A VC in Vacationland

Successful start ups often attract major customers, so called innovation buyers, who end up getting an inordinate amount of time and attention from the entrepreneurs and employees.  Innovation buyers are leading-edge companies who want to have all the latest technology to manage their operations. These buyers seek out start ups with interesting solutions, assign staff to evaluate the solutions, run pilots and sometimes buy the software. 

Some of this is very good time spent by the start up–deciding what new features and functionality are needed.  And some of the time is wasted going down paths that favor only the big customer. Often, start ups can lose sight of their business plan, spend way too many resources satisfying a key customer and not getting key market benefits as a result.  Others are very clever in manipulating the big customer to do lots of things for them in return for the special favors given to the customer.

I often get the question about large clients and how to best manage them.  My response is that you need to manage your company to success while meeting their needs. These buyers are critical to your success.  But not at the expense of the rest of your customers, or following your business plan.

Here are a few thoughts on how to manage large customers for your benefit as well as theirs:

1. Avoid agreeing to new features to close a sale–This is a common tactic used by innovation buyers on start-ups, asking for additional features as part of the contract. Offer instead to add the feature to your development schedule, request that the customer help design the feature and control the process.  
2. Get promotional opportunities specified in the contract–Having a large customer do webinars, presentations and white papers to inform future customers how your solution is saving them money and increasing revenue, for example, is a great way to get some payback for any special additions or features. However, you need to clearly specify what you expect up front in the contract as customers are not as likely to support you after the deal is signed if exact requirements are not spelled out in detail.
3. Remember that most buyers don’t want or need exotic bells and whistles— Even though the innovation buyers push you down the “fancy feature” path, the majority of your sales will be to less sophisticated clients who just want software which is easy to use and produces stated results. Make sure that your development plan recognizes the features and functionality that will best serve the majority of your customers going forward.

Innovation buyers can provides lots of benefits and many headaches for a start up.  Make sure you and your team are ready to work with the large customers without endangering your long-term success.