by Andreas Rekdal
Recognizing startups' ability to adapt quickly and come at problems from new angles, many of the country's biggest businesses rely on younger companies to improve their products as well as the experiences of their employees and customers alike.
These larger companies tend to think long term when acquiring new technologies. To your startup, that could mean a promise of stable income for years to come. Though the rewards can be great, getting into the big leagues is no small feat. Before you dive in, you better know what you're in for.
Getting your foot in the door
In the business world, making the right connections is crucial. That means getting to know the key people at the companies you want to sell to, but it also means working with vendor management groups to get on companies' approved vendor lists. This process can be easy or difficult, depending on the company, but it often involves passing some form of security assessment.
Another challenge many startups need to overcome is lacking a track record on the kind of scale major corporations want to see. Fortunately, there are ways to build reputation from scratch.
Larry Lidz, Chief Information Security Officer at CNA, suggests subcontracting as a strategy for startups to bolster their credentials.
"We always make sure we understand who our contractors are," said Lidz. "If the work and services you provide are solid, enterprises get to know that, which helps build your reputation and opens doors for opportunities at larger companies."
Pilot projects are another way to build reputation. Chicago startup Cultivate Labs' first major undertaking was a free pilot for O'Reilly Media. Today, the enterprise crowdsourcing platform counts industry giants like Ford Motors, Royal Dutch Shell, CNN, and the U.S. intelligence community among its clients.
"Sometimes you have to make an investment on your end to get in the door in these places," said Cultivate Labs CEO Adam Siegel (pictured).
Closing the deal
"When you are just getting your foot in the door, or sometimes even down the road, the person you're working with is the most important person in the world to you," said Jason Weingarten, CEO of Yello, a talent acquisition firm (pictured below). "They have you on speed dial, you're Facebook friends, you follow them on Instagram — you become embedded."
Weingarten practices what he preaches. Last month he flew from Chicago to New York to take a client to lunch and thank them for the work they had done together in the past year, returning to Chicago that same afternoon.
Through working so closely with his customers, Weingarten has developed a knack for navigating big companies software acquisition processes. That expert knowledge is important since his customers — mostly recruiters — often have little or no experience with enterprise software procurement.
By guiding his clients through the procurement, Weingarten often finds he can speed up the process and make his customers look good in the process.
Pricing is another important aspect of closing a deal. Having navigated a number of enterprise deals for Cultivate Labs, Siegel emphasizes getting to know your client — and their budget — before making an offer.
"A really basic lesson we learned is that just because it's a big company, that doesn't mean budget has been allocated for what you're doing," said Siegel.
He has learned not to be shy about asking whether the company has purchased similar products before and how big of a budget the department he's working with has to spend. Sometimes, clients may even be looking to spend big to make sure they don't lose allocations for the following year. In those cases, you have to strike when the iron is hot.
When negotiating and finalizing deals with enterprise clients, be prepared to wait. A lot. With extensive risk assessment requirements and lengthy chains of command, major corporations simply can't turn around in the same way your company can. Finalizing a single contract can take months. If you ever find that your patience is wearing thin, keep in mind that those long turnaround times may be the very reason the company is buying your services in the first place.
Expect red tape
When you reach the contracting stage, it's time to enlist lawyers to review contracts with your interests in mind. Most major companies will also require you to carry insurance to cover unforeseen problems caused by your software or services.
Charles Phillips, vice president of Phillips Brothers Insurance Agency, urges startups to run these insurance requirements by an insurance broker who knows the field well — both to ensure that they're covered if anything should happen, and that they're not wasting money on insurance products they don't need.
"A lot of times, certificate requests are boilerplate language that's given to all of a company's partners," said Phillips. "A good agent reviews these insurance requirements and advises the client about some areas where they can push back."
For example, if your startup is entering into a contract with a major auto manufacturer, you might receive the same list of insurance requirements as would a major advertising firm or a component manufacturer. An insurance agent who knows your industry would recognize requests that are outside the norm, and can help you negotiate those requirements.
Valynda Murphy, vice president of technology underwriting at CNA, agrees that subcontracting is a great way for small tech firms to get big company experience. She also urges subcontracting firms to take Phillips' advice to thoroughly understand their contractual obligations and liabilities.
"While you may not be contracting directly with big companies, you may still be taking on big responsibilities," said Murphy. "It's important to know what you're taking on and how new definitions of employees and contractors may affect you."
Let your work speak for you
Good work tends to bring repeat business. Upper-level employees within Chicago's largest corporations tend to know their counterparts at other companies, and rely on each other's advice when seeking out vendors.
"Word spreads quickly," said Lidz. "I have friends and colleagues who work at companies around the world, and we share information about what products work well and what vendors provide great services to us."
In Yello's case, a large percentage of the company's client base is repeat customers who've switched jobs and want to bring Yello to their new company. "If you are providing people with personal success, they're bringing you with them," said Weingarten.
Keep in mind, however, that no insurance policy can protect your reputation. So before you make the leap to the big leagues, make sure your technology and support staff are ready for the scale.