Dear Enterprise Startups, Not All Customer Intros Are Equal
These Are the Doors You Should be Knocking On
At Work-Bench we’re laser-focused on supporting enterprise startups with all things go-to-market. A conversation we often have with our founders is about finding and focusing on the right customer targets, especially in a company’s early days.
Between learnings at Work-Bench over the past 6+ years — in the trenches alongside our portfolio companies — and our team’s past lives in corporate IT, we know a thing or two about the industries and roles that startups should target when approaching the Fortune 500.
In an effort to share these learnings with more people (and also promote healthy dialogue about go-to-market efforts targeting the Fortune 500), I figured I’d share my perspective.
See below and please share your thoughts to me on Twitter (@fendien), whether you agree… or especially if you disagree :)
Industries To Target
Within the Fortune 500, we divide the group into three major categories: Engage, Avoid, and Questionable.
1. Wall Street Banks — Wall Street banks are hands down the leaders of the pack. They’re the most sophisticated buyers. They have massive budgets, and they put them to work. Most have dedicated Office of the CIO teams that meet with hundreds of startups a year. These teams vet startup technology and map products to relevant internal pain points. When these pain points have low operational risk internally (i.e., the use case doesn’t risk blowing up the company), they can (and will) work with surprisingly early startups.
When I was part of the Office of the CIO team in IT at Morgan Stanley, I experienced this firsthand. We did business with numerous startups, which always shocked outsiders, but the need to remain competitive was a highly effective forcing function, compelling us to spend chunks of our $4B IT budget on nascent startups’ offerings up and down our technology stack.
To be fair, this doesn’t mean that courting Wall Street banks is the easiest or quickest path to early customers for enterprise startups — quite the opposite is true sometimes. The scalability, security, and compliance demands from these heavily regulated and highly complex companies is enormous, but the requirements aren’t insurmountable. Best of all, if you can solve the ‘why now’ question, a pot of gold can be waiting for you.
To share just a few (of many) examples from our Work-Bench portfolio…
- Socure — When the company was just Series A funded, they closed Bank of America as an early customer in 2017. Socure’s co-founder Johnny Ayers spoke at the Bank of America’s NYC Technology Summit that we co-hosted in May about how they’ve closed additional deals with the bank since then.
- Merlon Intelligence — While seed funded, their first customer was a large European bank that selected them over a dozen legacy providers.
- Algorithmia — Before raising their Series B earlier this year, Algorithmia had five Fortune 500 banks and financial institutions using their AI Layer to operationalize their machine learning life cycle.
- True Office — One of our first Work-Bench investments, the company had Morgan Stanley as their design partner, who then became a significant, multi-year large ACV customer.
2. Regional Banks and Insurance Companies — These groups can work well with startups too and remain highly rated in our early adopter group. The caveat is that they tend to have fewer active pain points that they work on solving at once, and not all of their internal teams are equally setup to engage with the startup community.
For instance, one insurance company we work closely with has done a ton of work with early stage AI/ML startups but has been extremely slow with anything touching cloud infrastructure. A regional bank we love working with has done great work in dev tools but has zero in-house capabilities to work with AI Infrastructure companies.
The takeaway here for startups is to use their networks and VCs to gauge which teams at which companies have both the IT/business needs and capabilities to potentially work with the startup. This approach save time and headaches in reaching out to these types of buyers.
3. Healthcare/Pharma and Media — After the financial services world, we’ve seen equally strong success for startups in the healthcare/pharma and media industries.
In the healthcare/pharma world, take companies like Johnson & Johnson, who have been public about their cloud for many years (and work with many cloud-native and security startups to support these efforts); GSK, who has public case studies with companies like Tamr for probabilistic matching for data unification; and a multinational pharma company who bet their data science efforts on Algorithmia.
In the media sector, Bloomberg and Thomson Reuters both have teams dedicated to thoughtful startup engagement, similar to how the Wall Street banks operate. Dow Jones, LexisNexis, and S&P are examples of other groups we’ve seen deploy early stage startup technology within pockets of their firms.
For any enterprise startup looking for early customers, both of these groups should be evaluated with a high degree of focus and prioritization.
After Financial Services, Healthcare/Pharma, and Media though… things begin to really drop off. The tl;dr for these other industries is to proceed with caution.
1. Telco — This group is hit or miss. We see entirely too much noise in the form of corporate venture funds, accelerators, and more from the Telco industry at large, and it often doesn’t lead to meaningful commercial relationships. In fairness, we’ve seen a few mega deals get done with early stage companies — a great example is the pioneering work that our portfolio company Datalogue did with a top three Telco around data-driven network operations (and meanwhile Datalogue is just seed funded). Backtrace, another Work-Bench portfolio company (Series A funded), has a deal with Comcast for their crash and exception management platform.
Deals absolutely can get done in a startup’s early days, but navigating this group is exceptionally difficult, and channel relationships are critical for the Telco buyer segment given how this industry operates. Another topic we’ve covered briefly before is the concept of sequencing, and especially in the Telco world, make sure to understand which Telco companies are viewed as leaders who can get others in the group to follow. The bottom line here is to tread carefully and be sure to align to a huge, burning business need to catalyze a meaningful interaction with Telcos.
2. Tech — Technology companies are the fastest growing segment in the public markets, so this is a group to watch. While many leading Silicon Valley companies suffer from “not built here syndrome,” ;) they are becoming bigger software buyers, as they themselves grow into the massive corporations of tomorrow. Navigating this group is hard, and given the tight knit tech community (from a network perspective) paired with the rise of open source for much of machine learning, infrastructure, and cloud-native tooling, breaking in can be tough. However, if you have something that a tech company drastically needs and can’t build themselves, they have deep pockets to pay for it. Portfolio companies of ours like Dialpad (cloud business telephony) and Semmle (variant analysis) sell really well to the ‘born in the cloud’ tech segment.
1. Retail — As enterprise investors, our advice here is to avoid the Retail category. It comes down to a mix of a lack of sophistication paired with a low appetite for startup solutions outside of a few e commerce offerings that help retailers compete with Amazon. When added to the blackout periods for new tech rollout around things like the holiday season, the result is unmotivated buyers, tight windows, and a sector that is facing immense cost cutting pressures.
2. Manufacturing/Industrials — There are two types of conversations you’ll have with this group, and the tl;dr is that both end in a no-go. One just has more pain and wasted effort along the way.
We’ve seen fake signals here, which is the worst for an early stage company because they can suck up bandwidth with promises of a deal that rarely will pan out. Manufacturing companies have a need to stay relevant, given the margin pressures on their businesses, but the POCs that they’ll sometimes run lead to dead ends since they don’t have tech budgets to invest ahead of proven ROI. It’s a chicken and egg problem, so they typically just sit on the sidelines.
The other type conversation with this group will be a quick ‘no’ or a puzzled stare. Legacy technology vendors have entrenched relationships here that they won’t let go of, and when considering the overall IT mindset in this industry, it’s not an environment that bodes well for startup innovation.
3. Advertising and PR Firms — This group will make you dizzy. In the world of Omnicom, WPP, Publicis, etc, holding companies abound, and it’s never clear who has decision making authority, who controls the budget, and which use cases they even care about. When a central authority may have a need, it’s often for a core system like implementing Google Apps for Business, and a bleeding edge cybersecurity product or ML tool will likely be 10 steps ahead of what they want and/or need.
Roles to Target
Now that you have a sense of industries to pursue, the next step is at what level to enter. The goal is for a “Goldilocks intro” that’s not too senior while also not being too junior. We call this Middle Out GTM as I’ll explain.
- Too Senior — A classic move is to connect a startup with a CIO. This is almost always a bad call in today’s IT world given that CIOs are busy running IT as a business and don’t make purchase decisions, especially not for something that a startup is selling. Sometimes they’ll forward your note on to the true stakeholder, but you run the risk of annoying that person by coming in above their head, often without context.
- Too Junior — In the world of bottoms-up selling, entering at an individual level can help get some initial groundswell. You need to tread carefully here though because often times someone who may love your product but is too junior can setup endless meetings that go nowhere since they don’t have clout to make a real team or enterprise-wide purchase.
- Random Person at the Company — Don’t laugh, but we often hear stories of VCs making introductions to a random friend at a Fortune 500 company who is in a totally different part of the company than your true stakeholder. While some may think “it can’t hurt and is worth a shot,” the downside here is that these connections are often too disconnected to understand the dynamics of the team you’re targeting and you’ll get bounced around to a bunch of miscellaneous intros (which all take time to schedule, speak to, follow-up with, etc) on your path to trying to find the true stakeholder. Similar to entering from the CIO, you also run the risk of pissing off the person you actually want to speak with when they get constant pings from people they may not know internally.
- Innovation Teams — 95% of the time, AVOID. They are way too frequently not tied to business use cases, and are experts at the endless meeting game that I mentioned junior people may accidentally do. Their level of excitement to meet is often inversely correlated with their budget authority and influence sadly. Note that once in a blue moon you’ll find an innovation team that sits in the right part of an organization, actually has influence and some business initiatives to solve, and can be an early champion for your startup. But these are so rare that I’m comfortable suggesting the avoid tactic as the best defense for your startup’s precious time and resources in your early days.
Our suggestion: Middle Out GTM
Our suggestion of the right motion for most enterprise sales efforts is Middle Out GTM. No, I’m not referencing the TV show Silicon Valley ;) What I mean is finding the right mid-level executive who truly feels the pain that your solution is trying to solve and getting to them ASAP.
Often this person is still growing in their career, and meaningful wins don’t just help their company address a pain point, they help this individual stand out from the crowd to continue their upward mobility. When you can find somebody who is senior enough to own a pain point and the budget authority to solve it, you’ve struck gold. Given the potential positive career impact, they’re incentivized to spend meaningful time if your startup is uniquely positioned to help them.
The catch is that they can’t be too senior that they’re already bogged down with endless meetings like many senior folks in the Fortune 500 spend their days. They can then loop in the relevant colleagues to support an evaluation of your product and technology, and also work the internal politics around decision making to get you the necessary air cover in case that’s needed to help close a contract.
In Wall Street world, titles to look for could be Executive Directors or Senior Vice Presidents, newly minted Managing Directors (be careful though, because if they’ve been an MD too long they may just spend all day in meetings and not really meaningfully pushing an agenda forward), or rising star Vice Presidents. In other industries this could be a Director or VP, but there can be nuances depending on the specific company.
Hopefully this post sheds some light on the different sophistication levels, capabilities, and desires of different industries to meaningfully engage with the startup community as customers.
This should be viewed as a general framework, and while of course there will always be exceptions, my hope is that this can help you focus your GTM efforts.
For early stage enterprise startups, focus is critical given that each day is another countdown on your cash relative to your burn. At Work-Bench we’re all about optimizing sales efforts to boost chance of success, and our advice to founders is to really push on your VCs/Advisors to qualify intros to make sure they’ll take you down a meaningful path. When diligencing prospective investors and advisors, ask other founders about customer introductions they’ve made, and try to really dig in to understand the outcome of those conversations, or lack thereof.