The Right Way to Go After Big Clients; Don’t Put All Your Eggs in One Basket

The Right Way to Go After Big Clients

Don’t Put All Your Eggs in One Basket

SARAH E. NEEDLEMAN

Jan. 11, 2014 8:26 p.m. ET

A year after starting a restaurant-technology firm, Rajat Suri got an introduction to what would become by far his biggest client—the casual-dining chain Applebee’s International.Mr. Suri’s startup, E la Carte, makes software for tablet devices that allows diners to order and pay for meals from their devices. The 28-year-old came up with the idea after he and about a dozen friends struggled to divide up a tab at a restaurant.

While the introduction to Applebee’s resulted in a lucrative outcome, Mr. Suri says striking a deal with such a big corporation required a lot more time, effort and risk than he anticipated.

The sale took three years to complete, compared with as little as one hour for deals with smaller clients. What’s more, Applebee’s required E la Carte to spend a full year testing its software at select outlets—and it had to compete against a rival business for the same opportunity.

“Three years is a long time in the history of a startup,” says Mr. Suri, whose company will begin outfitting 2,000 Applebee’s restaurants in the U.S. with its table-side tablets next month. “I had to persuade our team members every day this is going to happen.”

If you’re building a business-to-business startup, securing a large corporation as a client may seem ideal. Yet experts in entrepreneurship warn that going after just one major sale can drain your fledging firm’s resources and hurt morale. Thus, they say it’s critical to maintain strong relationships with existing, smaller customers in order to avoid relying on a prospect that could take years, if at all, to come to fruition.

“You can’t put all your eggs in one basket,” says Krishna Gupta, managing partner of Romulus Capital, a venture-capital firm in Boston and an early investor in E la Carte. “You might spend months with a large organization and the final word will come down to, ‘We’re excited about this, but it’s not the right time.’ ”

The good news is that you may be able to learn how to improve your product or service from small clients, which can increase your odds of securing larger clients down the road, adds Stewart Thornhill, a professor of entrepreneurial studies at the Stephen M. Ross School of Business at the University of Michigan. “You want to take advantage of every bit of customer intelligence you can get,” he says.

The more small clients under your belt, the more attractive you will become to those large enterprises you’ve got your eye on. “Big companies don’t like uncertainty,” says Mr. Thornhill. “They want to know you’ll be able to deliver on your promises, so every customer you bring in replaces that uncertainty with fact and data. You’re reducing your risk profile.”

New York-based entrepreneur Irving Fain says his five-year-old firm, Crowdtwist, used feedback from its initial clients—firms much smaller than its current large clients likePepsiCo

PEP +0.78% and Vizio—to make key improvements. One noted that its customers were circumventing Crowdtwist’s software, which is designed to help brands measure and reward consumer behavior. Another client suggested features that the company hadn’t considered.

The information was so valuable that Mr. Fain, 33, says he and his co-founders regret not hiring a sales team sooner to help them acquire even more clients in the beginning. “We would’ve gotten a better understanding of the market more quickly,” he says.

Before pursuing a major client, consider developing a board of advisers that includes people with connections in the industry you’re targeting, says Mr. Thornhill. These folks may be able to help you determine if or when you’re ready for the big leagues so you don’t bite off more than you can chew. They may also be able to introduce you to corporate decision makers and put in a good word for your startup.

Don’t worry about the impression that your small staff and limited resources make on a potential large client. When a senior Applebee’s executive met with E la Carte’s team for the first time in 2012, it operated out a dumpy three-bedroom rental property in Palo Alto, Calif., that Mr. Suri also called home.

“We were nervous,” Mr. Suri recalls. “People were working in the basement, the living room and bedrooms.”

Yet the Applebee’s executive wasn’t put off by the modest digs. He even accepted an invitation for a tour of local entrepreneurial hot spots like Facebook‘s FB +1.26% campus. “It didn’t hurt us,” says Mr. Suri. “It created excitement.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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