Years ago my co-founders and I made a mistake. You can say that we fell into the waiting trap. At least in some ways, and for some time. Here’s what happened, why it went wrong, and what you can learn from our blunder.
The startup I was part of had developed a piece of software that could be used by management consultants in their work with clients. We found it to be very difficult to get the McKinsey’s of this world to start using our tool. So we started lower in the food chain and sold it to small boutique consultancies and independent consultants. The LTV (lifetime value) of a customer was modest, so it was hard to find a financially viable way to scale. We started looking for a partner that already had wide distribution, and could help us reach thousands of potential customers globally - without us having to build our own expensive salesforce.
So we had a meeting with Microsoft. Before I continue, let me say that I don’t have a problem with Microsoft specifically. I have since found out that the way they operated back then, more than a decade ago, is not too different from how most big corporates still handle their conversations with startups. So please don’t think that I am bashing Microsoft. I am also not updated on how they do things nowadays. Anyway, here is what happened.
We had the meeting, and we were told by the Microsoft team something to the effect of “this is very interesting, and we could definitely imagine working together with you”. We were over the moon! We heard ourselves saying over and over again, to colleagues, investors, at family dinners, and even at some of our sales meetings: “Microsoft is very interested”.
We were told by our contact that in a big organisation things just take time. We could surely understand that. He would have to pave the way internally, and talk to a lot of people - before we could move on to the next phase. Roger that.
We did our best to be patient. Once a month we reached out to get an update. The first couple of times our contact was still enthusiastic. Then it became harder to get a hold of him. But he ensured us that all was on track. It was just a slow process, but we would get there. Then suddenly his responsibilities at Microsoft changed, and the dialogue died out. We were devastated, and the following couple of board meetings were far from fun.
Years later I learned what had actually happened; Microsoft wanted to be open to startups and good ideas. So they agreed to have many meetings with hopeful founders. As a big brand they wanted to be nice, and keep all options open, so they would normally give some compliments and encouragement at such meetings.
In reality, though, they could only partner with a fraction of the startups that came to them, so eventually most dialogues would die out. As the Microsoft employees saw it, they were cheering founders along, being supportive, staying open to all possibilities - and then in a very small proportion of the cases they would go the distance and actually start a collaboration.
Seen from the perspective of the corporate I can understand that this can seem as a good thing to do. However, here’s what happened on our side, which I don’t think the folks at Microsoft fully understood and empathized with.
Now that we were so close to our big breakthrough (so we thought) we started to obsess about Microsoft. What was their strategy, what kind of products did they particularly like, how could we align most effectively with them. We took the foot off the pedal in terms of outreach to other potential distribution channels. For some time we even slowed down direct sales work. We had to be ready for a big rollout with Microsoft. Or at least optimise our chances by developing the features we suspected Microsoft would appreciate the most.
Each board meeting started and ended with talking about Microsoft. There were examples of other companies that had started working with Microsoft, and everyone becoming multimillionaires. It made so much sense! Microsoft had the distribution, the brand and the muscles. We had the innovative product and the creativity. We could develop faster and cheaper than they could (we speculated).
If a Microsoft insider had seen one of our board meetings during that period, I think he would have been surprised. If we had observed the Microsoft team we had met having an internal chat about us, I am sure it would have been very sobering to us. But of course that never happened. We waited, and stayed in our delusion. Up to the point when our contact person lost interest in us. And it turned out that no one else at Microsoft was interested in continuing the dialogue with us. Bummer!
Our startup continued for some years after this episode, but it never became successful, and was eventually closed down. The need our product was supposed to solve was at the end of the day not important enough to the customer segment. It wasn’t Microsoft that killed us, and it was our own lack of experience that allowed for the year-long distraction to happen.
What I learned from this experience:
To investigate deeper how real an interest from a potential partner really is.
Not to get carried away by fantasies and dreams. To stay grounded.
Build a pipeline of potential partners. Definitely don’t go all-in with one of them until the contract has been signed.
Focus first and foremost on all the small steps we can take on our own every day. It can be tempting to dream that someone else will come and make us successful, but most often it doesn’t happen that way.
When in talks with big companies, make sure to build relationships with all the key people, not just one or two.
Ask clarifying questions. Know when to back off and when to keep asking.
Make sure there is a real commitment before spending too much time and money on something that is specific to just one potential partner’s needs.
In short: definitely don’t wait for a big potential partner to get on board. Instead make your startup more and more attractive day by day, through initiatives that you can carry out here and now.
Next time we will look at the misunderstanding of waiting for the “perfect” team member to come and save the day.
Read part 1 here.
*Illustration by Mynte Sidor Bjergegaard, 13-year young freelancer