Startup? Find Your Elephant To Survive

As a (technology) start-up, you might be pretty interested in leveraging your company through smart partnerships with more mature companies. Collaborating with an established business will add a significant amount of credibility to your start-up. In many cases, we are talking about a collaboration with the ecosystem leader in your specific niche.

As a (technology) start-up, you might be pretty interested in leveraging your company through smart partnerships with more mature companies. Collaborating with an established business will add a significant amount of credibility to your start-up. In many cases, we are talking about a collaboration with the ecosystem leader in your specific niche.

By connecting your little waggon to their powerful locomotive, you can gain credibility and increase your chances of survival by a factor of 10.

To find the right ‘Elephant’, or the ecosystem leader, you need to map the value chain in your domain.

 

There are many possible value chains. Find your own value chain to find your ecosystem leader. 

There is a reason why larger enterprises are rolling out support programs for start-ups. They move too slowly to innovate in dynamic environments so they compensate for that by acquiring innovative companies (usually start-ups) to do this for them.

The ecosystem leader is the biggest link in your value chain. Sometimes it’s the one that sells a few products to the many. Let’s call him ‘the Elephant’ from now on. This Elephant also has competitors, so he’s under pressure. He can only survive this pressure through innovation. And he needs you for that. So you can both benefit by a mutual collaboration.

Why would this Elephant be interested in you? Because you are going to validate new markets/ products for him, while he is stuck in predefined product roadmaps. Your product roadmap is not yet predefined. You see something moving in the market and you respond. He doesn’t have this luxury.

In our(cloudalize.com) specific case, for instance, we understood that Nvidia would become the market leader for graphics processing units (the graphics card in your computer or better known as GPUs). We expected that the ‘dematerialization’ of personal computing would lead to new cloud computing technologies. So we wanted to be part of that.

The Benefits

So what are the wider benefits of connecting with an Elephant for a start-up?

  1. If you build relationships with their strategic marketing and product development divisions, you get an impression how they believe the market will evolve. They spend a lot of money on market research which you obviously can’t afford. So connecting with right people in larger enterprises can significantly increase your market knowledge and as such, increase your chances for product/market fit.
  2. If you get lucky, their product development division acknowledges the fact that you might be important, or at least interesting for their future. This might be an opportunity for joint product development. Keep an eye your own IP.
  3. As a solution partner of the Elephant, you get instant credibility to the outside world. This because you use their logo on your website, use their quotes in your marketing material and use their relationships for initial traction and more effective investor meetings. So a technology partnership will increase your chances of getting serious funding by a factor of 10.
  4. Being acquired is in many cases the result of years of joint collaboration on both a technological and commercial level. However, cases exist where large companies realise that they “forgot” innovation in your specific subject and just acquire your before their competitor does.
  5. MDF or Market Development Funding: They can fund your marketing and sales activities such as creating a video, building a website, attending exhibitions, etc. The reason is simple; if their product is part of yours, it’s a win-win.

The negative side effect could be the risk that you became too dependent on them. You need to avoid that because it can seriously depreciate your company (demand and supply).

Making the right connections

So how do you find your way in these large enterprises where thousands of employees work in complex hierarchies? It’s not easy and it takes a lot of time. In the technology start-up we have build, it took us about a year to figure out which division was right for us and gain access to the relevant senior managers with decision-making power.

Step 1

Start high in the tree. There is almost always a Vice President (VP) or Director with the mission to ‘expand the ecosystem.’ It’s called ‘business development’ and should not be confused with what we, as sales people, understand as business development. Don’t think of business development in terms of generating leads. For the technology Elephant, ‘business development’ on this level means detecting and collecting start-ups and technology partners around new product lines with the goal of accessing and understanding the end-user market in greater depth.

Your ideal contact knows the company bottom up and has access to all levels in the company (up to the CEO).

Most people are afraid to cold call or email high-level people in these companies. They do not get many outside calls. Use tools like LinkedIn to find and contact this person as your first point of contact.

This is your way in. But remember, the person needs to understand what you do and where it will fit in the value chain of the future ecosystem. Or more exactly, which ‘Elephant products’ you need to serve this new market. And this is particularly difficult because we are speaking about future ‘use cases’ (your product used in a new application) and future product lines (their thing).

Step 2

Your goal is to get in touch with the relevant product division (via the GM or VP) that is a good fit for your product. In other words, you are going to use their product to deliver your future customers. There are two possibilities:

  1. If you are lucky, this person immediately envisions your product as part of the future value chain, and as such an important element of value for the end-user. Don’t expect this to happen.
  2. This person has no clue where you might fit and s/he doesn’t understand what you are doing. In this case, you’ll have some work to do to create that vision for him/her.

In the first scenario, it’s likely that you’re too late and a bunch of competitors are already banging on his door. But once you have some management backup, it’s time to go to the floor.

Step 3

Your next stop will be the local sales division. No product division executive will ever change his product if the sales divisions see no value in it. So it’s time to start doing some more ‘customer development’ by collaborating with the Elephant’s local salesforce.

Take the sales team to the end-users (or vice versa). Make sure you have a proof-of-concept (POC) that works and that the end-user will be impressed by. Be aware that this is a phase which can take between 3 months and 1-2 years! It’s part of your ‘customer development’ phase and is the most crucial phase in a start-up company too because it ensures (future) product/market fit.

At this stage you’ll realise how much power ‘sales’ has in a company. Good companies listen to the field and adjust their offerings accordingly. And this gives the sales division a lot of power. They know what the end-user wants and as such what needs to be done to serve him.

The sales team get it; they will need your product to ensure efficient selling in the future. Emails are being exchanged between you, and their managers are being copied into your correspondence.

As soon as that’s happening it’s time to go back to the product line responsible and discuss your terms.

In case of questions, feel free to reach out to me
or add me on LinkedIn. 

Disclaimer: I’m not saying that this is the only way to grow a relationship with larger enterprises. It is the way I did and it’s one of the possible ways. I can only say this worked for us.