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Why Every Enterprise Startup Needs A New York City Presence

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Editor’s note: Jonathan Lehr is Venture Director at Work-Bench where he focuses on early-stage enterprise technology investments. He is also the founder of the NY Enterprise Technology Meetup.

I recently wrote about the state of enterprise tech in NYC in order to showcase New York’s growing enterprise startup ecosystem. In highlighting the 70+ enterprise startups headquartered in the city, however, I left out the important and growing constituency of companies opening satellite offices in New York with headquarters elsewhere.

This faction of startups is reacting to the critical fact that, if your company would like to sell into large corporations, the benefits of a New York presence make opening an office in the city increasingly essential.

Enterprise Sales Is About Relationships

Enterprise sales has always been about relationships. To sell software into an enterprise, buyers must put their name and year-end bonus on the satisfactory delivery of your team and product. Trust is therefore a critical part of the equation, and that’s tough to build by flying in for meetings or living on the phone.

Taking a client out to dinner or bringing them into your office allows them to build a deep understanding of not only your product but the people and infrastructure behind it.

As Mark Cranney of Andreessen Horowitz explains in his post If SaaS Products Sell Themselves, Why Do We Need Sales?, in many ways, enterprise sales is about helping customers through their own internal buying processes. Even the best, most popular product can’t make a typical enterprise buyer change the way it does procurement.

According to Stephen Purpura, founder and CEO of Context Relevant, whose company has a large and growing NYC presence, “[I]n the new tech world of SaaS, cloud, social, and mobile there’s a race to low value, low touch, high volume sales models. Models optimized for massive inside sales teams, quick pitches, and rapid sales cycles. But while the tech world may have changed, the large enterprise buyers haven’t. The truth is, you’re not going to sell a seven-figure deal over the phone, and you’re not going to get through a Fortune 100’s procurement process without boots on the ground.”

Purpura further declared the art of the enterprise sale lost and notes that “having customer-facing teams in New York, where they can have frank face-to-face conversations with C-level executives, has become a differentiator. We beat competitors every day because we’re in the room while they’re on WebEx.”

New York’s many modes of transportation – be it subway, cab or Citibike – also make last-minute impromptu lunches a breeze, not to mention that if a customer runs into a critical support issue, it’s no big deal to pop by their office and save the day.

We beat competitors every day because we’re in the room while they’re on WebEx.
— Stephen Purpura, Context Relevant

Having an NYC presence enables enterprise startups to understand and fit into the sales and business development culture of large enterprises on the East Coast. According to Joyce Shen, director of emerging technology partnerships and investments at Thomson Reuters, understanding this mentality is important when selling to large companies, which often have similar cultures and technology evaluation processes.

Customer network effects can further generate increased demand for your product. According to Shen, “Most large enterprises are clients and/or partners with other large enterprises, so having physical presence and network in New York allows enterprise startups to expand reach quickly if they can land one or two anchor clients with substantial and more horizontal use cases.”

Support and Customer Success

Beyond the direct benefits to sales and customer referrals, having a local presence for your support and customer success teams gives your customers and prospects added assurance that you’re serious about supporting their needs.

Given the increased focus on “land and expand” strategies within the enterprise, demonstrating white glove customer service is a great way to increase your chances of increasing ACV by year-end.

Tim Eades, CEO of vArmour, described New York City as a second home for the Silicon Valley-based company. The data center security company has a core team based in Mountain View to help organizations protect their virtualized and cloud assets, but with New York as the epicenter for financial services, Eades says a NYC presence is a must in order to properly support their customers in banking.

Building a Better Product with Feedback

Beyond sales and support, an NYC presence makes prioritizing your product roadmap and iterating on features easier. When you’re here and interacting with customers, you can learn their pain points and respond to them instead of just building cool technology in a vacuum.

Alex Polvi, CEO of CoreOS, adds that “developing truly impactful technologies in the long term means understanding the real problems that businesses face in areas like security and infrastructure.” On having been part of the NYC tech community since mid-2014, CoreOS “has been fortunate to have a talented team that is closely connected with the tech and business communities so we can continue on the path and work together to create a more secure Internet.”

BetterWorks has been focused on the enterprise since day one and therefore started on both coasts simultaneously. “Customer success is a core part of our offering,” said Omar Divina, head of BetterWorks New York. “It’s critical because sometimes customers aren’t sure of how to ask for what they need. Our approach is to understand what’s underlying even the most basic functionality questions and customer requests. Why are these folks asking this question? How can we satisfy their needs in ways they might not have anticipated?

“In addition to the NYC team traveling to our Silicon Valley headquarters regularly, we have an informal exchange program where key folks from Palo Alto head to New York to get feedback and insights from some of our largest enterprise customers.”

Communities for Sales, Hiring and Mentorship

Being here in NYC ingrains your company in our community, where relationships build naturally. Seeing potential buyers at local enterprise tech events like the NY Enterprise Tech Meetup makes it easier to chat informally about their IT pain points and gauge interest in your solution. This would be difficult to achieve during a short visit, which normally, due to time constraints, is highlighted by a ‘hard sell’ strategy.

Jaime Melendez, associate director of technology partnership and business development at Merck, is a regular attendee of the NYETM, which he uses to scout new technology solutions to solve pain points for Merck’s IT teams. He’s also met numerous companies at accelerators such as Work-Bench, which numerous enterprise startups from across the country call home for their NYC teams. Many of these startups have gone on to meet with Merck teams, with some eventually becoming vendors of the firm.

[CoreOS] has been fortunate to have a talented team that is closely connected with the tech and business communities.
— Alex Polvi, CoreOS

Melendez remarked that “as one of many Fortune companies located on the East Coast, it’s easiest to work with an enterprise startup that is co-located with your organization. Having the engineers work together side-by-side with the designers while the product managers take notes helps drive the necessary collaboration to ensure the right product gets out the door as quickly as possible to the end-user. While it’s not impossible to do across time zones, there’s something about being in the same room.”

NYC’s diversity is a welcome reprieve from Silicon Valley’s echo chamber. Since tech isn’t the only industry, you can tap into people from a wide range of backgrounds as you hire for different functions. This comes in handy when trying to understand customer needs or navigate a long sales cycle. Who better to do that than people who previously lived it themselves from the other side of the table?

David Aronoff, a general partner at Flybridge Capital Partners, highlighted how engineering talent abounds in his March 2014 report “NYC is the next Venture Capitol.”  With 110 universities in the broader region, tech giants such as Google, Amazon, Facebook, and Yahoo drawing in elite hires, and NYC’s recent lead on H1-B visas granted, we’ve got quite a pool from which to draw top candidates.

“Don’t Act Like an Amateur”

A friend who is senior in supplier risk management in IT at a top-tier investment bank offered some practical advice for enterprise entrepreneurs: “Don’t fly in and out, and don’t treat NYC like a second or third tier market.  It’s the biggest opportunity in the world, so why wouldn’t you be here? Go where the money is.” (Unfortunately, I can’t name this friend due to the fun compliance rules of working at a big bank.)

He summed up with a blunt warning: “Don’t act like an amateur. Set up shop here and give NYC the proper sales and support coverage it deserves.”

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Thanks to Jessica Lin, Laurel Woerner, and Michaela Lehr for reading drafts of this. Context Relevant and vArmour are Work-Bench Ventures portfolio companies. BetterWorks and CoreOS are members of Work-Bench’s enterprise technology growth accelerator, but Work-Bench Ventures has no ownership in the company.