This week, the good folks at StartupGrind Barcelona invited us along to speak at the Corporate Innovation Summit as one of the two startups to share their experiences alongside the innovation teams from FC Barcelona, ASICS, Damm, Nestle and more.
At Cledara, we work closely with both BBVA and Mastercard and members of the Cledara team have done massive deals with banks like Barclays, Cross River Bank and Starling, as well as companies you’ll know like Uber, Facebook and McDonalds.
Doing these deals is massively important. The right deal can change the destiny of a startup, but to get it done you need to cross a minefield. We were excited to provide some of the unvarnished realpolitik of what it’s really like to be a startup on the other side of the table from these large companies, as well as share some lessons that we’ve learned (the hard way) over the years.
We hope it’s helpful for you. Let us know on Twitter at @CledaraHQ about your top tips for doing deals with large companies.
1. Don’t be too excited when a large corporate comes knocking
When a big company comes knocking it’s tempting to think they will transform your company, whether it is by being a massive customer, or bringing nearly limitless distribution, but the reality is that probably won't.
Part of this is simple sales funnel maths - you can’t win every deal, but it also has to do with the laws of inertia for big companies. It takes a really long time to get a deal done and until something is signed, there are a thousand ways for a deal to die.
One common way a deal dies with a big company is that it takes longer to get done than you have runway for. You can often spot this in corporate-sponsored accelerators when a founder at demo day announces a POC with the corporate sponsor (there was probably a KPI for POCs with accelerator participants), but usually nothing comes of it.
That means keeping things in perspective when you receive interest from a big company. Don’t bet the company on the deal and ensure the team stays focused on the core business.
2. Allocate time accordingly
If you have a shot at something with a big company that could be a company-maker, but probably won’t be, you have to think about how you allocate your time and resources to it. Obviously, you want to move it forward, but you have to think about your ability to progress other things. Sales cycles with big companies can be easily longer than your runway and so it’s usually critical that you’re not dependent on a deal with a corporate to demonstrate traction going into the next round.
We like to limit the time we spend keeping a deal like this alive. Big companies with lots of people can spend a lot of time on things and so, try to apply a ‘Minimum Viable Engagement’ strategy and stay focused on your core business. Focus on ensuring there’s always a next action and a clear owner, but don’t feel as though you need to jump when they ask you for the 7,835th time to “prepare a couple of slides”.
3. Big things are done in lots of small steps
When you are in the deal, don’t focus on closing it, but instead taking small steps forward. If you’re always pressing for the close, then it’s likely that you won’t uncover all the objections. In a big company, there are way more people that can kill or block a deal than say yes. You have to be patient, listen to your internal champion and be willing to take meetings that they recommend, even if you don’t understand why, to neutralise threats.
This sounds like the opposite advice to number two, but it isn’t really. Doing big things requires investment, but just make sure you don’t spend more time than you need to. Very often the last person standing gets the deal. Persist and keep shuffling forward and if you can last long enough, you’ve got a chance to convert.
4. Practice big company Judo
The key to doing business with big companies is that any deal is infinitely better than no deal. Every time you hit a roadblock, whether that is something that might make them say no or significantly delay a yes, consider offering to drop it from the deal.
Oftentimes, a single concern can derail a whole deal and you can waste a lot of time trying to negotiate one thing, leaving the rest of the deal waiting. By removing things, it takes a concern off the table and can help you move forward. You will end up with a deal that’s smaller than you wanted, but once you are in, you have the chance to build trust and it’s usually much easier to make the deal bigger later.
The idea is that if you can take away all the reasons that they might say no, eventually, hopefully, you’ll be left with a yes. The yes lets you get through to the formal procurement due diligence stage and in the door as an approved supplier or partner. Once you’re in and generating value, you can try expanding the deal.
5. No skin in the game, no deal
Probably the most important rule of doing business with big companies is ensuring they have skin in the game. If the project requires work from a startup, whether that’s writing code, training users or implementing the product, it’s important to agree a fee up front and success criteria that, if met, will convert the PoC to a regular contract.
Depending on the type of deal, it may be appropriate to agree to a monthly minimum commitment too. This was probably the best piece of advice we’ve ever received for being successful with big companies (thanks Ian!). If a deal is a distribution agreement, you need to make sure the corporate partner is incentivised to do what they said they would do. A monthly minimum is a really good way to ensure this, after all, if they are excited about the market opportunity and believe in their ability to execute, why wouldn’t they agree to a modest minimum?
6. Keep building the relationship
Once you’ve done the deal, continue managing the relationship. Lots of deals die after they’re done when a key stakeholder moves on, a strategy changes or when deals take longer than hoped to deliver results.
In a previous company, we’d worked for more than a year on a deal with a bank. We’d endured 23 different committee approvals. We were finally live. It was a huge deal, it opened up another massive geography for us and we were the only one that had managed it. And then, almost all of the bank’s executive team left, it was put up for sale and almost no one left in the bank new we existed. We’d managed to nurture relationships across the bank and so we were able to keep things going with the few that were left, but had we not, all that work would have been for nothing.