I’ve heard many investors and some executives repeat the mantra, “Never offer exclusive deals,” and since this blanket statement is generally bad advice I thought I’d offer the less conventional but I believe more practical version of why exclusive deals can actually be a huge bonus for a startup and why I actively encourage them.
Sales is all about knowing the key values of your buyer: What are they trying to achieve in working with you, why do they care about your solution and how will it help them economically? If you know that at senior levels the buyers often have an enemy in mind in each of their big moves in the market you can use that to your great advantage.
The beauty of these types of buying motives is that exclusivity comes at a cost to the buyer and they often don’t mind paying up to get it. As a startup this is often the one true source of strong leverage in a negotiation to get a better price, get a longer-term commitment, get PR commitments and so forth.
To craft exclusivity agreements, make them time bound, and name the competitor who you’re not allowed to sell to. If they won’t name the competitor, specify the industry or geographical region as narrowly as you can. In exchange for exclusivity, you want larger contracts, longer-term contracts, more commitments to success, and funding for accelerated development.
Startups should say no to 99% of partnership opportunities. Most partnerships never go anywhere and don’t make sense for the startup to invest significant effort into the relationship due to being time and money constrained. Partnership opportunities do make sense when there is significant skin in the game on behalf of the partner (e.g. large up-front fees) or a super minimal way to work together (e.g. less than 20 hours of work to get something out the door that is useful).
Now, it isn’t that bigger companies are trying to take advantage of startups. Rather, bigger companies have more resources and less focus, whereas startups are often looking for product/market fit and need to stay focused on work that’s applicable to 80% of their desired customers.
Edited excerpts from Let’s Meet: How to Prevent Big Companies from Wasting Your Startup’s Time by Hunter Walk:
As a startup, figuring out how and when to engage with large companies is essential to not losing focus and driving the process towards a desired outcome. Some thoughts:
1. Don’t take the meeting unless you know what you want to get out of it. You don’t actually have to meet with BigCo, especially if they won’t tell you what the goal/agenda is, who will be in the room, etc.
2. Make sure the right people are in the room. You want an informed decision maker in the room. If you get stonewalled on this request, ask what data/information can you provide in advance to make it worth this person’s time to attend.
3. Unless you know your goal and prepare for it, make the meeting less formal. If it’s just an intro meeting, turn it into a meal or walk n’ talk to remove the ‘presentation’ aspect.
4. Turn every meeting into a recruiting opportunity. Get the contact info of everyone in the room. You never know when you might want to reach out to them to join your company.
(1) In my experience, the biggest risk of meeting with large companies is that their goal isn’t a partnership, but reconnaissance — to learn about what’s cutting edge in their market. An indicator of this is when a relatively large number of senior execs turn up for the meeting. How can you avoid this? Maybe by asking to meet with the key decision maker alone for the first meeting, and only progressing to a larger group when there’s clear evidence that they want to get something done with you.
(2) Perhaps the challenge of correctly framing meetings with large companies is just a specific case of how to set up successful meetings generally. On this, see the advice from Aaron White, Scott Britton and Steve Blank.