Ask HN: How to Successfully Handle Fortune 500 Companies?

https://news.ycombinator.com/item?id=8719833

by LargeCompanies • 12 years ago

3 5 12 years ago

news.ycombinator.com

My team and I have been working on our start-up for about 20 months. Our strengths lie in tech and creativity and ATM we severely lack business acumen.

I wonder if others here have dealt with massive companies who were extremely eager to work with you and your technology, but the deal fell through. Specifically, because your contact( for us a VP of Tech) you were working with did not want to be bothered by any legal document that protected years of work. His company would greatly benefit from our non-public patent-pending technology at the event and overall their entire bottom line.

Though now this great opportunity is gone, I'm wondering maybe we should have rolled the dice and just RAN with it. Is business more important, then protecting your IP and not having any legal contract between you and a Fortune 500 company? We thought a short page & half legal document was fair, but overall it killed the deal.

This would have been our first real customer and a massive one at that. The VP was going to use our event technology an upcoming conference full of the CEOs of this massive company. Our technology is currently in private closed beta.

What has your experience been? All our advisers said they must sign the document.

yurisagalov2• 12 years ago

The bad news is that they're probably not as interested in you as they made it seem, and you never had a real opportunity with them. I know it's disappointing to hear, and I assure you everyone has made that mistake themselves -- myself included.

Big companies do a lot of outbound R&D -- conversations, PoC's (proof of concepts), and so on. Sometimes these conversations are a 30 minute call. Sometimes they're a series of meetings. Sometimes they even try your product. In almost all cases, when they become serious about trying your product (e.g. outside of a sandbox), they'll want a legal agreement.

NDAs don't count here, they're generally vanilla.

What they'll want is a trial agreement (sometimes called a Pilot Agreement, Software Evaluation Agreement, and so on). This agreement will almost certainly protect them more than it will protect you, but it can be negotiated. They're quite easy to generate, particularly for larger Fortune 500 companies that generally have entire procurement departments dedicated to this process. The agreement will cover your IP, situations where you might infringe on IP, general indemnification, and so on. Sometimes the procurement guys really won't want to negotiate it -- their job is to protect the interest of the company, and they almost act adversarial to the person trying to bring you into the company as a "check-and-balance" since the person bringing you in may have already fallen in love. In those cases the person requesting the evaluation can sometimes apply pressure as well.

So, when a VP at a large Fortune 500 company tells you they won't do a trial agreement with you, or won't be bothered to discuss it at all, it largely tells you that they're just not that interested in it. We've dealt with companies where even a non-manager can generate software evals.

There IS one caveat here: They haven't seen/tried/etc. your product. If you're over-protecting by, for example, expecting them to sign an NDA or a software eval agreement without them first seeing a demo/trial, it's quite likely they'll usually just turn away. It doesn't sound like that was the case here, but something to keep in mind.

LargeCompanies2• 12 years ago

So at a recent hackathon we used our framework that syncs up all devices in a room and created another/new audience engagement app. We pitched the app and immediately after a VP of X company said I have to use this at my year end board meeting. For the next week and half he was sending us resources (images and other documents) and during that time we were speaking with our advisers/lawyers creating a Beta Evaluation document. The VP was extremely eager all the way until he received the document where his excitement waned. Thereafter he sent two emails end of last week and then today said he was going in a different direction :-(

Overall this isn't our first encounter with a massive company. But our experiences and efforts thus far have not yielded any such clients.

Do you mind if I ask how you and your company finally sealed your first big deal and was it with a mid to large sized company?

Really appreciate your insight. Thanks!

yurisagalov2• 12 years ago

Sure, I have two separate stories here that might be relevant:

The first company we dealt with was a massive Fortune 50 company early in our existence. They were very interested in our technology, and we were both young and naive. Still, we've been warned so often about dealing with large companies that pretty early into the process we insisted on signing a paid Software Eval agreement. In retrospect, it was a pretty small amount of money (five digits), but at the time it felt like a huge win. From the moment they said "we'd like to try your software", the procurement department was involved -- NDA, software eval docs, etc.

The software eval was "successful" (in fact, we even presented to the CTO, the President, and VP of Engineering of the company), but it wasn't truly an eval. It was a very custom-tailored version of our product for their deployment. And yet it still didn't really go anywhere. Things fizzled out with them for a while and then about 12 months later they came back once again asking to do another evaluation. This time we insisted on success criteria that required them to commit to a set number of seats if the evaluation was successful. The evaluation was successful, and they bought the seats, but even now the deployment is in a state of "proof of concept" -- they bought ~1,000 seats from us, but at their organization size it's just not that material yet. Seriously.

Another company we dealt with was a ~15,000 employee company. They too were very interested in our technology. They emailed us and convinced us to come and do a demo in person. Having liked the demo they told us they wanted to pilot the software. This immediately kicked off the conversation with the procurement department. NDA, software eval, success criteria, etc. This time, we did need to do some additional work, but we were very diligent in making sure that _any_ custom work that we do was applicable to all customers. They too have now bought ~1,000 seats, and are now in the process of rolling AeroFS out to the rest of their company, but as a benchmark, it has been ~12 months since they bought their initial 1,000 seat license. In some ways, even for them the 1,000 seat license was a continuation of their PoC.

Enterprise sales are slow, but the resulting contracts can be quite lucrative. Just make sure you qualify your customers. It sounds like you only lost ~2 weeks on this deal, and that's really not the end of the world :)

codeonfire• 12 years ago

My experience as an observer is that people at big and small companies will try to get free stuff as long as possible, then they'll negotiate forever, then they will never pay until threatened. Some big companies have as part of their business plan to put their smaller partners out of business just as a product is delivered or project finished.

I feel you made the right move wrt the VP. Working with F500 companies requires a long time commitment and your company needs some weight. You need something that forces the F500 to re-engage and pay up after their first attempt to screw you.

Secondly VPs don't typically go looking for technology to buy. They tell people below them to do that and then just sign off. In your case the VP literally wanted some free tech to show off at a conference. You need to sell to someone lower level who is not going to be a man child. Imagine someone who went through childhood and then just...kept going. Next time offer some free on-site consulting and then get the low level managers you meet to buy in to the project and actually pay (to impress their vp, of course!)

Ask HN: How to Successfully Handle Fortune 500 Companies?

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