Fortune 500 companies can be attractive customers for software startups. The Fortune 500 have million-dollar budgets, powerful brand recognition, and global reach. Entrepreneurs usually spend 18+ months navigating the procurement organizations of these companies, spending hundreds of thousands on sales and engineering resources to land one of these big accounts as a customer. But is it worth it? Is the time and effort required to sign an industrial enterprise account worth the money spent on customer acquisition? The answer is…sometimes.
Industrial enterprise customers are particularly tough. These customers have historically been slow to adopt new digital solutions, so selling to these customers usually requires white-glove manual services, custom features, and long implementation cycles. These customers are engrained in legacy software like SAP and Oracle and require custom integrations which burden the cash-strapped startups who try to sell to them.
Often, the companies that serve industrial Fortune 500 customers are well-capitalized Fortune 500 software companies. These large software companies specialize in selling white-glove solutions to large industrial enterprises. They build teams of internal sales consultants and implementation specialists, and they are rewarded for the efforts with large contract values from their enterprise customers.
Because of the way these large, incumbent software companies are designed, they usually avoid selling to the mid-market. For example, a small deal from a small manufacturing company is just not worth the squeeze for their expensive, white-glove sales motion. This leaves an opportunity for certain startups to capture smaller mid-market deals where the big incumbents refuse to play.
There’s no one way to be successful. If a startup is well capitalized, has a superior product to incumbents, and manages cash burn appropriately, an enterprise motion can be very successful. Or, if a startup has an easy-to-implement, plug & play solution that requires minimal sales effort, the mid-market may adopt that solution like wildfire.
The key is that the product design and the sales organization of the startup has to be aligned with the customer profile that the startup is pursuing. In the worlds of Juan Muldoon, Partner and Co-Head of Ventures at Energize Capital, “You have to match the engine to the race.”
It'd be interesting to do a deep dive on the MM industrials sales cycle, milestones that influence probability of a successful sales outcome along the way, and how to capitalize said milestones. Just a thought!