Why won't corporates buy from startups?

Why won't corporates buy from startups?

Tuesday July 23, 2013,

5 min Read

In an interview with Ajit Gupta, the founder and CEO of Aryaka Networks, he described that an enterprise customer is the best kind of customer that a company can ever hope to get. Of course, they are difficult to get, but once you do, they are an entrepreneur's delight. So why are there so few enterprise startups?

Lets look at it from the eyes of the corporate. While looking for a long term solution the lifespan of a startup is always under scrutiny. Also, a startup is often times found wanting in its ability to communicate it's expertise to a corporate. Furthermore, there are always issues like compliance incompatibility between a corporate and a startup.

But on the other hand, there is always a need to innovate. In a recent ReadWrite article, it was reported that legacy software companies have been on the decline, while those working on newer technologies are beginning to reap rich dividends. It is obvious that a corporate is looking for newer innovations, which are abundant in startups.

So where is the gap?


I spoke with Sandeep Phanasgaonker, the founder of a new startup, AgileITvantage, which provides consulting services for CIOs from large corporates on working with cutting edge technology startups. Sandeep comes with about 30 years of corporate experience; his last stint was with Reliance Capital as it's president and CTO. Having deep insights into the corporate world and first hand experience as an entrepreneur, he shared some interesting realities about the startup corporate dynamics.

Understanding what it takes to sell to a corporate

At the end of a 30 year corporate tenure, you would expect to retire. That however is not the case with Sandeep. As Reliance Capital's president, he interacted with a lot of startups. As with anyone who's worked with startups, he too fell in love with the startup way of life. He says, "In my last two years at reliance, I worked with a lot of startups. The sheer passion, energy and vision that each of them had was very infectious. They also had immense technology expertise. However, they didn't know what it takes to sell to a corporate. They need to speak the language of the CIO. This gave me the opportunity to nurture them and I ended up starting up on my own."

Sandeep shared that technology buying decisions at corporates are done by its CIOs. So selling to a corporate would require understanding the role of a CIO. He says,"A CIO is a strong tech guy. He's been a core technologist and then become a business guy. Making a business call in favor of a new technology is a big risk for a CIO. They are very pressured. How will the technology fit in? Will it scale? Will the startup even survive? There are too many questions that they have to answer."

Sandeep says that corporate like to work on a pilot basis with startups. He says, "Run a few pilot projects and give them the confidence that your product can scale. That's one way to crack a corporate deal."

What a corporate wants 

Sandeep believes that a corporates have a lot to gain from startups. He says, "Lets be honest. At the end of the day, an enterprise is looking to cut costs. That's why a lot of corporates build their own tech. They're cutting costs in storage by moving to cloud. So the cost compulsions of working with a startup is huge for a corporate."

Sandeep says that a corporate gets caught in a cost wrap, with respect to technology. He says, "Once a corporate adopts a technology, it is for the long haul. They follow a drum beat and scale vertically. If you're prompting a change, then it is going to have a lot of business implications for the corporate and you better be ready for a lot of dialogue. But also remember that a corporate wants to have the benefit of the innovation to be passed on to you."

Experience is a must 

On a concluding note, Sandeep believes that selling to corporates is not for everyone. He says, "You cannot have guys coming out of college trying to sell to corporates. You can read up something and make a working product also, but if you haven't experienced it first hand, then how can you ever address the need of a corporate? Without experience, if you're trying to sell to corporates, you're like a babe in the woods."

It is early days in Sandeeps startup life, but in it's 7 months of agileITvantage's existence, it is already mentoring some startups in building robust business models and acquiring corporate clients. "A Pune based startup we're working with is already seeing some good results and we've helped them with their product launch." This sort of corporate to startup crossover is good for the startup ecosystem and we hope Sandeep's switch will prompt many more in the space.

Connect with Sandeep here

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