236: How Startups Should Go After Enterprise Customers

Steli:

Hey everybody, this is Steli Efti.

Hiten:

And this is Hiten Shah. And today on The Startup Chat we’re going to talk  about how to target the enterprise in all ways, sales, marketing, product, et cetera. And  see how far we can get on giving you folks a lot of thoughts on  how to do that. One of the reasons we started this trend … Or, sorry,  one of the reasons we’re talking about this is because there’s a trend that both  of us have seen where even companies with just a single founder are going up  market, and not just going after small, medium businesses, but they’re also going after mid-market  companies and larger companies. And just to throw it out there, Steli, to me, this  is not just about enterprise. It’s just about charging more than $10,000 a year, you  know? Because that’s when you start getting into the areas that all the enterprise sales  type of stuff applies. In true form though, an enterprise sale is in the millions  of dollars a year. If you really want to go for what enterprise really means.

Steli:

Yeah, it should be like 6, 7 figures is typically what you …

Hiten:

Yeah.

Steli:

What you would want. And we can go crazy on this episode, but I want  to jump right in here.

Hiten:

Yeah.

Steli:

Which is … Here’s my first tip to people. If you want to target enterprise,  or large organizations as your customers, you want to charge a lot of money for  your product. Because the cost … It’s going to take a very high amount of  time, money, and resources for you to really close a enterprise customer. The demands are  going to be really high, they’re going to moving very slowly, you’re going to need  a lot of energy and effort and senior people on your team to close these  customers. So it’s going to cost you a shit ton of money to acquire a  customer like that, and a lot of time. So it needs to pay a big  enough return to be worth it. And often times in experienced startups that want to  go the enterprise route, they think if they make their product a little cheaper, things  might move faster. Or because they’re lacking confidence they’re thinking, “Well we can’t really charge,  you know, 250,000 for this. We’re just going to charge 10,000 or 5,000, or $1,000  a month or something.” And then they approach this super massive, you know, giant of  a corporation, and they have to go through all these hoops, and they have to  deal with all these delays, and all these decision makers. And it takes them 18  months to close a deal that they thought would only take 2 months. And now,  you know, you’ve spent so much energy, time, and money … You’re making $1,000 a  month? It just makes no sense. So my first tip out there is that, if  you want to go down the enterprise route, you need to make it worth your  while. You need to realize that it’s going to cost a lot more money than  you think to acquire these customers, so you need to price your product accordingly.

Hiten:

Yeah. I mean, if you charge too little, then no one’s going to care, especially  with a larger sale. And it’s odd, I’ve noticed return’s higher when you … When  they pay you less money in enterprise.

Steli:

Yeah, in enterprise it’s definitely like these massive organizations … The cheaper your product, the  less of a priority it is. And also, it is looked upon as they’re …  You have to think about the world that they live in. They live in a  world where they spend millions of dollars buying technology, and implementing technology with lots of  consultants, rolling them out over years. So, when something’s like a few hundred dollars or  a thousand bucks, to them, that equals that this probably is not a good tool. This probably is not a company that’s going to be able to service them well.  So they actually … Pricing makes a big part of the branding in terms of  how serious these companies will take you.

Hiten:

Yeah. So pricing as a signal for the value of your product, and how seriously  they should take it, I think is a big mountain in enterprise.

Steli:

Yep.

Hiten:

I mean another one here is, I would say, has to do with sales cycle.  So I see a lot of companies … Especially … I mean, this was more  a problem earlier, like back in the day, but companies get kind of frustrated having  a long sales cycle. Right, and saying, “Oh, it takes 6 months to close the  deal for a enterprise customer, let’s say in the 6, 7 figures region.” And, you know, it kind of makes sense. But every time that I’ve dug into those problems  … You know, it’s a problem when someone says it takes 6 months. Typically, they’re  just doing something wrong in their sales process. And usually it has to do with  the process itself, and the way that they’re setting up the meetings with the enterprise.  For example, they’re not getting all the key decision makers into, you know, conversations within  the first month of starting to talk to them. And I’ve seen acceleration happen pretty  fast, going from 6 months down to 3 or 4. Even less, once you really  figure out, “How should I be selling this enterprise?” How … Are you mapping their  word chart on every call, asking who else needs to be on the next call?  And every call asking, “Are there any other people who should understand this information that  we shared with you today?” And all those kind of questions to search this …  Basically, what’s the decision making process inside of the company? So that’s a big one  that I have to point out, which is … We used to think enterprise, selling  to enterprise takes 6 months and that’s okay. I think now I’m finding more and  more, especially with businesses that are selling enterprise, they can actually make that process much  faster.

Steli:

Yeah, I think one way … One piece of advice that I give in terms  of understanding what it really will take … The problem for most startups is that,  or most companies that sell to enterprise, is that they get some kind of an  entry point, they have a few conversations, and they don’t ask all the critical question  to truly understand what it will take to close this deal, and close this customer.  So what happens is they come up with a thesis on what it’s going to  take, and then all these “surprises” pop up that delay things and make them take  much longer. So my advice to founders, is that once you talk to an enterprise  line and you realize that it seems like there’s a good fit and they seem  interested, I would always do a technique that I coined, The Virtual Close, which basically  is just asking them, “Hey, it seems like this is very promising and could be  a great fit for both sides. Let me ask you, what would it typically take  for you to purchase our product, become a customer. What are all the things that  we have to do from this point on, all the way to us successfully implementing  our technology in your company and helping you with all your problems?” And the key  part is not just to ask the question, “What will it take for you to  become a customer?” But then to follow up with questions until you reach a virtual  point where they buy. So when they tell you, “Well, you know, we’re going to  have to go back and talk to a bunch of stakeholders, and see what they  think about this.,” most people will just go, “Cool. Sounds good. Let us know what  happens.,” right? Which is obviously not the right step. Instead of doing that you go,  “Aright, so you go back, you talk to stakeholders.” Let’s say that conversation goes well.  First of all, who are all the other stakeholders, right? But let’s say that conversation  goes well. What typically happens next? Well next, we want to get in on another  call and get more stake holders involved and asking questions, blah blah blah. Alright, cool.  Let’s say that call goes well. What happens next? Well, next we want to do  a pilot. Again, most people eventually, they will stop asking questions and go, “Sounds great.  A pilot. Exciting. Alright, let’s try to make it happen.” I would advise you to  keep following up, alright? So I go, “Alright, let’s talk about pilot. How do you  typically do pilots? What KPIs do you set? How long do they take? What would  a successful pilot look like? Let’s say this becomes a successful pilot, what happens next?  Are we in business already?” “Well no, then you have to go through procurement.” “Okay,  and then?” “And then you have to go through legal.” “Alright, and then?” “And then  my grandmother has to read your palm. You know, and look into your future.” “Alright,  and then? Are we in business then? “Yes. Then, you know, after that final step,  we would purchase.” Boom. Now, you have a roadmap of what it’s going to take,  who are the stakeholders, what are all the steps. Now you can realistically assess A,  if you can shorten some of these steps, if you want to take all these  steps, how long all this will take. You can have a real roadmap. And then  you know it’s, “Okay, this is going to take 6 months, or it’s going to  take 9, or whatever it is. And now you can make very … Much better  decisions than what most startups do in the enterprise space, which is … They say,  We talk to a team. The whatever, director or marketing is really excited about this.  And then I ask, “Alright, so what’s the sales process there? How are they going  to buy? What are all the steps?” And they just don’t know, and they just  make shit up. They just go, “Well, I think that, you know … I mean,  they looked into it. I think that they should be ready in a few weeks to buy. I mean, we’re planning on closing them this month.” They have no idea,  you know. And then at the end of the month I check in again and  they’re like, “Yeah, we’re probably going to have to do a pilot but they’re busy  with something else, and the pilot’s going to start in, you know, October. Alright. And  then, you know, they finish the pilot and then, “Oh yeah. Now we have some  slow down in legal because of some contract thing.” And it just … All these  “surprises” come on up, and then the deal that the startup originally thought, “Oh we’re  going to close this in a month.,” it in reality takes them then a year  to close, right? And that’s really a very costly thing, is when you’re not even  knowing why all this takes so long. So I couldn’t agree more with you on  this. Here’s another thing that I want to point out when it comes to enterprise  sales for startups. I don’t know how you see this, but I see a lot  of startups stumble into it. And I think that that’s a really, a very risky  way of doing things. And when I say stumble into enterprise sales, here’s what I  mean. The Startup X starts off with an idea for a product. They imagine the  product being used by businesses very generically around the world. They start by probably marketing  more towards, or thinking that their earliest customers are going to be probably in the  S&B sector. And then they maybe go to a demo day of the incubator, or  the get a little bit of press, or they present at some conference. And randomly, you know, a big enterprise reaches out and shows interest. And says, “Hey, we want  to also buy your product.” And they have that first meeting with that enterprise customer,  and because of the variety of factors, there’s an enterprise potential buyer that’s very excited  about them. Then all of a sudden they go, “Well shit. Let’s just go into  the enterprise space and sell them.” And they … So there was no strategy of  going into that space, there was no experience. They get a little bit of inbound  interest, and they just say yes to that inbound interest without being fully aware of  how you have to play the enterprise game to win. And then it might turn  into this massive detour that often times ends up deadly for these startups. I don’t  know if you’ve seen the same thing, but it’s rare that I see young startups  that are very focused and with strategy, decide to go into the enterprise sector. I  mean, that happens more and more. But what I also see often, is that they  just stumble into it. Something happens, they have a bit of conversation with somebody that  shows interest, and all of a sudden they go, “Oh shit, maybe we should go  into the enterprise market.” And I think that that’s a very dangerous way to go  into that space. You should have a solid strategy. You should know what you are  doing. Just because a few big companies show some interest because you got a prominent  article on some website, doesn’t mean that there’s a product market fit or that your  company should focus on that right now.

Hiten:

Yeah. I totally agree. I mean, accidentally stumbling into it can be a good thing  if it’s time to double down on it. Or it can be a really bad  thing because you accidentally stumbled on it and don’t know what to do with that  attention that you’re getting. Also, I’ve seen a lot of false positives there too, where  a company gets enterprise interest and they go all in on it, and then they  realize it actually wasn’t … It’s not going to work out for reasons like, their  product doesn’t fit the market when it comes to enterprise, or they can’t improve the  product fast enough, or you know, some … There was a random company that emailed,  or called, whatever, came in, that’s not indicative of other enterprise companies. Or larger companies.

Steli:

Yeah. So another one maybe … So I think … Or let me ask you  this, Hiten. So most of the startups that I’ve seen be successful in enterprise either  were around for a while and they grew resources and resourcefulness, and traction and branding,  and eventually they kind of just grow. They go up market from small customers to  bigger, to bigger, to bigger, to eventually being at a point where they can service  and succeed at the enterprise level. So very organically, over a long period of time,  grow into the enterprise space. Though startups that I’ve seen successful go into the enterprise  space in step 1 are usually the ones that have a … Have experience in  the enterprise space. So either the executives or founders worked at large enterprise organization, or  did enterprise sales before. Or/And they’ve raised a ton of funding from investors that have  a lot … That are like ex- executives of large corporations that just have a  lot of expertise and know-how. And they hire or build a team that’s very focused  on enterprise. I don’t know of many examples of a startup that was not really  well funded and that didn’t have a background of it’s founders and founding team in  the enterprise space, but was able to sell to the enterprise from the get-go successfully.  Do you have an example of that? Or have you … Does your experience match mine?

Hiten:

No, it matches yours fully.

Steli:

So …

Hiten:

Yeah, and I don’t really have any examples. I mean, yeah, I mean there’s companies  that are open stores that end up adding services/businesses and go enterprise pretty fast. But  yeah, in general, it pretty much maps.

Steli:

So if out both experience maps there, you can reverse engineer this to an advice,  which is that if you don’t have a ton of resources in terms of funding,  and investors, and advisors, and people around you that have a lot of experience in  this space. And you have the firepower, the money to really invest in this space  and/or you don’t have a ton of experience working at large enterprises or selling to  them for many many years, it’s usually … It’s not a good idea for you  to go down that route. Like self … Starting a self-funded technology company when you  have 0 experience. You’ve never worked for a large corporation, you’ve never sold to a  large corporation. And then that’s going to be your first customer? Often times when people  like that come to me I ask them, “Why? How? Why did you come up  with an idea for a massive organization when you’ve never worked for one or sold  anything to one? Like how intimate can your knowledge really be in that space? 99.9% of the time it’s not a good idea to start there. Maybe you grow into  that, but it’s not a good idea to start with that in mind. It’s going  to be very difficult. All the learnings, all the time it takes … It’s not  an area you can experiment with, like, “Oh, I’ll do some tests in the enterprise  space and then go back to something else.” That shit doesn’t work.

Hiten:

Yeah, even with outbound emailing.

Steli:

Yeah, I know.

Hiten:

Even with outbound emailing, which is the key way to get enterprise sales. Either emailing,  or somebody who already has a relationship with them. It’s not … You don’t have  enough numbers. With small businesses there’s a million of them. Millions of them.

Steli:

Yep.

Hiten:

And so sending cold emails works. Even with , sending cold emails, and a little  bit sloppy in the beginning can work. With enterprise, I think the process, you’re right,  it has to be a lot more deliberate. Usually you see either somebody with relationships  targeting enterprise, like they already worked in the industry, or they’re already a sales person  that knows how to kind of work the enterprise like that, and has relationships. Or  you see people enter in who have funding, to be honest. You know, and are  able to build out the tack and the team and, you know, but they also  start out with smaller companies. Even if it’s mid-market and smaller deals. Even if it’s  like later stage startups, before they start moving up into enterprise. I see that commonly,  by the way, Steli. I don’t know what you see, but I see a lot  of companies start a little bit smaller than enterprise, knowing that enterprise is the final  kind of customer assignment that they’re going to go after.

Steli:

Yeah, and I think that that’s smart. Like that’s a very kind of common strategy.  I think it makes a ton of sense. So let me ask you. I think  that most of the times when you start a new product, and you want to  have large enterprise customers, most of the time it’s a sales-heavy effort at first, and  then it becomes more and more marketing effort as you’re scaling things up. Would you  agree with that, or do you think there’s like early stage things? Like marketing wise,  people should really consider a few things from the day 1 when they want to  go into that space.

Hiten:

Yeah. Again, I know this is like a broken record right now, but to me,  open source is a good example of the marketing effort in enterprise. The marketing effort  I can think of, is you get the end user. Because you know, in enterprise  there’s buyers and there’s end users. The people that are buying are not usually the  ones using the product. That’s changing a little bit, but it’s still pretty standard. So  the decision maker, the buyer, actually not even the decision maker, that’s a different story.  But there’s a buyer and end user. So the buyer tends to be attracted by  certain management features, administrative features, price, other kinds of things like that, efficiency, while the  end user’s very focused on, “What’s this going to do for my job?” And so  if you can get an end user, kind of bottom-up approach, get them using your  product early, I consider that marketing. Open-source products that target enterprise tend to do that.  I think there’s one called Solar Wind, or Solar Winds. I don’t remember, they’re a  public company. They’re the ones that always come to mind, because they provided a whole  bunch of tools for IT, traditional IT, and then basically had upsell into, kind of  the whole organization and kind of more of an enterprise sale once a lot of  the developers in the company were already using the open-source tool. This is a pretty  standard tactic across the board, around going after enterprise with marketing. So I’d say that’s  1. Outside of that, I don’t know, I like sales when it comes to enterprise,  or even larger deals first, because that’s your fastest way to learn. And that’s really  what you should be optimizing for early on, is “How fast can I learn?” Marketing,  you won’t probably learn as fast as you would with sales. Especially when you’re targeting  enterprise.

Steli:

Yeah. So here’s my tip to kind of round up this episode. I think my  tip for people that still want … That still feel like the enterprise is a  big, or the right opportunity for them and their startup … One tactic that I  often teach that people put into practice with success, is the, you know, “Ask for  advice, you might get money, because if you ask for money you will get advice.,”  piece. So often times a good strategy in the early days is to just learn  a lot more and potentially start off the prospecting pipeline for your startup in the  enterprise space, is just to pin people that could be potential buyers or that know your potential buyers within the organization. And tell them that you’re building a new technology,  you eventually want to sell to companies like theirs, and you want to get advice  on how to build this technology from them because they are a domain expert, or  they’re a thought leader. So reaching out and saying, “Hey, I’ve admired your work. Your  thought leader, lots of people brought up your name. I want to tell you a  little bit about my new technology and get some advice from you on how to build this business.”

Hiten:

Yeah.

Steli:

And then you just share with them what … They’ll leave their guard down because  you … It’s not a sales call. You tell them what you do passionately, and  you get their honest feedback. And then you literally just ask them, “Hey, if you  were my co-founder, if you work with me on this, or if you were the  founder of my company of this, how would you sell this to this business? How  would you sell it to your employer? How would you go to market with this?”  Just use these people’s experience and expertise to learn. A lot of the times if  what you have is truly compelling, these conversations, after they’ve shared some business knowledge with  you, and enterprise knowledge, they … It might turn into, “Hey, you know what? I think that we could be a buyer, and I think I know somebody in the  company that you should talk to.” And then they will be internal references and introductions,  and these conversations often times will turn into real sales conversations. But even when they  don’t, they give you real knowledge of this space and how to think about things  like a large corporation, and how to sell to a large corporation. So I would  really advise this. Step 1 is to meet with as many corporate enterprise executives as possible and get advice from them. And then see how much of that advice can  you turn into practice, but also how many of these relationships can you really nurture  to the point where they turn into potential buyers.

Hiten:

Yep. Totally agree.

Steli:

Awesome. Alright, I think that’s it from us for this episode. If you have more  questions on how to do the … How to successfully sell to the enterprise as  a startup, or if you have used cases or advice or strategies you’ve used successfully  … We say this a lot, and we’ll never stop saying it.

Hiten:

Yep.

Steli:

We love to hear from you.

Hiten:

Please.

Steli:

Send us an email, steli@ , hnshah@gmail.com, or ping us on Twitter, any of the  many other channels that we’re out there on the web. We always love to hear  from you, and we’ll hear you very soon. This is it for this episode.

Hiten:

Yep.