It seems every entrepreneur wants to start an enterprise software company. However, many of these founders do not possess a realistic understanding of what selling to the enterprise actually means.
While it is true that enterprise budgets can be large, convincing managers to buy your products is often difficult, complex, and time-consuming. Enterprise buyers tend to be risk averse and have a carefully defined process for evaluating products and vendors. Thus, enterprise selling can be a slow and expensive trap for startups that are unprepared.
On the other hand, for startups that get it right, enterprise buyers offer a great way to gain product feedback, references, and revenue.
Although CXOTALK usually highlights stories about digital transformation and innovation in large organizations, now and then a startup catches our eye. I became interested in Helpshift because they have cracked the code on enterprise selling.
Helpshift has raised $36.2 million and counts companies such as Zynga, Target, and Virgin Media among its customers. Microsoft is also a customer and Helpshift provides the chat support infrastructure for mobile apps such as Outlook and Office.
When founder, Abinash Tripathy, started the company, he envisioned a future in which software companies and app developers would need to provide direct methods to offer in-app support on mobile devices. Solving this problem required Helpshift to build an infrastructure that can handle millions of help transactions every day.
I asked Abinash to be a guest on CXOTALK and explain how Helpshift entered the enterprise and managed to build relationships that companies such as Microsoft consider mission-critical.
We spoke for 45-minutes, creating a treasure trove of information valuable to both enterprise buyers and founders. Among the key points:
- Startups that want to compete in the enterprise must endure long sales cycles and an extended investment horizon
- There are benefits of being an enterprise company from the start, but it requires patience and founders who have expertise in the large enterprise segment
You can see a summary of our discussion in the short video embedded above and read a transcript here. Of course, watch the entire show and read the full transcript at the CXOTALK site.
Michael Krigsman: What about the sales cycle? As a startup, how did you manage that aspect of it?
Abinash Tripathy: If you’re selling to the enterprise, and you’re consciously building an enterprise to sell to the enterprise, all of those things are a given. You have to do those things to be able to sell to an enterprise, including the long sales cycles.
If you don’t have that experience in the Valley and you’re trying to build an enterprise company, you won’t see the value of working with these companies, being patient, and investing up-front to go work with companies of that size, and you’ll always go after what’s easy. So you see a lot of these B2B companies in the Valley, they do what’s easy. They’ll go after small companies – five, ten person companies – that don’t have a lot of complex requirements and build for them. Then they find that it’s really hard to move upstream, and sell to the enterprise.
And, you know, there’s a reason why Salesforce is Salesforce, and Zendesk is Zendesk. They’re two different-sized companies, from a revenue and size standpoint, and they probably have an equal number of customers, right? The revenue difference is 5 – 10x, right? Because one sells to very large enterprises, and the other one sells to sort of, you know the long tail.
Michael Krigsman: What is the advice that you have towards startups who want to sell to the enterprise, but they look at these long sales cycles; in many cases, getting introductions is hard. But once they have an introduction and the sales cycle, the need to invest is very, very difficult. It’s just that delay, that time, is so expensive for a startup and it’s cash that they don’t necessarily have and time that they don’t necessarily have.
Abinash Tripathy: Yeah, so for companies that sell to the enterprise, the scaling and the growth is slower than those selling to the SMB, initially. So, let’s say you take two companies: one selling to the SMBs and the other selling to the enterprise-sized companies, and they start their journey at the same time. Chances are the SMB-focused company will scale much faster than the enterprise-focused company in the initial years, right?
And, so after the three-four year mark, it looks like the SMB company is ahead. But then, once that market starts to peak out, or, you know, bottom out, and it happens very rapidly in those sort of SMB segments where you run out of all the SMB that company can sell to, and then you make the decision to go up-market, and then your product is nowhere near close to being up-market at that point. Any company… I haven’t seen a single SMB-focused company become a successful enterprise company. I haven’t seen any examples of that. Nor have I seen examples in the reverse where you see enterprise-focused companies being really good at selling to SMB. I think they’re two separate markets, they’re two separate needs or requirements, and different types of companies will cater to those segments.
That’s really…So, the biggest thing, coming back to your question, which is “What do you really need to do to be an enterprise-class company?” The first thing you need to do is you need to know that you are building a long company or a long-term company. You need to find patient investors, investors who have the patience to build a longer-term, enterprise-class company and are not looking for that SMB, fast-growth kind of model. So, it starts with picking the right investor. In the Valley, there are those investors that really want the rocket ship, B2C-style, no-sales kind of companies. They basically tell a founder, “Oh, you should not have any salespeople at all; it should only be inbound marketing,” so there are investors that prefer that. And then there are investors that believe that “You should start working with large enterprises. It’s going to be slower. Build an outbound team.”
And the two types of companies are very different. If you’re looking at the SMB companies, they’re investing a lot of dollars in marketing, in digital marketing, and not as much in sales. And you look at enterprise-focused companies: fewer dollars in marketing, more dollars in BDR [business development resources], outbound, inbound, having account reps and inside sales. Very different models, right?
Now, the other thing I’d like to add is if you think about how we grew as a company before we built our sales, the BDR, SDR machinery, the first thing we invested in was customer support and customer success. Because, when you work with enterprise customers, they are big brands, and you don’t want to fail them, so you want to make sure you have the best customer support and customer success teams in place to handle these big accounts and make them successful, and they become case studies. They go around to the world telling them how good you are as a solution provider, and then companies in their class come in, inbound. And when that engine starts to work, it’s very powerful.
Abinash Tripathy: My biggest advice is if you don’t have a co-founder that has worked in the enterprise category or space, selling or in BD [business development], then get one. You need a person that understands what it takes to work with enterprise companies. That’s the first and foremost requirement.
And, the second one is to find patient money. If you want to build a long-term enterprise company, you going to want a VC that is patient and knows what you’re going to be doing, and it’s going to take some time and is willing to work with you and help build the company. And so, patient money is really important.
I think those two things, if you’ve got people who have the experience that you need for enterprise, and you have patient capital, then I think you’re on your way. It’s not that those problems can’t be overcome, it’s that those are the two things, the foundational elements.
To see the list of upcoming CXOTALK episodes, click here. Thank you to my colleague, Lisbeth Shaw, for assistance with this post.
(Cross-posted @ ZDNet | Beyond IT Failure Blog)