19/05/2015

By Mike Hughes, MD, PeopleTECH


Technology makes the world go round. It is nigh-on impossible to run a business without technology and no-one would seriously consider launching a start-up without it. There are all manner of different types of software that are integral to modern business, from accounting systems to customer management software, and collaboration tools to HR platforms, and you would be hard-pressed to see a business that doesn’t deploy one or all of these.

Start-ups and high-growth firms will choose the type of technology that makes most sense for that bit of their business and for their way of working, before selecting the specific supplier. But that might not be as straight forward as they would like. Many large tech vendors are often wary about supplying start-ups, and certainly engage with them differently from how they might build a relationship with an established corporate client. Why is this, and how can start-ups get the technology supplier that they want and need?

Are start-ups a risk for technology supplier?

I have worked for some major technology firms in my career, and in my current role at PeopleTECH I spend a lot of time working with start-ups and high-growth firms on their customer management strategy. A large element of this strategy involves ensuring that they have the right technology to help provide their customers with the right experience, so I am in regular contact with large IT supppliers.

So I am unequivocal when I state that in my experience, systems and services vendors engage with start-ups quite differently from how they might build a relationship with an established corporate client. Whereas major companies offer the temptation of an assured substantial revenue stream, and the security that comes with being an established business, start-ups provide no such immediate inducement. Revenue from a start-up may take a considerable period of time to build, there is also a risk that the start-up will simply go out of business, while business development costs for the supplier may be very similar.

For IT suppliers these costs are not insubstantial – it takes time and effort to close a sale in a competitive technology landscape and it is often the case that their commission-based salespeople are often less willing to work with start-ups. That’s not something that any major technology firm would admit to of course, but that doesn’t make it any less true, or indeed any less of a problem for start-ups or high-growth firms that need that technology to establish their business.

Getting the tech you want and need

Many suppliers will therefore shy away from dealing with start-ups, which requires the sales process to almost invert itself. Before suppliers will enter into detailed discussions with start-ups or high-growth firms, they need to be persuaded that the potential client has a viable proposition. Of course, a start-up could look to use cheaper (or even free) options. These can be fine for a short period, but really a business is looking for something that will scale as they grow. There are main two steps to be taken in order for start-ups to get the tech they want.

1) The start-up or high-growth firm must approach more potential suppliers than it would normally do, and time these approaches for leaner periods of sales seasonality. This is mostly a question of numbers – broadening the potential supplier pool gives you a better chance of convincing one of them that your organisation is one worth working with. It is also highly advisable to make sure a number of SaaS providers are included. They are invariably more flexible than on-premise solutions and are general more willing to work with organisations of different sizes and stages of development.

Also, knowing when the quiet periods are in that technology supplier’s annual cycle will also be of benefit – if you approach them at a time when many of their larger corporate clients are renewing contracts then you will find it hard to get their attention. Do so during a quiet period and it will be much easier to get noticed.

2) You must have a well prepared introduction presentation that you can use to convince IT suppliers of your business’ future prospects of success, longevity and ability to generate funds and therefore pay on time.

This is really a question of a building a case, not dissimilar to that used to attract investors, presented within a non-disclosure agreement and abbreviated to protect commercial and intellectually sensitive material. The IT supplier wants to walk away, convinced that your business is not a risk for them and will be one that pays on time and helps them meet their targets.

Is it fair that start-ups and high-growth firms have to jump through so many hoops, purely so they can buy the technology that they need to drive their business forward? Almost certainly not, but it is also something that is most definitely required if emerging firms are to get the right technology to suit their business needs at that point in their evolution.