An anthology of startup screw-ups that ended well
I have attended many tech events where corporates were depicted as doomed behemoths unable to work with promising startups. Never-ending sales cycles rewarded by free work (POC-mania), unacceptable payment periods, malicious behavior regarding IP, unsustainable revenue concentration… You know the story.
However, there are often two sides to a story, and I haven’t seen a lot of corporates sharing their feelings about doing business with startups.
From what I’ve witnessed over the past two years, startups can also be very bad business partners when they let their runway mess with their heads.
Here’s a short anthology of screw-ups that fortunately ended well.
I. Going AWOL
I connected a startup with the CEO of a large corporate. The meeting went extremely well and the CEO wanted to use their product right away. The founder, who was late for the meeting (not kidding), was quite relieved after everything and promised to send over a proposal in the next couple of days.
Two months later, still no proposal and no answer to the follow-up emails sent by the CEO (yes, you read that right). The startup was working on a significant Series-A with international investors and didn’t manage to maintain on-going business discussions.
As a consequence, the CEO, also a former entrepreneur, didn’t want to hear from them anymore. “I cannot work with people only focused on raising money”.
Most startups have an expected runway of roughly eighteen months post-fundraising, meaning that they all have a “time of death” in mind which could affect their interactions with potential partners.
In this specific case, the startup decided to secure additional runway at the expense of a prospect by merely going AWOL. Definitely not the right way to handle this — a simple email or call would have done the trick.
Luckily, their product was a perfect fit with the corporate’s need and quite unique in the market, so the CEO agreed to give them another shot by resuming talks.
II. Patronizing your prospects
The meeting started exactly like this:
Startup: “We work with your biggest competitors; we also work for some of your international subsidiaries. Do you think it makes sense that, as a French startup, we’ve never managed to work with you? If we were a Silicon Valley startup, no doubt the local players would have worked with us.”
Corporate: “You’re actually the perfect case study of things to avoid when trying to work with us. You tried too many entry points, at every seniority level. We don’t like that.”
The startup then developed a terrible diatribe against the corporate silo mentality and the lack of courage of its IT department.
In this scenario, the startup decided to leverage both Fomo and guilt to speed up a relationship that was going nowhere. My take is that, again, runway deeply influenced their strategy with this specific prospect. As a matter of fact, they had just secured a massive Series-B and figured that the timing couldn’t be better for guilt-tripping an almost-lost prospect.
It was the right call; they got a lot of respect for their stance during this meeting and managed to get some follow-ups with the corporate. They ended up working together a few months later.
III. Humiliating your co-founder
Often, there is both a tech guy and a business guy within a founding team. This early-stage startup was pitching a very large corporate — I’m presuming it was one of their first meetings with a corporate.
The business guy goes through the deck, he has the full attention of the corporate, there is obviously a strong complementarity with the corporate service offering — nothing could go wrong at this point.
Then comes the awkward moment when we finally get to slide twenty of the deck. A slide about the tech, drafted by… the tech guy.
Business guy: “Is this for real? Don’t you know how to spell this word? Did you go to school?”
He then grabs the PowerPoint, goes on to amend a few spellings live — right in front of the corporate.
The tech guy, overwhelmed by embarrassment, stands there and smiles awkwardly.
This early startup was eagerly looking for a market validation… in order to raise a seed round and go on developing their product. My take, and maybe it’s a bit far-fetched, is that this founder acted like a freak just to prove that he was extremely detail oriented… despite the fuck-up in the deck.
I’m presuming roughness was of help as they signed a pretty cool deal, which in turn helped them get a strong seed raising.
IV. Leaking to the press an unsigned contract
A founder, whom I truly admire, was negotiating a very large deal with a corporate. Discussions were a bit lengthy, mostly on details, so he decided to speed up the process by leaking to the press some aspects of the deal.
Me: “Why on earth did you do that?”
Him: “I have to make sure there is no going back.”
Me: “Seems to me it’s the perfect way to kill the deal.”
I’m sure you’ve guessed that in the meantime he was negotiating a significant fundraising… for which he really needed to have this contract signed… hence the genius (or dumb move) of leaking to the press. Anyhow, it worked and the deal was signed shortly after the press release.
Working with startups can be painful, and based on these selected screw-ups, I’m wondering if corporates are fine with working with unprofessional teams out of desperation, or if they are smart enough to judge a product rather than ephemeral awkwardness.
What seems clear though is that startups’ runways have a huge influence on their relationships with potential partners. Even though the above-mentioned examples ended well, prioritizing your investors over your clients will never be a good long-term play.