Flattery Will Get You Nowhere

I haven’t posted something new in quite a while.  There are lots of reasons, not the least of which is that I try to comment on patterns I see which have not entered the general discourse about startups.  This one is about the seduction of the startup CEO – a pattern of distraction I see all too often.

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Startups are the stem cells of our economy.  They represent the hope and possibility of something new, invigorating, and transformational.  Startups are new ideas, often self-selected with leaders who see a few moves ahead from the rest of us.  At least that is the hope.

It often feels like the scarcest resource in a startup is money.  It is not.  Time is scarcer.  You can raise more money, but you cannot raise more time.   

New companies are interesting precisely because they are new.  If you’ve been doing this early stage stuff for while, you begin to recognize that there are certain life forms that get their nourishment from the new.  The most obvious are venture capitalists themselves.  We VCs all harbor the secret fantasy of finding the next big thing before anyone else recognizes it, even the new company itself. 

Nearly as obvious are Established Companies – the putative ‘partners’ of the new company. This comes in several forms – the line of business meeting, the business development meeting, and the corporate venturing meeting.  They, too, are driven by a discovery fantasy.  They are looking to discover growth DNA to graft.

All this attention is seductive for the new CEO.  The new CEO has the fantasy closing the single transaction that instantly transforms the new Company from obscurity to dominance.  You can hear this hope in the treatment of institutions as individuals.  “We had a good meeting with Bank of America.” “We just got an inquiry from Toyota.”  “Far West Ventures wants to meet with us.”

One of the most common mistakes small companies make is mistaking “opportunities” for opportunities. Most of the time these “opportunities” are distractions that drain energy, resources, and most of all, time.  People don’t talk to institutions. They talk to people.  When you have a “good meeting” with a potential partner, you really had a meeting with people in an organization. 

These people have their own agenda, only a portion of which is institutional.  A large part of it is personal.  I can’t tell you how many times I have seen a new company take two or three meetings with someone from a big company, only to culminate in a conversation in which the big company person uses the new relationship to disclose that s/he is leaving and looking to join a company like yours.

Another frequent outcome is the set of “good meetings” that lead to the “no, thank you” result.  Usually these are result of a process of discovery and education engaged in by the inquirer and the new company respectively.  The inquiry begins with a sense of genuine but diffuse excitement about “your space.”  Eventually as you spend time with them, the inquirers are bit more educated about they do want and a lot now more educated about what they don’t want. They don’t want companies like you.  This is equally true of companies and investors.  You are worse off than you started. You have spent precious time and you have educated one more resourceful and intentioned group about your market and the strategic contours of the opportunities within.  No good can come of this.

But not all “opportunities” are illusory.  Some are real and truly transformational.  What I try to get my companies to do is apply basic sales skills to this question of partnering and inbound opportunity management.  The undisciplined salesperson will chase every inbound inquiry in the hope of finding the “bluebird.”  The disciplined one will ask qualifying questions of the inquirer.

• Why are you interested in this sector?
• How does this fit into the core business or business strategy?
• Is there a line of business directly impacted by this sector?
• Does the line of business have an objective in this sector for the coming year?
• Is there a specific budget or program associated with this sector?
• Who is responsible for this sector?
• What kinds of companies/products are you looking to evaluate or partner with?
• What other companies/products have you considered?
• What were your conclusions about those other alternatives (likes/dislikes)?
• Is there a timeline or desired time goal for building a relationship with someone in the sector?

These questions may seem too direct to pose to an inquirer.  After all, you are small and they are big. They have the power in the conversation, or so it seems.  But if they have a well-formed interest, they will be all too happy to share these data with you to move the conversation along rapidly.  If they don’t, they are looking for an education.

Save your time. This is not the Academy Awards.  It is not an honor just to be nominated. It may be flattering to be called; but many are called, and few are chosen.  And this flattery will get you nowhere, fast.

Comments

[Nivi]

A couple years ago, someone put the first half of your essay to me like this: "Little value is created when startups spend time with big companies."

[RYK]

Thanks, just in time post, I needed this advise for tomorrow's meeting.

[s]

This is a good reminder of distractions. Perhaps younger entrepreneurs are more prone to being distracted.
I think it depends on the type of development taking place, too. If it includes HW, I can tell you there are still worse distractions. Some are very difficult to avert.

I may disagree with the comment about time and money. If you are refering to marketplace timing, OK, but what's the point? If you are refering to startups altogether, you CAN buy time. If we had more money we could hire another programmer and surge ahead in time. As it is, it plain takes longer because we DON'T have more money.

Christensen emphasizes avoidance of money that is impatient for growth, and patient for profit. He recommends entrepreneurs take only money that is impatient for profit. That's because the business model has to stand up straight ASAP. This puts me in good company, since slugging it out the hard way - and taking more time - can produce a better outcome. Again, if you're refering to strinking while the iron is hot marketwise, it is a point well taken.

[Andy Blackstone]

I agree completely with your premise. Sales time spent chasing deals that are never going to happen is a huge waste of energy in a start-up situation. I think there are a couple of things that startup management can do to organize the sales effort and to understand the answers to the questions you suggest in your post:
1. Define an "ideal prospect" profile, including understanding who the right person (at least in terms of job description) at the prospect company is and what problem you're solving that is critically important to that person. This can be a fairly broad definition early in the life of a company, and then refined as more information about who's really interested is available. Then, don't initiate sales conversations with companies/people that don't fit that profile, and spend your initial questioning time confirming that they do fit.
2. Build a sales process consisting of a set of events that need to happen in order for you to obtain an order. Track your progress by checking off these events. If you aren't able to check some of them off after a reasonable amount of effort, confront the prospect with the lack of progress, and if that conversation doesn't result in check-offs, abandon that prospect and spend your effort on someone else.
These two things will significantly cut down on wasted sales time, and will give you a much better idea of how (or if) your "opportunities" are progressing toward orders.

[Christopher Richards]

I agree about people and not organizations. When I start a writing project for a client, I ask who are we talking to? Almost always I get a description of a company as a response.

I have to dig deep before discovering the values and interests of the people who will read the copy. A business title doesn't tell me much. I want to know about the reader's age, sex (gender if you must), pressures on them, and why reading this matters right now.

[Alex Iskold]

Peter, this is a very smart post, but I feel I need more specific advice. Of course you can grill big companies, but you first need to pick'em. How do we do that?

Alex

[Jim]

Brilliant post, Peter. I love the part where the young entreprenur is getting stroked by a big company only to find out the deputy assistant junior director he's talking to at United Weasels is jut trying to gain information on what it's like "out there, where I'm going next month." I think I saw this about a thousand times while I was at Demo. It was incredibly common among atrt-up CEOs that had to deal with telcos. Great post Peter.

best
Jim Forbes