10 Considerations for the Startup planning to offer to the Enterprise (and why many will fail)

Lately, I’ve been hearing from more startups that they want to get into the enterprise space. These consumer focused web startups are the ones we know and love with the clever non-sensical names, rounded corners, and domains missing the “e”.

For many startups, having enterprise customers is a great proposition, as it gives the opportunity for repeat revenue from a stable source, partnership opportunities, and maybe even chances for acquisition.

[While many startups are interested to offer their services to Enterprise companies, they underestimate the complexity. There are many overlooked requirements from culture to support that startups just don’t get]

Sadly, while we love these tools on the free open web for our personal uses, many of them aren’t ready for a smooth transition into an enterprise web teams and by serious business folks and executives. A new set of rigorous feature requirements need to be met, including disposing of the ‘fun brand’ and getting ready to support demanding corporate clients.

10 Considerations for the Startup planning to offer to the Enterprise

1) Most importantly, find a business opportunity or pain that you plan on fixing.

2) Re skinning: In many cases, offer a white label tool so it can be rebranded by the consumer.

3) Offer an ASP version as business units will want to adopt without the IT department. (Update: ASP as in Application Service Provider, so a web-version hosted on your servers, so they customer doesn’t have to download any software, or have to rely on IT to do this. Typepad, SalesForce, and SurveyMonkey are examples of this)

4) Later, evaluated offering a software version that IT and Engineering can download and use on internal or secured severs behind the firewall,

5) Build a robust system that won’t fail from heavy enterprise use, sadly, Twitter would never make it.

6) Develop login and permission systems that work with a variety of identity systems, ensure data can be easily transferred to clients, use industry standards.

7) Provide a healthy dashboard and metrics for the clients administrative team

8 ) Hire sales and account teams that have backgrounds in corporate. For initial sales with a business unit, expect to sail through, but expect rigorous testing, negotiations, and detailed contracts when dealing with corporate purchasing departments.

9) On demand support: Dealing with enterprise clients requires a higher degree of support, expect to jump, leap, and spring into action at the request of your corporate clients.

10) Get serious: consider rebranding and refocusing the tool. Refine or create a separate marketing effort to aim for the enterprise space, consider creating a sub-brand.

While it’s sure attractive for startups to want to offer their products to corporations, many have not thought through the implications and requirements to be enterprise class. Quite frankly, many won’t have the aptitude, resources, or time to do this right.

[Many startups will offer to the enterprise, but most will fail. Successful startups offering to the enterprise need to have maturity, and it’s not something that can be masked]

If I’ve missed any considerations, please extend the list, by leaving a comment or sharing from your own blog

A special note about terms: While it would have been so easy for me to use the term Enterprise 2.0 I used every precaution to actually describe and explain the concepts rather than just using that term. I hope that you too become mindful before using that term, as well as Web 2.0. Show your mastery: focus on descriptions and outcomes rather than buzzwords.

17 Replies to “10 Considerations for the Startup planning to offer to the Enterprise (and why many will fail)”

  1. Hi Jeremiah, it has been good experience reading your blog. Very interesting and relevant topics.

    But it seems that you just changed your feed setting. I can’t get the whole blog post content in my google reader now. I am based in Shanghai where feedburner is blocked. So it is impossible to get to your blog through the link in the reader. Do you think it is ok to keep providing a full content feed? I guess the request is a bit “surprising”, just take it as a reader’s voice. Thank you.

  2. Hi, Jeremiah:
    While you make many good points item 8 is death! Large corporates will not buy from small startups. Why would Amex buy software from a couple of guys working from home? So, how you find a channel to market is crucial and startups these days should be thinking OEM, OEM, OEM.
    Now not many folks now how to do this, so it is a big challenge. I wrote a book last year for budding entrepreneurs and this is an area I cover quite extensively, but within a wider context of the many other things they need to consider, which is outside the scope of what you have covered.
    Cheers, DaveR

  3. Hey Jerimiah,

    Very interesting post and I was interested in the list as a check list for what we are doing, we are doing pretty well. Dave Richmond commented earlier and pointed out the #8 as a sticker.

    I agree and disagree. (We are currently pondering how to accomplish this the best possible way)

    I think that Dave points out a very valid issue, but it is one that is able to be overcome. We are a very young startup but have had great success in SAS especially with larger corporations who are now wanting our product internally. We are actually noticing greater interest from these large companies. It seems that they are more keen on the whole idea of SAS.

    Ironically we never envisioned the demand that we have had from these large corporations. It is actually having us consider a more formalized sales team especially for these large corporate types.

    I think that #8 could be a post on its own. There are so many things to consider when you start looking at the potential arrangements. I would be curious to know more.

    Great post!

    cheers
    Scott Brooks

  4. Thank goodness someone has finally said it. #8 is a dodgy one though. If you’re trying to go in under the radar then business folk won’t necessarily need the ‘bag carrier treatment.’ At least not in the initial stages. The white label idea ‘can’ work but then Salesforce.com has done very well thank you without it.

  5. Hi Jeremiah,

    One of the things that you neglected to mention is the impact of VC and specifically the desire for a high average-deal-size as part of the valuation equation.

    This check-list is important, but it’s going to be ignored in many cases because the VC-backed CEO is often going to push for the enterprise deal to drive valuation through bigger deal sizes.

    My $0.02 for the afternoon…

    -Mike

  6. I think one of big things that startups needs to be prepared for is that, depending on the size of the deal, one big account can drive the development of their product. It takes a lot of resources to keep a big enterprise client happy and not let them steer the future of the product.
    -Veronica

  7. Jeremiah,

    The startups hoping to sell to Enterprise customers will find that Enterprise customers are 100% different from what they might have gotten used to in the consumer market.

    As a result, only those who have dedicated resources that deal ONLY with the Enterprise will have any chance for success. These resources will need to include inside sales, direct sales staff, product development, technical support, billing, etc.

    Also, having additional revenue streams other than selling into the Enterprise will be very important as the sales cycle into enterprises is extremely long (sales cycles average 8 to 14 months for On Demand ERP or CRM for example)

  8. I have worked with a number of B2B start-ups and agree #8 is easier said than done. A saying we often used was that “an executive never gets fired for hiring IBM”. The implication being that if they hire us and we fail, they will be asked to justify why they hired this unknown company.
    I don’t want to overlook the importance of #9. The ongoing relationship is critical to the future success of the company. A good relationship will mean the all important “referral” for B2B start-ups. A bad relationship will be a nightmare (or potentially company destroying event). I just posted on my blog a negotiation model for technology companies that stresses the importance of making sure the relationship and expectations of your client are clearly communicated.

  9. Hey David #3,

    I understand your point but I disagree. I think being a startup reduces your chance of landing the ‘big guys’ but you have to be dedicated and stay with it as well as being focused on smaller clients as you grow.

    We’ve taken this strategy and have done a great job as a small bootstrapped startup of getting enterprise clients. There’s a strategy to it for sure but I think over the long haul if you are offering something of value they will do business with you regardless of size.

  10. I love this post and the comments … I’m a “startup” who is selling an enterprise solution… we’ve been around for 18 months and have been in various markets, but are in conversations right now at the enterprise level.

    I don’t have anything to add, but thanks for the insight!

  11. Great post, Jeremiah!

    #8 has an over-riding factor that I believe relates to the risk associated with the deal. If big corporates perceive a low risk in dealing with you (low risk principally being related to the detachment / replacement effort and costs), it shouldn’t be a material consideration.

    A lot of what we’re talking about in “enterprise 2.0” isn’t exactly describing a mission critical operational system, so arguably it’s the perfect market for smaller players to get into.

    #3 & #4 are related to #8 in that if your service is not mission critical, then yes, corporates would be prepared to use your service in ASP form. It’s not appropriate to use salesforce.com as a reference, however, as their infrastructure capabilities have had millions invested in them. If you’ve ever looked at their availability reports you’ll see they have big bikkies invested in keeping the service online. A smaller player isn’t going to come close to being able to do what they do but it shouldn’t matter if it’s low risk and you’re half-decent at keeping the lights on (plus being personal with the service).

    I’ve seen soome pretty shabby license and service level agreements approved before, principally because of an acceptance of the low-risk.

    For me, I think the big question is whether #4 should come first or not. It’s cheaper to do it this way as you don’t require any infrastructure at all but it depends entirely upon your business model. Are you a product provider or a service provider? Factors outside your control will be what role their IT department makes in the acquisition / evaluation process.

    Re: #6 – it’s a great point and if you’re going to prioritise, I’d argue that you start with support for Microsoft’s Active Directory, especially if you want to get into the lucrative financial services sector.

  12. So I’m an enterprise guy responsible for looking at consumer web services for possible enterprise consumption. Obviously, web 2.0 startups have some phenomenal potential to be productivity builders in the enterprise.

    I agree with almost everything you say. As an IT guy, I shudder at you “selling around” me (#3), but I LOVE the SaaS/ASP model. Unless your a software/hosting company (we’re not) you suck at owning/running software, so offer that ASP model. However, instead of telling me I should run it inside my firewall to be secure, simply be prepared to do a short meeting with my security auditors as part of expanding our deal. Even better, have an auditor come in on your own and produce a report that we can hand to the corp. security guys and just get that out of the way.

    Another thing is to be responsive. Enterprises move like monoliths, and are looking to Web 2.0 for speed and agility. If they say they’d like to see that search bar move or would like to see a different interaction flow, mock it up and show it to them in a day (or even in the meeting). Show that agility and speed that we can’t reproduce in our own data centers – it is your distinct advantage.

    Bake data portability into all your SLA’s and TOS. Trying to lock us in to a proprietary thing from which there is no escape can’t work. Compete on your merits, not on lock-in.

    Finally, don’t sell a “platform.” Chances are you can’t solve all our problems or meet all our needs. Show how your solution plays nice with others and easily integrates with things you’ve never even thought of or heard of (like our old legacy garbage) in a low-effort/high-fidelity way.

  13. Good one again, Jeremiah! Sure, #8 seems a throwback but something that could provide stability especially for quick thinking and fast moving IT guys. But then, Mr. Schueller just summed it up and gave a great and concise post and be the authentic person to explain the solutions.

  14. We are navigating this challenge as we speak. As a 20-month old seller of on-demand CRM services, I won’t pretend to offer mandates as to how smaller SaaS providers can sell to Enterprises. I can tell you we have done it and will continue to sell to both Enterprise and the SMB, including the one/two person shops. I have learned that every deal is different and servicing Enterprise deals does come with its own unique challenges. The Enterprise deals will happen if the value proposition, service levels and motivations line up. The people doing the deal on both sides need to align as well and the “human factor” cannot be underestimated.

    Joe Schueller #13 above is right on and reflects a growing sentiment at the Enterprise level. I believe he is still in the minority, but companies, big and small, are realizing that in most cases they are not in the technology business necessarily and technology needs to be a means to an “end” and not the “end”. I plan to benefit from the shift in the IT Department mindset in the years to come.

    One last thing that I believe helps Enterprise deals of this nature work is that the service (or product) provider can’t be afraid to say “no”. At some level, the Enterprise hired us (or you!) for a reason and sometimes it is okay to politely communicate that you don’t plan to do everything the customer asks.

    Jeremiah – great post, you obviously struck a nerve based on the feedback and I look forward to more along this thread.

  15. Hi Jeremiah, Any ideas on how a startup might be able to keep their “fun brand” while offering services to the enterprise? Do you think a company could do both?

    PS: You mentioned focusing on “descriptions and outcomes rather than buzzwords,” and I agree – so I’m going to work on that.

  16. Another problems for startups is not understanding the role of influencers in the enterprise buyers’ decision making process. The influencer landscape is quite volatile these days and the best practices can differ dramatically from one influencer community to another (e.g., what works on IT analysts like Gartner and Yankee does not work on bloggers which does not work on trade publications).

Leave a Reply

Your email address will not be published. Required fields are marked *