Why do companies buy anything from B2B startups?

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.

That’s it.

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.

14 thoughts on “Why do companies buy anything from B2B startups?”

  1. Mukund, was it any easier to do B2B sales in the US than India? I am assuming this post is based on your experience during Jivity and Buzzgain. I am also curious how difficult/easy was it to sell Jivity to medium-small enterprises since it doesn’t exactly come under the ‘ICU’ list of requirements for SMEs.

    1. Avlesh. Nope. People buy not for tech or support. Those are after thoughts. They buy because of a problem they need solved or they have a relationship. Nothing else. All the things you mention are nice to have or on the flip side table stakes.

      1. Interesting points of view – yours and Avlesh’s. We’re a tech startup with a b2b offering and we’re pursuing both routes simultaneously – exploring existing and new relationships in enterprises and working hard (very very hard indeed) to ship a product that solves a difficult problem using technology and UI/UX. Ultimately, we believe hugely in the self-serve model as a way to grow a scalable innovative product in the first few years…regardless of whether the product is valuable to businesses or individuals.

      2. Perspectives Mukund.

        Here’s why – Our primary target in most companies we work with, are their marketers and product managers. Their biggest pain point is to run in-site marketing campaigns without involving their respective dev/tech teams, which in turn leads to more and more delays in trying out new campaigns quickly. We fill this gap – only with self-serve tech and nothing else. Our first enterprise customers (Art.com, MMT, Yatra etc) signed-up just because of this and nothing else. And to make it clear 2 of those three names were inbound queries.

        I can’t insist on how quick customer support is key to building any business like ours. 90% of our support queries are technical in nature – the user is trying to do something in the WebEngage dashboard but unable to do so for some reason or the other. We make sure that such queries are replied quickly. Not only have we earned evangelists but also got paid customers because of the proactive support.

        I am not undermining the importance of “connections” as you put them, but in my biz the above mentioned 2 factors have been key to where we are today.

        Oh, btw, we have a WebEngage WordPress Plugin for your blog – http://wordpress.org/extend/plugins/webengage/ 😉

  2. Completely agree with you. Most of our enterprise customers came to us because of point 2. But in addition to that, one other factor which influenced their decision was “Customization”
    The other big solutions in the call center space, Avaya, Cisco etc do not offer customizations or the customizations come at a very big cost. Whereas, we as a startup, were able to provide those customizations.

  3. Completely in agreement Mukund! No truer words can be said about sales in startups! “She who has the relationship wins” – that’s the mantra. Love these pearls of wisdom. Keep ’em coming 🙂

  4. Sweet and simple. How this will fit into a SAAS offering to enterprises with a much lesser ticket size? It is impractical to build relationships with every customer.
    I believe relationships will fetch you initial customers, but the real business is fetched by your product/offering. Please give your thoughts.

    1. Satish
      You are correct. The early adopters come because of relationship and solving a pain point. For SaaS companies think of your website as the medium (or a person) who has to build that relationship. So if new customer “signs up” what does your email inviting them to use your product say, what does your demo show (like a sales person would). These are part of the product experience or customer onboarding, and help in building a virtual relationship with your prospect.

  5. Couldn’t agree more, Mukund. “Relationships-as-a-differentiator” can be extremely demoralizing, especially when you’re naive / idealistic and hoping to compete purely on product merit. This came as a rude shock a couple of years back, when we were working on Enpower (http://enpower.in).

    It follows from your reasoning that you have to pursue a lot of non-scalable customer acquisition methods in the inception of a B2B business, and that until you hit a certain critical mass, customer success / progress can be hard to come by. How do you fix this? (Case in point, the entrepreneur who approached you for advice – surely he can’t manufacture relationships overnight)

  6. Good points, Mukund. Relationships is definitely the core ingredient when you are selling to large enterprises. However, its not that important when selling to global SMBs – when you have a low-touch sales. What matters is the pain point (what you also mentioned), credibility of the app/company (via testimonials etc.) and whether or not the app just works (simplicity, easy of use etc.).

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