Customer Mirage: Risks of Signing A Large Company As Your First Customer

Imagine you’re in a hot, dry desert and desperate for water. You’ve been walking all day and the thought of drinking nice, cool water makes you ecstatic. Suddenly, you see it! A pool of water in the distance. You hurry towards it, running as fast as your legs will carry you. But when you arrive, all you find is sand. Damn sand!

You’ve just experienced a mirage. And this is exactly what it feels like when you’re looking for that first customer and close a whale. You’re desperate for validation and revenue. If only you could get that big name-brand customer, investors would be tripping over themselves to give you money! TechCrunch would write about you! The cash would be rolling in and all your worries would be over!

After weeks or more likely, months of emails, calls, negotiation, and nervous waiting, you finally land a deal with a WHALE, a well known publicly traded company. Not just any deal – this deal starts with $100k+ in revenue and has the potential to bring in much, much more. This is the inflection point right? It’s all #winning and *crushing it* from here!

Unfortunately it usually doesn’t work like that. If your first customer is a large company, the deal is more likely to be a mirage than the start of a winning streak.

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The Art of Rejecting Startups

Corporate innovation people get pitched by startups All. The. Time. In theory, a startup may reach out or be introduced and they’re a perfect fit at the perfect time, leading to a quick deal. I’ve personally never seen a deal happen that smoothly and certainly wouldn’t bet on it. The far more likely scenario is you’ll be rejecting startups that reach out to your corporate innovation group.

Startups are rightly rejected by large companies for a variety of reasons. The startup may have misinterpreted the corporation’s existing capabilities or the corporation is already building a similar solution, internally or with an external partner. But many times, a startup with an objectively needed capability comes around – and yet, the timing isn’t quite right so a deal doesn’t get done. Sometimes the issue is budget. Other times, it could be an attention problem – decision-makers are focused on another, more important problem.

No matter the reason, the world is always changing and corporate needs are no different. Smart corporations (similar to VCs) are great at saying no while leaving the door wide open for future collaboration when a need arises. There’s a fine line between misleading a potential partner and clearly saying no but leaving the door open for future opportunities.

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The Five Questions Large Companies Ask When Evaluating Startups

I get contacted regularly by startups looking to partner with large, global companies who can give them scale. My work over the years has shown me a number of these deals from both sides of the table. While almost all of these relationships make some logical sense on paper, in reality they are way more difficult to implement than founders initially think.

On the surface, the logic for these relationships is straightforward – one party has a unique technology or product that can improve things for end users while the other party has global distribution and scale. What’s not to love? But there are several other factors that go into the decision making process for large companies which founders often fail to consider.

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Corporate Startup Lab Demo Day 2019

Last week, I had the pleasure of attending and keynoting Carnegie Mellon University’s Corporate Startup Lab Demo Day. My friend and mentor Sean Ammirati first shared the Corporate Startup Lab model with me in 2017 and I’ve been a fan since Day One. The idea is to bring together Fortune 500 companies with interdisciplinary teams of students to build internal startups solving problems and developing new business models.

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Inside Outside Podcast Interview

I recently had the opportunity go on my friend Brian Ardinger’s podcast, where we spoke about The Startup Gold Mine. We were able to get into a few different things, including:

Startups and corporates speak a different language

  • Different timeframes
  • Size of deals
  • Response times
  • Number of stakeholders

Corporate incentive structures for successful partnerships

  • How comfortable is the corporate team in innovating? If comfortable, they’ll have a higher tolerance for misses. Look at the entire portfolio.
  • Companies that allow intrapreneurship give employees new outlets to thrive.
  • Allow more employees to scout for deals – innovation can come from all parts of the organization.

What are the benefits of startups-corporation collaboration?

  • Inside large organizations (10,000+ employees) it’s an echo chamber. They only see direct competitors.
  • Need someone looking outside of direct competition. Expose the corporate team to new ways of thinking.
  • Startups also get exposure to see how their tech can apply to different domains.

You can listen to the podcast on iTunes, Spotify, or your favorite podcast player. Learn more about this and other great innovation episodes on the Inside Outside Innovation website.

Make sure to grab a copy of The Startup Gold Mine at your favorite bookstore!

Agile Giants Podcast Interview

My good friend Sean Ammirati has started a brand new podcast called Agile Giants. The show is inspired by his work over the past few years leading Carnegie Mellon University’s Corporate Startup Lab (CSL). In Sean’s words from his Medium post announcing the podcast:

If you already are a corporate entrepreneur, want to become one or are just looking for some advice around commercializing transformative innovation, this podcast is for you.

Sean was nice enough to interview me on the podcast. Our wide-ranging conversation was mostly focused on The Startup Gold Mine but also included stories from other projects I’ve worked on, like Estee Lauder’s External Innovation team.

You can listen to the episode below or on your favorite podcast player.

Hustle to Freedom Podcast Interview

I recently had an opportunity to chat with Ryan Helms on his Hustle to Freedom podcast. It was a pretty wide-ranging conversation that included lots of background on Unlimited Brewing as well as The Startup Gold Mine. In particular, we got into how to start a business as a side hustle and de-risk it along the way. This episode should be useful to anyone interested in side hustles, beer, and problem solving.

Give it a listen and make sure to subscribe to the podcast!

What to Do When Your Corporate Partner Says No

“Sorry, this just isn’t a good fit for us right now.”

This simple but terrifying sentence is a recurring nightmare for founders trying to close deals with corporate partners. And it’s even worse when you’ve been working on a deal for months and were banking the fortunes of your company on its success. So when you’re rejected, is it all over or is there something you can do to turn things around?

Here are some tangible next steps to take when your corporate partner says no to a deal:

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The Lindy Effect and The Future of Beer

In today’s world, we’re constantly being inundated with “newness”. It seems like every day, there’s a new startup or company coming up with a technology to improve how we do things. Despite how much media hype there is around these new technologies, it’s hard to know which ones have lasting power and which will fall by the wayside.

When looking at something new, a mental heuristic I find really helpful is examining it through the lens of the Lindy Effect. Those who have read Nassim Taleb’s The Black Swan and Antifragile are already familiar with the Lindy Effect. If you haven’t, here’s a brief summary (though you should still go read the books):

The Lindy Effect refers to the life expectancy of non-perishable things, like ideas or technology. Basically, the rule states that the longer something has been around, the longer it will be around.

An easy way to grasp this concept is to compare two successful books, one old – say, The Bible and one new – like Fifty Shades of Grey. The Bible has been around for about two thousand years while Fifty Shades has only been around for a handful of years. Which book is more likely to still be around in a hundred or a thousand years? Obviously The Bible. This concept applies to more than just books though – it applies to anything. Technology, media, transportation – everything. Something which survives a long time has, by definition, gone through the crucible of time…and survived. That bodes very well for its future survivability.

While not true 100% of the time, the Lindy Effect can be a useful tool for predicting which new technologies or ideas will survive and which are just blips on the radar. A great example of this is the butter vs margarine debate. For literally thousands of years, humans have consumed butter. Then, for a brief stint during the twentieth century, humans were told butter was bad for them and many people switched to margarine. But as is becoming readily apparent, butter isn’t nearly as bad as once thought and margarine may literally kill you. And accordingly, butter has made a comeback. Which is more likely to be around in a hundred years?

Thanks to what I do for a living, I’ve been thinking about the current state of the beer industry and looking at it through the “Lindy Lens”. I’ve made a series of predictions with explanations below that arise from following the Lindy Effect to its logical conclusions in the beer realm:

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Planting Seeds

I’ve been making a point to ask startup founders I hang out with for advice, particularly about management, priorities, and growth. I’m mainly trying to preemptively ensure we at Unlimited Brewing don’t fall into the same traps that others have already solved.

A few weeks ago, my friend (and East Village neighbor!) Sebastian Metti gave some advice which really stuck with me. I asked Sebastian how founders should spend their time. His response was super simple:

“You should spend your time planting seeds.”

This is brilliant advice. The idea of “planting seeds” loosely translates to building relationships, which applies to sales, business development, hiring, fundraising, press, and pretty much everything else. Some of these “seeds” will flourish and yield gigantic harvests. Most of them will go nowhere. And that’s totally fine.

planting seeds

When a business is just getting off the ground, the founder is the entire company. They need to build, sell, market, pick up the trash – everything. But as a company grows, there’s no way the founder will be the most skilled in every function. Nor should they want to be. That said, the founder will still be the only person with a high enough view of the company AND the ability to steer the company where it needs to go. And that’s where building the right strategic relationships becomes super important.

Back to planting seeds.