Yesterday I had a chance to talk with a software entrepreneur who has built a security product that’s primarily sold to mid-sized and larger companies. Over 8 months have gone into the development and he has been able to get fewer than 5 customers for the product. Surprisingly he’s been able to get enough interest from investors who have provided early funding to the tune of several hundreds of thousands of dollars. He has been able to also generate lots of interest from partners but that has not translated into customer sales. Given his developer background, he was keen to talk about sales and how to generate some initial traction in the market.
Here is what I have learned from all my initial startup selling in the B2B space (i.e. startups selling anything – software, hardware, services, juice bars, etc. to other companies, not consumers).
There are only 2 reasons why companies buy from startups – The person buying has a very good relationship with the entrepreneur, or the person buying has a dying pain that she feels can be solved by the startup’s solution.
This is dramatically different from why they buy from Cisco, Office Depot or any other large company – where politics, budgets, executive management preferences or any other of over 100 factors also come into play.
Lets drill down into both those reasons.
I have personally only been able to sell the first 10 or so first customers for all my software companies through relationships that I built earlier. Which is why I always advocate digging you well before you are thirsty. Most of the software that I have built (B2B) did solve a problem, but I found that it was never an “immensely-horrible, I’ll-die-if-I-dont-fix-it” kinda pain. I avoided those because I did not have as much confidence in my ability to solve that type of problem since the scrutiny & pressure of “must-work-or-you’re-dead or this-better-work-or-you’re-out” causes buggy software.
So I focused on building relationships with key people (that usually took a few months), without me talking much about my product or service. It was purely to help the other person who I wanted to be friends with.
When you build a strong relationship, you will find people are more willing to forgive bugs, try unproven software or even give a no-name startup a chance.
Given my engineering background, I have a “formula” that I believe that will help you understand relationship building.
Relationships = Time + Trust + Mutual interest.
In this case, + is not addition, but an operator. More about this formula in a later post, but the summary is building a relationship takes time (quality not quantity) spent together, building trust by small commitments you deliver on and mutual interests you share with the other person.
The only other reason larger companies buy from small startups is that they are in a huge pain and they believe startup has a unique solution, offering or product to solve that pain in the fastest possible time. I emphasize “they believe” because they are really not sure yet since they have not built a relationship with that individual.
Relationships trump everything in sales. Everything. She who has the relationship wins.
Which is why you are better off getting a referral from one of your customers (who you have a good relationship with presumably) to another potential prospect (who they have a good relationship with).
So before you start you own B2B entrepreneurial venture, build relationships.