Why Big Companies Buy From Startups — And How to Sell to Them

Why Big Companies Buy From Startups — And How to Sell to Them

It’s a rare achievement when a lowly startup manages to persuade a Fortune 500 company to buy its product — big company managers tend to avoid unnecessary risk, and they worry if they think the company they’re buying from won’t outlast the products it sells.

But they also worry about falling behind their competitors, according to three top managers who spoke at the DEMO conference in Silicon Valley (Santa Clara) Tuesday, and that forces them to look hard for new technologies that can help them stay ahead.

[login]All three managers — Ralph Loura, the CIO of Clorox; John Murray, the CIO of Genworth Financial Wealth Management; and Sheldon Wang, the CTO of eHealth — said their companies make special efforts to stay on top of new information technology trends.

Had AT&T been looking at Skype, Murray pointed out, it might not have lost part of the international calling market. “We stay on top of our direct competition, but you don’t see enabling technology coming out of left field,” he said.

So Clorox has created a new job called solution designer — a role that stands between Clorox’s IT department and its domain architects — and assigned five people to look for new technology and think about how it might fit into Clorox. Genworth tries to hire senior managers who like technology and are early adopters themselves. eHealth directs everybody in the organization to look for new technology.

Here are some do’s and don’ts from the executives on how your startup should try to sell them new technology:

  • Do your homework. It sounds simple, but big companies don’t spend time explaining to small companies why their product is needed. Read your potential customer’s SEC filings, listen in on their quarterly conference calls, and understand their needs and challenges as best you can. Try to get someone lower down in the company to have lunch with you and talk about what the company is doing. Understand the company’s contract cycles. THEN approach the CIO or CTO and explain how your product can help him.
  • Be yourself, and be true to your product. Don’t make outrageous claims. “Desperation comes across, with folks trying way too hard to make a product fit into a Fortune 100 or 500 opportunity,” Loura said. “If it’s a natural fit, it will fit.”
  • Don’t assume that if your product is cloud-based, it will work in your customer’s cloud. “Expect to be able to answer how your product is hosted in the cloud, how it uses this SDK and that API, and how it ports to a competitive service,” Loura said. “Don’t assume the cloud has been addressed — do your homework again.”
  • Expect to start small — your customer won’t bet his business on your product. For a multinational customer, you’ll need to understand how you can scale and support your product internationally in markets with multiple languages and geographies. Clorox, for instance, is more likely to pilot new products in smaller markets, like Brazil or Australia, where there’s not so much risk.
  • Know what would happen if your product fails, and be able to discuss that honestly. Be prepared to discuss your burn rate and how you’re capitalized. Don’t ask the customer to take the risk. One solution, Murray said, is talk about what you’re doing early and offer to come back in a few months when you have more proof points. “That would be fruitful for me, and it shows me they know how to manage a customer relationship,” he said.
  • Have accounts you can reference where your product worked well and you did a good job.
  • Don’t stalk potential customers. Multiple voicemails and e-mails are not welcome. “We’re busy, and if there’s interest in following up, we’ll follow up, if anything has created a spark,” Loura said.
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