, hence to put a foot in the door, a commercial model which require minimum or no capital investment could be an good option. If it is not viable then look at a model that does not have significant upfront capex investment e.g. For Hardware capex, you can come up with “Infra at lease” approach instead of one-time upfront cost.
  2. Risk-Reward: If you have proven capabilities with other customers, you could follow approach of having a fixed fee to cover your expenses and create a reward bucket that you offer to charge only if you meet the success criteria that you will jointly agree with stakeholders and put it in the contract document.
  3. Gain Share Model: If you are very confident of the value you could generate, you could propose the gain share model i.e. charging % of the value generated only once the benefits are released by customer.

Along with putting together Innovative Commercial Model, the startups should also create simple and practical invoicing plan to avoid any adverse impact on their cash flow e.g. you could define milestone-based billings of interim deliverables.

I have seen some these approaches helping some of the startups as well as SMEs and hope that this was useful for you. In the next blog, I will share some areas that startups should focus on while executing their first PoC/projects with large corporates.