Kim is the CEO of a B2B app development company. He and his team have just finished creating a new SaaS product that lays waste to the competition. Their investors are stoked and the future seems bright. Months ago during a planning session they decided to target Enterprise Financial Institutions as their primary customers. If they close just one of these institutions they'll have enough MRR to be breakeven. (insert woots and beers)
The team sets out contacting potential customers but as weeks and months go by they have yet to close one deal. Everyone seems to like the product and agrees it's a game changer but no one is pulling out their chequebooks. They have 2 more months of cash and then it's game over.
Choose one of the options below if you think you know why they are failing.
1. It's an issue with the industry they picked. - Kim and the team decide to give up on the Finance vertical go with Oil and Gas. That's fine with them as O&G companies are huge and represent a massive opportunity themselves. With this decided everyone on the team gets to work again. The marketing team revamps the website and marketing collateral, dev makes some tweaks to the app's language and interface and the CEO presents the new plan to the investors. Once again the team hits the road/keyboards and starts trying to sell the app. Great conversations are had, people get excited, chickens are counted but no deals are closed. In less than 2 months they run out of money and the startup is dead.
2. The app still needs more work. Kim and the team decide there must be something missing in the app. Maybe it's the interface or one of the features they've been putting off developing due to the cost involved. With nothing too lose everyone gets excited and goes back to the drawing board. The interface is refreshed and slicker than ever and 3 new features are added in less than 2 weeks. The app is now more complete than it ever has been and it looks like nothing will stand in their way. Once again the team hits the road/keyboards and starts trying to sell the app. Great conversations are had, people get excited, chickens are counted but no deals are closed. In less than 1 month they run out of money and the startup is dead.
3. They picked the wrong customer. Kim's team had created an amazing app and there was nothing wrong with the industries they were trying to sell into. What they didn't give thought to was the psychology of the person they were trying to sell to. They were the new kid on the block in an industry dominated by an "old boys" club of applications. The executives they spoke too saw more risk than reward in trying their app. Imagine the director of technology at JP Morgan telling his CIO that they were going to ditch using IBM's application in favour of a much better built app by 5 unknown guys in Vancouver? No matter how much better it was there's no way he was going to risk it. If this is sounding a little like Jeffrey Moore's Crossing the Chasm that's good because it supposed to. Understanding corporate sales psychology is paramount to a startups success. As a startup you are going to have to pay your dues by selling to smaller businesses first or get really lucky and find some visionaries and early adopters in larger ones. It is the rarest of instances where you can skip ahead of the line and sell direct into enterprise as an unknown startup. Once you build up some small and mid tier clients you'll have the capital and cred to reach out to the big boys but not before that.