This post is by Steli Efti from Openview Labs
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Most B2B startups initially sell to other startups before going after more established companies. And for good reason—it’s a logical first step to pursue other companies that are like-minded and in similar situations. Plus, startups tend to be smaller, more approachable, have less bureaucracy when it comes to making purchasing decisions (meaning they’re often quicker to close), and then more forgiving when things go wrong after they’re a paying customer. However, it’s important to realize right off the bat that selling to startups isn’t the same as selling to small businesses or enterprises. They’re completely different types of prospects that require a unique sales approach. When it comes to selling to startups, here are three tried and true best practices you should be following today:
1. Understand your audience (and their needs)Regardless of who you’re selling to, you need to do your homework about who your ideal customer
long before actually reaching out and starting a conversation. But when it comes to pitching startups, you need to be particularly careful in your research. One thing that all startups are short on is time—which means they (more than most prospects) won’t want to waste time listening to take a generic sales pitch that isn’t hyper-relevant to their unique situation. Therefore, it’s crucial to know exactly who you want to talk to, have a clear reason for why you’re calling, and why they should want to talk to you before you pick up the phone. With the proliferation of startup data tools like Mattermark and Crunchbase, you can learn in a matter of minutes who your best contact is at a target company. You can even look for signals that it’s the right time to reach out, by identifying funding announcements or monitoring job openings using tools like Datafox and AngelList.
2. Spend time near other startup foundersThe startup market has much more of a community cohesion than many other industries—due in a large part to the shared experience of how difficult it is to scale a new business. Thankfully, this means that founders generally hang out in the same places (both online and in-person), so if you want to sell to them, you need to make yourself present there too. Start by checking out popular startup communities like Hacker News, Product Hunt, Growth Hackers, and other industry-specific or niche Facebook communities. Be active in the comments, share helpful ideas, offer up lessons learned from your experiences of starting a company and ask for feedback on your own product through these communities. Look for ways you can build authentic relationships, take these relationships off-platform and build real connections with your potential startup customers.
3. Ditch the fluff in your pitchYou might be able to get away with a buzzword-packed pitch to someone at an enterprise-level company, but the eyes of a technical startup founder will glaze over the moment you begin straying away from how your product can directly (and positively) impact a meaningful metric in their business today. Startups are making a bet by taking on an investment and often losing money today, in order to generate much more of a return in the future—which means they don’t have the luxury of time to waste. In order to effectively sell to startups, you need to lose the lame industry jargon and drop the buzzwords. Instead, strive to be very straightforward and transparent. Be specific, not ambiguous. And if you don’t know the answer to a question that comes up during your pitch, be honest and tell them “I don’t know.” Most startup founders have well-developed bullshit detectors and they’ll see right through a pitch that isn’t rooted in clear metrics.
The dangers of selling to startupsAt this point, it may seem like startups are going to be your perfect customer. And in many ways they can be—especially if you’re a startup yourself. But there are also dangers that come with including them in your sales strategy. By their nature, startups are volatile companies, which means they can also be unpredictable customers that might suddenly run out of funding next month. Not only that, but you have to be comfortable with the fact that startups often:
- Have smaller budgets than larger organizations: This means your customer acquisition cost (what you’re willing to pay to get them as a customer) has to be smaller as well.
- Churn at a much higher rate: Not just from going out of business, but because they might make a hard pivot in their business model and not need your product anymore. This makes their lifetime value much harder to calculate.
- Give feedback that can muddy your product roadmap: Startups change quickly, and acting on all their feedback is a dangerous game. Startups will often request features they think they’ll need once they’ve grown to a certain point. But often don’t when the time comes. Blindly following customer requests like this can leave you with serious feature creep.
- Are vulnerable to the funding market: If you sell to startups with lots of funding you’ll do great when the funding market is strong. But when that dries up, it could impact or even kill your company. I’ve seen this happen again and again, and founders always like to complain about it: If only funding hadn’t dried up at that point, we’d have succeeded, but it was outside of our control. No, it was not outside of your control. It was very much within your control to decide to focus on startups that require a generous funding environment, and you should have hedged against the possibility that the funding environment would change in the first place.