One of the biggest challenges for startups is how to gain traction with established brands. Whether selling to them directly or seeking partnerships, sooner or later all startups cross the path of large, slow-moving corporations. Speed of traction often depends on whether the startup’s offering is a must-have or nice-to-have for the brands.
Recent success stories such as Buddy Media, which exited to Salesforce, helped brands address their must-have needs of establishing an effective presence and engagement on Facebook. Next-generation platforms such CrowdTwist (disclosure: Fairhaven is an investor) are gaining fast traction because they help brands address today’s must-have need of driving sales, not just engagement, across all social channels.
Solving a big problem is not enough to win big brand business – although it helps. In reality, breaking into the maze of a large corporation is pretty difficult. Should startups try to gain traction at the departmental or brand level first or shall they go for a homerun directly at the corporate or parent company? Can they do both? How do they get conservative executives to get over the startup risk? How do they find out who has appetite to take some risks and a budget to spend, too?
The fact of the matter is that there is no one defined path to break into the large brands. Many startups have succeeded by winning brands one-by-one, while others have found strong support at the corporate level. Some have chosen to focus on one vertical, e.g. consumer packaged goods (CPGs) or sports teams, and win by leveraging domain expertise and connections, while others have taken more horizontal approaches.
However, the common thread for the startups that have succeeded with brands – in addition to the passion and resilience of its entrepreneurs – always involves having a strong supporter within the brand who understands the potential impact of the offering. This person is often an evangelist or visionary who believes in the startup and is willing to put his/her internal support and resources to ensure success.
It also requires that the entrepreneurs be flexible. It will likely be a longer sales cycle than expected and it may not play out as you had planned, so don’t be wedded to pursuing the opportunity exactly as you had envisioned originally; the brand may have other ideas.
You have to be open to feedback, as you may learn something new about the brand’s need. It’s also an opportunity to integrate their feedback into your future pitches and product roadmap. Listen for new use cases as you speak to brands, ask a bunch of questions about their challenges and concerns, you might be surprised by what you hear.
This brings me to my next point of seeing the problem you are solving from the brand’s perspective. What are the business goals and how does your solution align with those goals. Be mindful of budgets, both in terms of timing and dollar amounts. Even the most fervent supporters have to answer to bosses, be accountable for failures, manage expectations and meet goals. In these instances, patience is a virtue. It also means that you need to have a healthy dose of reality and know when to stop pursuing an opportunity, because it no longer exists. This is particularly difficult for the ever optimistic and resilient entrepreneur. Finally, if a brand leader does take a risk on you, do whatever you can to make that person look like a rock star. In doing so, you not only secure a long-term supporter within the brand, but also a reference for the broader market.
While the old mentality of someone never getting fired for choosing IBM still prevails, in many Fortune 500 companies executives are increasingly aware that innovation does not always occur organically. More often than not, incumbents are limited in the ability to innovate or experiment with new product lines or solutions as they fear jeopardizing their exiting revenue streams. Nor can they afford to acquire everyone in the market. This makes partnering with or buying/subscribing to innovative platforms highly appealing, albeit high risk. Despite the mutual desire, the path for startups to gain traction with large brands and for brands to identify promising innovators remains a challenge.
This challenge is top of mind attending FutureM in Boston this week. Speakers from established brands such as L’Oreal, PepsiCo, Dunkin’ Donuts and JetBlue, are discussing how to best expose brands to innovation and help startups gain traction. Now more than ever, brands want to work with startups in the marketing and advertising technology space. Startups need to be ready to face the fun and frustrations of landing that first big customer, which is a critical milestone in their journey to success.
Rudina Seseri is a partner at Fairhaven Capital Partners, an early stage venture capital firm headquartered in Cambridge, Mass. Since joining the firm at its inception in 2007, she has invested in and served on the boards of CrowdTwist and FashionPlaytes. Rudina Seseri serves on the Advisory Board of L’Oreal’s Women in Digital.