All posts by Chuck Devita

Why Lawyers Don’t Run Startups

Why Lawyers Don’t Run Startups

This article by Steve Blank is excellent.  The business decision-makers should negotiate the strategic issues and then engage the lawyers to draw a contract that reflects those agreements.

“Startups need to have a great lawyer, accountant, patent attorney, etc. But founders need to know how to ask for their advice and when to ignore it…

Strategy Questions Not Legal Questions

The issues our lawyer had raised about the contract, while correct, were strategy questions the founders needed to answer, not legal questions. Negotiating deal points before we thought through our strategy at best would have cost us a ton of money with little progress.

Looking at the Visio contract the question we were faced with was; how bad would the short term consequences be in signing the deal? The answer to that was easy – none. We’d have money in the bank and a reference customer.

The next question was, how bad would the deal points Visio was asking for screw us in the long term? This was more complex. Some of them would have limited our ability to sell to other software companies. Those were clearly unacceptable. Some of their other requests were just “comfort” issues like putting the software in escrow to protect Visio in case our startup went out of business.

Finally, there was a class of what I call “business development contract terms.” This happens in every company when a contract is passed around for review and everyone feels they have to mark it up with extraneous demands to feel like they had their say. Most of these points might have sounded great in law school but were impossible for a startup to deliver….”

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Selling Tools or Solutions to the Enterprise?

Are you Selling Solutions or Tools to the Enterprise?

I regularly encounter SaaS application vendors who are having difficulty getting traction in Enterprise customer acquisition.  The founders think they have an Enterprise Solution because it has the potential to change the way work is done in the Enterprise.  Because they a)  have limited functionality in the initial version and b) have not done the hard work to understand and quantify the value to the customer, they price it low ($25K ARR or less).  The result is that prospects see the application as a tool or point product.  Enterprise executives, who have the authority and political capital to authorize changes in the way work is done are looking for solutions to their top priority problems.  They do not spend cycles on low-priced tools.  They delegate the evaluation to those who don’t have the authority or political power to change the way work is done.   Often, prospects see the app as a “nice-to-have” rather than a “must have”.   The result is low close rates and long sales cycles.  Sales reps try to solve this by forcing demos on every candidate they can find.  They focus on features rather than value for the customer because they have not been trained how to sell value.   The founders may see the traction problem as poor sales execution when it may well be product positioning, low price and the lack of a clear value proposition.

See a related post on Selling Value to Executives.

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