A large company showing interest in a startup is one of the events that creates the most excitement and adrenaline. Managing the commercial negotiation with corporate companies, though, is not a downhill process, and mistakes are always around the corner.
Once the contact arrives, the question that will pop into your head is: how do you handle the negotiation with a large company without defocusing the whole team from its activities?
Imagine this scenario:
after validating the product, the customer base, the website and the web marketing campaigns, drafting the contracts and above all finishing the MVP (Minimum Viable Product), you are finally ready to sell your service and cannot wait to issue the first invoices. Several months have passed since the first line of code, and the curiosity to find out whether the dream has become reality is at its peak.
The first contacts arrive from the web marketing campaigns, along with the first small-ticket sales. But here comes the surprise: one of the contacts is an IT manager from a large, important, well-known company, interested in learning more about your services.
The adrenaline goes through the roof, and all the company’s energy concentrates on managing at its best the complicated relationship about to begin.
My experience has led me to formulate three tips for trying to handle the commercial negotiation with a large company at its best:
1. Ask yourself whether it is the right moment
The reality (unfortunately) is that very often the answer is NO! A large company will hardly be able to turn to and use the services of a startup, which is often too far from the required standards from every point of view: product maturity, legal terms, commercial strength and support.
It is more likely that it is merely interested in understanding how the market is moving, comparing prices with other competitors or launching small, localised tests. The risk is entering a commercial, legal and product-customisation flow from which it will be very hard to come out unscathed.
Avoid getting pulled too far from your own activities, try to stay coherent with the hypotheses you still need to validate and, if anything, take the opportunity to refine your internal documents and processes.
2. Look for partnerships with System Integrators
Look for a partnership with System Integrators suited to your size and used to acting as a bridge between startups and large companies, so that they lead the negotiation and preserve your (precious) energy, leaving you behind the scenes.
They will be the ones implementing integrations and customisations, commercially following the numerous requests that will come in and handling the contractual matters.
Finding the right System Integrator to resell your service is not simple. To identify one, start looking for those who resell products in your industry, get in touch with several of them and meet them in person to gauge the affinity. Try to have more than one choice. This will allow you to select the best one depending on the negotiations.
You will also amplify sales through resellers or promoters of your product!
3. Avoid working for free
If you build a POC (Proof Of Concept), get paid for it. It is often the true first step for companies genuinely interested in using your service.
Be aware that the negotiation will very likely not go through. Act accordingly. Consider it a wildcard from the deck, not your guiding light. Sure, your mouth is watering, but the risk hidden behind this kind of negotiation is big.
In a startup’s initial phase, it is fundamental to recognise the customer target suited to the service offered and consequently concentrate your energy in the right direction: it can make the difference between surviving and failing.
Sell to those who are ready to buy your service without too much effort. The big fish will be caught, in the future, with the right net.
Startup Bakery is the Italian startup studio specialised in creating B2B SaaS companies with Artificial Intelligence. We offer aspiring Co-Founders the opportunity to develop a business idea. We create investment opportunities for Professional Investors. We help companies in their innovation process.