Startups Serving The Enterprise: – Greylock Perspectives

Building strong partnerships and capabilities means that getting out of the marketing swamp, through the winds of cost and risk, across the enterprise feasibility gap, through the desert of procurement and over the ocean of early execution — will all be more tenable the second time around, and the rewards even richer on both sides.

Why are large enterprises so interested in startup tech? It’s a matter of survival. Every company is undergoing a digital transformation. Farsighted executives see the pace of change in business accelerating. These executives know that the companies who more rapidly adopt advancing technology will run their companies better, faster, cheaper, smarter. Technology is a weapon used to defend against competitive threats, and achieve and preserve market dominance.

Similarly, for an enterprise technology startup to survive and thrive, they must understand how to effectively work with large companies. Within large enterprises are most of the employees, data, workflows, industry and institutional knowledge, assets, customer relationships, intellectual property, and budgets in the world.

1. Recruiting Partners in the Swamp of Marketing Fog
Before enterprise executives and startup founders are ready to set sail together, they need to identify the right partners.

  • Shine a Bright Light: A warm introduction can be vital.
  • Paint a Clear (and Easy) Path Out: Startups need to clearly explain the problem they are solving, their value proposition, and their differentiation.
  • Seek the Right Stakeholders, at the Right Time: And those other technologists and leaders are structurally more aggressive in technology adoption than the CIO.

2. Maintaining Faith through the Galewinds of Cost and Risk

One enterprise tech leader said that talking to his team about bringing in a new technology inevitably triggers an immune defense reaction: New vendors need to understand how customers are measuring return and cost. 

Even once your team has cleared a path out of the swamp, it can feel like you’re fighting against a galewind. There’s a lot of natural resistance to bringing in new vendors, because a new offering needs to be valuable enough to overcome inherent cost and risks of working with a startup.

Startups should be empathetic to this risk aversion and understand that, on the customer side, someone’s career is often on the line.

Enterprise customers told us they think also about the “hidden costs” of vendor management, user training and adoption, integration, implementation and administration, and the risk of the startup dying or getting acquired.
Because of these many “hidden” costs, smart technology buyers are projecting out the landscape of vendors, and looking for startups that not only offer tactical benefits but have a chance to endure as longer-term partners — disrupting an existing category or creating an important new one.
Advantages for disruptor companies include innovating on the experience of purchasing and using the technology, and the total cost of ownership.

To de-risk their decisions, enterprise tech leaders want to work with startups that have raised capital from top-tier investors, because it’s one sign they’ll go the distance.

3. Bridging the Gap of the Four S’s: Scale, Security, Spend & Supportability
Value may outweigh the costs and risk, but will the product work in their environment?

  • Scale: Can the startup support the scale of the customer’s user base or infrastructure? Increasingly, we see customers want to validate that scale rather than taking it on faith. … This includes ease of use, rollout plan, reporting, integrations into existing technology, administration workflows, SLA’s. Customers are also evaluating who is going to help them deploy — for example, the existence and quality of the startup’s sales engineering or implementation team, if needed.
  • Security: Startups told us this is #1 on everyone’s list. The need is often driven by regulation such as GDPR, or internal requirements for sophisticated access control, and the key thing here is to have a clear approach to customer data.
  • Spend: Pricing models that are appropriate for the first thirty developers or first hundred users might not work for broad deployment. Startups must offer pricing models that are feasible at scale, aligning with the value they create for their customers.
  • Supportability: Is the startup prepared to offer the kind of support (often 24/7) that enterprise customers need, at scale? Can they handle the reality of legacy technology that large companies are often saddled with, and make their customer successful?
4. Avoiding the Quicksands of Customization

The quicksands of customization are an especially tricky neighborhood.
…getting sucked into customization can mean company death, or at least, derailment.

Just as customers will choose to work with a particular startup based on ability to scale, durability, and other factors, startups should also choose their early customers carefully, balancing customer requirements against strategic priorities and limited company resources. Being too accommodating or diffuse in strategy can be a recipe for mediocrity in multiple categories.
Disciplined customer segmentation is key

Giving potential customers realistic visibility into your short and medium term roadmap is also a pattern for success. Beyond choosing early customers carefully, startups should also take a pragmatic view of what feature requests to field, and when.

5. Surviving the Desert of Procurement & Approvals
The procurement process can be a bear — you feel like you’re so close to the finish line, but it’s a mirage. You can get stuck in limbo.
Startups need to have realistic expectations about speed, and plan ahead for sales cycles so they don’t run out of resources before they show progress.
Enterprises, on the other hand, need to create pathways for the business to push through important innovations fast.

To accelerate their sprint through the procurement and legal desert, startups should find internal champions, arm those buyers with the right business case and other support, and arrive prepared with mature contracts.
There are also different purchasing processes for different scales of spend. Building up engagement with a large enterprise partner through a land-and-expand model also changes a startup’s initial experience in procurement.

6. Crossing the Ocean of Early Execution
Finally, quest-goers need to build a strong ship and chart a clear course to cross the ocean of early execution.

  • First, this means structuring PoCs and initial engagements to be short, with repeatable onboarding flow, clear success criteria and commitment from partners to that timeline.
  • Second, technology leaders also cautioned against “poisoning the well” — damaging relationships and reputation by not delivering on promises.
  • Third, enterprises need startups to consciously involve the necessary stakeholders to operationalize technology, even in planning and deployment, support their change management, and follow up with discipline.
7. The Golden Fields of Innovation

In summary, the quest to reach the golden fields of innovation — that is, to successfully deploy new capabilities and technologies into the enterprise — is a journey that requires strategy, careful planning and consistent execution.
Once that early execution is successful, this is not a one-time quest. It’s an ongoing journey with each new partner, and each new use case and product line. An early success lays the groundwork for a strong customer reference that will help generate new business — in today’s age of connectedness and transparency, a startup’s best salespeople are its happy customers.