Editor’s note: Roman Stanek is CEO and founder of GoodData. Follow him on Twitter @RomanStanek.
Lately, in Silicon Valley and its counterparts around the world, disappointment has ruled the halls of companies that had a huge impact with consumers, but then fizzled as investments when they went public. Facebook’s and Zynga’s IPOs are the most notorious examples. Attention quickly moved from the consumer to the enterprise market, where Splunk, Palo Alto Networks, Workday, and LinkedIn are all humming along just fine. Entrepreneurs seeking to sell to enterprise customers should recognize that the business-to-business (B2B) market, especially with respect to IT, plays by a different set of rules than the business-to-consumer (B2C) space.
The Silicon Valley Conundrum
There is much talk in the Silicon Valley community of lean startups and pivoting. The idea is that you get going, learn from your mistakes, and then evolve toward what the market needs. There is a lot less talk about what this process of evolution does to the founder’s stake in the company, which goes down with every pivot, every attempt to start over.
In the B2C space, this process can work because the marketing costs are low or nonexistent and there is an efficient path to massive scale. The goal is that the uptake happens virally and the figuring out takes place with a safe cushion of huge numbers of users. Even so, some of the figuring out isn’t so fun to watch, as evidenced by Instagram’s recent attempt to adjust terms of use to better support revenue generation or Twitter’s journey from lots of users to a stable business model, a journey that continues to this day.
This model just won’t work in the B2B space. New products, especially those aimed at IT, must usually be sold. If you don’t have both the technology logic and the business logic of your product worked out, the founders and early investors are in for a rough ride.
Here’s a common scenario. A Silicon Valley software developer will come up with a novel technology idea, such as a new database. Its first customers are other fast-growing Silicon Valley companies who are grateful for the solution but are small and not exactly flush with cash. The developer then turns to the enterprise. But the enterprise is not a dedicated follower of fashion. Gaining a toehold in the enterprise is a separate swim lane from engaging consumers or startups who never pay for support or consulting. Remember, Salesforce.com has a massive direct sales force. That’s not because they want to have one. Splunk has a sizeable direct sales force, too. And for a sales force to succeed, the offer must be compelling.
6 Requirements of Enterprise Software Sales Success
Of course, it’s not impossible to sell your technology to the enterprise. If you plan on finding ways to make some serious B2B money, here are some of the rules for getting the business logic right.
- Have a significant, monetizable value proposition. Getting people to use something is different from getting them to pay for something. From the beginning, your offering has to be something that people find so valuable that they’ll pay for it, not just play with it. Yammer, the enterprise social platform, had plenty of penetration, but it was not fundamentally connected with the business systems people used every day to do work. The company was sold to Microsoft, which could bundle Yammer’s capabilities into its Office suite and exploit its significant presence in enterprises.
- Sell the way the enterprise buys. Selling to the front office can be on an inbound basis, with relatively horizontal, lightweight, consumer-like pitches. The problem is, you’ll find that some serious company – Salesforce, Google, and Microsoft – already owns most of the desktop. Enterprise IT is used to provide significant, detailed explanations of functionality on an outbound sales basis. That means real salespeople burning real shoe leather. If you want to upsell, you’ll probably have to up-staff.
- Meet enterprise requirements. Your technology will need to satisfy all of the enterprise’s requirements for the “-ilities”: scalability, reliability, security, availability, and so on. Enterprise IT wants to know that the software can integrate with long-established systems of record. Be prepared to answer questions about single sign-on, uptime, firewalls, recovery-time objectives, service-level agreements, and failover.
- Focus on targeted value scenarios or first go vertical. Because of the “crowded shelf” in the front office, your technology stands the best chance of getting an initial enterprise sales bump if it can solve a deep and irksome process problem that is a known issue across industries, or only applies to one industry. Enterprise IT often won’t buy from companies that haven’t already sold to quite a few of their peers, but you have to start somewhere. Your “land and expand” strategy might do best by starting with a nettlesome issue, deep in the weeds.
- Have some patience. We like to say, “selling to the consumer is about selling positive emotions. Selling to the enterprise is about suppressing negative emotions.” Enterprise IT is not a culture of early adopters. “Ain’t it cool?” is not enough. Enterprise IT sales cycles are often months long and you should prepare to be met with skepticism. Consumers usually ask, “Is it awesome?” “How much does it cost?” Enterprise IT asks, “What if it doesn’t work? Will I get fired?”
- Establish a control point. With enterprise IT, being the first to market is not always the winning scenario. What’s more important is having a gambit that puts your technology’s hooks in an organization’s fabric – a “control point” of sorts. Your technology has to have some aspect that will prevent customers from moving to the nearest competitor tomorrow. Salesforce and LinkedIn sell dozens of products based on their control of customer data, which can be aggregated and, importantly, monetized, because they reveal important trends in business. Yammer’s control point was its community of thousands of people in an organization, which made it difficult to replace, though ultimately, it could not capitalize on that proposition alone.
Conclusion
If you want to sell your technology to the enterprise, and buy a big ski chalet in Switzerland, you have to solve real problems for the enterprise, and you should expect to have a substantial sales and marketing operation. Fundamentally, the product has to make work easier, integrate better with other systems, and meet much more stringent requirements than a consumer product would. The enterprise is a large and slow-moving but a powerful and valuable animal. Capturing it requires addressing its concerns and its persona head-on. Don’t expect to figure most of this out by pivoting.
One of my investors, John O’Farrell of Andreessen Horowitz, puts it this way: selling to the enterprise “definitely separates the men from the boys. Enterprise customers are demanding and conservative – and they should be. They’re being asked to implement a product that will interface with their other apps in real time and form the basis for critical business decisions.”
It is vital that you know as much as possible in advance about how you are going to make such customers happy. Think of it this way: Raising an A round for an enterprise-focused company is relatively easy. Getting a B round on attractive terms will only happen if you are making sales because your theory of what customers need, the one you carefully figured out in advance, is actually working.