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Top 4 Reasons Companies Shouldn't Buy from Startups: 1. Startups have a high(er) chance of failure or pivoting into something you didn't buy. ("Fail fast" is a

Top 4 Reasons Companies Shouldn't Buy from Startups: 1. Startups have a high(er) chance of failure or pivoting into something you didn't buy. ("Fail fast" is a popular mantra [a]) 2. If the startup does have an "all-star team" as you say, they're more likely to get acqui-hired by Google/Facebook and the product subsequently shut-down. (I've said before that this is a byproduct of the acqui-hire craze and I still believe it). 3. Many startups (especially those with all tech founders) seem to suck at customer service. They tend to focus on automation and hacking their way to avoiding any type of high-touch service (the exception seems to be companies that make support tools). Do you prefer phone support from your software vendors? Don't choose a startup. 4. Their pricing doesn't fit your buying model. Many government and educational institutions must buy using a PO process. Large companies don't want the "small team plan" for $29/month. FYI I'm not posting this comment to be a prick–rather it's a thought exercise. If you want companies to purchase from startups more often, stop trying to convince them why they should and start addressing the reasons why they don't. [a] http://www.feld.com/wp/archives/2009/04/the-best-entrepreneurs-know-how-to-fail-fast.html http://www.feld.com/wp/archives/2009/04/the-best-entrepreneu...

mathattack 13y ago
All very true. This is why I find that companies tend to do best buying from companies of relatively similar size. GM and GE struggle with buying from startups for these reasons. The pace of change is too much. But they will buy from the startup after IBM has bought them. Startups are better off finding more nimble initial customers. Crossing the Chasm [1] is the best resource I've found on describing the challenges of startups servicing large companies. The exception to this is parts of the company that are either specifically geared towards hunting new technologies, or subsidiaries/departments with lots of autonomy and shorter timeframes. Basically folks who are tasked with experimenting and moving on. Even then, it's a better fit with services (boutique ad agencies and investment banks supporting large firms) than products with lock-in. [1] http://en.wikipedia.org/wiki/Crossing_the_Chasm http://en.wikipedia.org/wiki/Crossing_the_Chasm
lifeisstillgood 13y ago
Counter-points 1. Pivoting away from revenue is pretty stupid thing to do. If you are buying from me, and so is Tom Dick and Harry, I am getting a strong market signal. 2. The team is so good they might get acqui-hired and you are worried your multinational company is now relying on them - well there is a solution to stop another company acqui-hiring them.... 3. Customer service sucks most places. Some use it as a differentiator (Rackspace), but a lot of the time customer service should be automated (lost your password?). And "on-boarding" new customers by hand - this is gold that some startups are learning about 4. I will happily send you an invoice and set up a monthly billing run. It just won't be for 29 dollars a month :-) But yes - I agree with your main thrust - we should make it easy and simple to get a yes turned into a paid invoice from a corporate budget holder.
- deleted 13y ago
  [deleted]
- callmeed 13y ago
  Regarding 3: I agree many CS functions should be automated (lost password is a good example). However, for foreseeable future a lot of people want to talk to a human. This is especially true for services that touch sensitive or mission-critical data (money, infrastructure). As an example: I love Stripe as much as anyone, but I find it extremely odd that a company that touches up to 100% of another company's revenue doesn't have a phone number on their support page [a] Maybe I'm old-fashioned but I think there's more to it. At my company, at least, great customer service has been a cornerstone for us and a reason people refer us and don't leave us. [a] https://support.stripe.com/ https://support.stripe.com/
  - vvvVVVvvv 13y ago
    You don't build customer trust with good salesmen, you do it when you fix the issue they're having. See Amazon.
    - Silhouette 13y ago
      See Amazon. Assuming that was meant to be an example of good customer service, it's an ironic one. I'm increasingly voting with my wallet for local stores over Amazon for any big name items. This is mainly because Amazon's unpredictable pricing, including sometimes dramatically overpricing things for a while, is turning me right off trusting them or assuming that they'll be cheaper the way they almost always used to be. Free delivery, we'll-call-you-back customer support, and a smartly automated returns process are all great, but they are still vastly inferior to being able to walk for two minutes from my home and buy what I want right now, and being able to return it just as easily on the increasingly rare occasions there is a defective disk in the box. Between this kind of nonsense and a couple of years of getting Christmas wrong for lots of people, I'm not sure how much longer Amazon specifically will be able to rely on the good will they've built up over the years without a change in course.
vvvVVVvvv 13y ago
Regarding the customer service part, I'm not sure to understand what's the logic behind such a thought process. When you're a giant corp, you can afford to be slacking on CS. But when you're a small structure with a limited amount of stability and cash flow, why would you take the risk to screw your PR ? I'm biaised, I'm doing specialised tech support for a Giant so I it's obvious to me. I've been looking to move to a smaller company (Ie a startup) and I found not so many positions, most being standard CS and nothing technical which is surprising. Might be because I'm in Europe though.
nwenzel 13y ago
Don't buy from bad startups. 1. Startups have a high(er) chance of pivoting out of something you don't want. They aren't stuck selling you the same bloated database (or whatever). 2. Don't buy from startups that don't have a path to monetization and growth. If the path leads to no where. That's not a company, that's a resume bullet point. 3. Don't buy from a startup just because they're a startup. If they suck at service, they're not worth your time and money. 4. Yes, startups should fit to customer expectations. But if a big company's or govt's buying model prevents them from buying a superior product, then maybe something is wrong with the buying model. Govt buying decisions led to a $300M webapp. Marc Benioff offered to build and host it for free for 5 years. http://www.washingtonpost.com/national/health-science/healthcaregov-will-meet-deadline-for-fixes-white-house-officials-say/2013/11/29/caf6a236-5792-11e3-835d-e7173847c7cc_story_1.html http://www.washingtonpost.com/national/health-science/health... "A White House official said the administration could not have accepted the offer, because it ran afoul of federal contracting rules."
- callmeed 13y ago
  OF COURSE something is wrong with the govt/edu buying model (I worked at a college for 5 years). But I still think it's worth playing the game if that's within your target market. Are you saying don't sell to them on principle?
  - nwenzel 13y ago
    Of course they should. Marc Benioff tried to sell to the govt. Govt couldn't buy it. Couldn't even evaluate it. We're talking to several universities now to find the best way to serve them. Sometimes we run into structural road blocks. One school requires a printed hard copy form be sent between departments for processing. But we're still trying to find a way to make it work. Mostly because I'm hellbent on moving companies, schools, and governments from paper to digital.
- mbesto 13y ago
  > "Don't buy from bad startups." Do you have a resource that can definitively tell which startups are bad and which ones are good?

mathattack 13y ago

All very true. This is why I find that companies tend to do best buying from companies of relatively similar size. GM and GE struggle with buying from startups for these reasons. The pace of change is too much. But they will buy from the startup after IBM has bought them. Startups are better off finding more nimble initial customers. Crossing the Chasm [1] is the best resource I've found on describing the challenges of startups servicing large companies. The exception to this is parts of the company that are either specifically geared towards hunting new technologies, or subsidiaries/departments with lots of autonomy and shorter timeframes. Basically folks who are tasked with experimenting and moving on. Even then, it's a better fit with services (boutique ad agencies and investment banks supporting large firms) than products with lock-in. [1] http://en.wikipedia.org/wiki/Crossing_the_Chasm http://en.wikipedia.org/wiki/Crossing_the_Chasm

lifeisstillgood 13y ago

Counter-points 1. Pivoting away from revenue is pretty stupid thing to do. If you are buying from me, and so is Tom Dick and Harry, I am getting a strong market signal. 2. The team is so good they might get acqui-hired and you are worried your multinational company is now relying on them - well there is a solution to stop another company acqui-hiring them.... 3. Customer service sucks most places. Some use it as a differentiator (Rackspace), but a lot of the time customer service should be automated (lost your password?). And "on-boarding" new customers by hand - this is gold that some startups are learning about 4. I will happily send you an invoice and set up a monthly billing run. It just won't be for 29 dollars a month :-) But yes - I agree with your main thrust - we should make it easy and simple to get a yes turned into a paid invoice from a corporate budget holder.

deleted 13y ago
[deleted]
callmeed 13y ago
Regarding 3: I agree many CS functions should be automated (lost password is a good example). However, for foreseeable future a lot of people want to talk to a human. This is especially true for services that touch sensitive or mission-critical data (money, infrastructure). As an example: I love Stripe as much as anyone, but I find it extremely odd that a company that touches up to 100% of another company's revenue doesn't have a phone number on their support page [a] Maybe I'm old-fashioned but I think there's more to it. At my company, at least, great customer service has been a cornerstone for us and a reason people refer us and don't leave us. [a] https://support.stripe.com/ https://support.stripe.com/
- vvvVVVvvv 13y ago
  You don't build customer trust with good salesmen, you do it when you fix the issue they're having. See Amazon.
  - Silhouette 13y ago
    See Amazon. Assuming that was meant to be an example of good customer service, it's an ironic one. I'm increasingly voting with my wallet for local stores over Amazon for any big name items. This is mainly because Amazon's unpredictable pricing, including sometimes dramatically overpricing things for a while, is turning me right off trusting them or assuming that they'll be cheaper the way they almost always used to be. Free delivery, we'll-call-you-back customer support, and a smartly automated returns process are all great, but they are still vastly inferior to being able to walk for two minutes from my home and buy what I want right now, and being able to return it just as easily on the increasingly rare occasions there is a defective disk in the box. Between this kind of nonsense and a couple of years of getting Christmas wrong for lots of people, I'm not sure how much longer Amazon specifically will be able to rely on the good will they've built up over the years without a change in course.

vvvVVVvvv 13y ago

Regarding the customer service part, I'm not sure to understand what's the logic behind such a thought process. When you're a giant corp, you can afford to be slacking on CS. But when you're a small structure with a limited amount of stability and cash flow, why would you take the risk to screw your PR ? I'm biaised, I'm doing specialised tech support for a Giant so I it's obvious to me. I've been looking to move to a smaller company (Ie a startup) and I found not so many positions, most being standard CS and nothing technical which is surprising. Might be because I'm in Europe though.

nwenzel 13y ago

Don't buy from bad startups. 1. Startups have a high(er) chance of pivoting out of something you don't want. They aren't stuck selling you the same bloated database (or whatever). 2. Don't buy from startups that don't have a path to monetization and growth. If the path leads to no where. That's not a company, that's a resume bullet point. 3. Don't buy from a startup just because they're a startup. If they suck at service, they're not worth your time and money. 4. Yes, startups should fit to customer expectations. But if a big company's or govt's buying model prevents them from buying a superior product, then maybe something is wrong with the buying model. Govt buying decisions led to a $300M webapp. Marc Benioff offered to build and host it for free for 5 years. http://www.washingtonpost.com/national/health-science/healthcaregov-will-meet-deadline-for-fixes-white-house-officials-say/2013/11/29/caf6a236-5792-11e3-835d-e7173847c7cc_story_1.html http://www.washingtonpost.com/national/health-science/health... "A White House official said the administration could not have accepted the offer, because it ran afoul of federal contracting rules."

callmeed 13y ago
OF COURSE something is wrong with the govt/edu buying model (I worked at a college for 5 years). But I still think it's worth playing the game if that's within your target market. Are you saying don't sell to them on principle?
- nwenzel 13y ago
  Of course they should. Marc Benioff tried to sell to the govt. Govt couldn't buy it. Couldn't even evaluate it. We're talking to several universities now to find the best way to serve them. Sometimes we run into structural road blocks. One school requires a printed hard copy form be sent between departments for processing. But we're still trying to find a way to make it work. Mostly because I'm hellbent on moving companies, schools, and governments from paper to digital.
mbesto 13y ago
> "Don't buy from bad startups." Do you have a resource that can definitively tell which startups are bad and which ones are good?