3 Effective B2B Models for Startups
Having been in the B2B segment for almost a decade, I have picked up some interesting learnings that we’ve been adopting at our startup Portier Technologies over recent months in particular. In this article, I’d like to share 3 ways in which we approach the B2B sector for the purpose of scaling faster than would financially be possible.
Here are 3 options startups should consider when they are ready to scale their product sales:
Find a HUGE Partner and Scale Fast
If you are selling your product to a certain sector, there’s already a set of larger corporates that’s serving that particular market with a range of products. For example, if you are a provider of cloud telephony solutions targeting hospitals, a large local telco in the country you’re selling this solution in, will already have an existing sales channel with hospitals. This company would have already been selling the likes of WiFi networks and other products to these hospitals for years.
What this means is that these corporates have dedicated account managers out in the field, who already have strong relationships with your potential customers. In addition to this, approaching a potential customer can be harder under the umbrella of an unknown startup. Imagine a name like Vodafone versus a name like “enter your cool startup name here” selling to hospitals. Simply put, Vodafone doesn’t have to earn the trust that the startup will find hard to establish.
The advantage you gain from having a large corporate by your side is the combination of already existing relationships, an already functional sales force and a recognisable name you can associate your company with. In that sense, you don’t have to allocate large chunks of your funding to deploying a massive set of sales people or on extensive marketing efforts to make a name for yourself. Having said that, the corporate needs to be convinced that adding your solution to their portfolio will uncover new revenue opportunities and help them achieve some of their more visionary goals. If the above is given, you can create the old “win-win” situation by giving your partner something attractive, whilst being able to scale your solution fast.
Nevertheless, there are also disadvantages with this approach. Imagine the amount of products that sits in the portfolio of a corporate at any given time. Whilst these corporates are no longer as inventive and creative as they used to be, their large bank accounts enable them to pick some of the most inventive and creative products to push into the market. In this respect, they can be very distracted, meaning that you will have to maintain their interest and continuously reinforce the benefits of your solution. In other words, you’ll need to hold the corporate’s hand and avoid thinking: “now that we secured this channel partner, they will sell our product like crazy!”
Find a SMALLER but more Mobile Channel Partner
Large corporates often grow to such an extent that they stop “directly” caring for some of their smaller clients. In such cases, they themselves rely on channel partners. These partners often sell a variety of products and include a mix of services in their offering. A large IT company like Oracle for example, might not care too much about directly dealing with a small business that wants to buy Oracle solutions. To solve this problem, they accredit channel partners that might possibly sell some of their competitors’ solutions, but ultimately also help Oracle serve a lower priority segment.
These channel partners are often a very intriguing group of people. In simple terms, they want to make money! And because they want to make money, they are very focused, extremely agile and always on the lookout for new revenue streams. When you look at a large corporate as a partner, you might be wowed by the size of their sales teams and might think that gaining access to large sales teams can only be great. The problem is that some of these sales people already have their routines and could see a commission-related risk in pushing your solution which is likely to be one of the least-established items in their product portfolio.
In contrast, these smaller resellers have more concentrated sales teams, and in some cases, they are so entrepreneurial that their account managers get equity incentives and feel as though they sell for their personal gain too. This is a clear advantage when working with such a group of partners, as they can often manage your solution and the associated sales process a lot more independently. It’s almost like recruiting a sales person who’s keen to work for a startup, but this person now comes with the backing of a locally established company. Whilst the name of the company might not mean as much as a large corporate’s name, the effort coming from this type of partner is likely to be bigger.
Go it ALONE
Duh! Yes, you can go it alone too. I’d say that the biggest advantage with going it alone is mostly financial, as it means that you wouldn’t have to share the revenues with any potential partners. I’d also say that this is probably how you always imagined your sales process to look like; build a great product, test and validate it with a trial client, and then, use that case to start selling it to other companies like crazy.
This is particularly valid if your product has pretty much zero competition in its industry, which seems highly unlikely. However, if you really have such a unique product on your hands and the market is ready for it, there’s probably no need to bring in partners, as the solution will likely market itself. However, this really is an unlikely scenario, given that there’s virtually a competitor to any solution.
In essence, a large chunk of the partnership decision will depend on commercials. Initially, it’s fairly natural to exclusively look at financials, especially given that startups are measured and benchmarked in such ways. To think that you don’t want to submit any of your revenues to third parties is not unusual, but this goes back to the same old cheesy line of “rather a bigger pie than a larger piece of a smaller pie”, so if you want that pie to be bigger, you should really consider establishing a functional partnership. If you’re happy with growing at a more reasonable pace, going it alone might be the best solution.
Portier is taking hotel technology to the next level. We graduated from Chinaccelerator, an SOSV accelerator that helps internet startups cross borders.
