Start-up Entrepreneurs' Blog

Danger … More Tricks Played On Start-Ups

November 5, 2010

Established corporations know the deep desire of a start-up to do business with them.  Some companies are straightforward with start-ups and others play tricks on start-up to their benefit alone. What are more of these tricks?

Hedging with Multiple Suppliers

Established companies may be working with more than one start-up that is developing the same technology, leading each start-up to believe that they are their supplier for the product and waiting to see which start-up produces the best and most cost effective solution. This can get the solution at the best possible price when it is needed and they’ve created more than one supplier.

A common scenario is for a system provider to have another established company develop a piece of their new system without any obligation between them – with no contracts or money changing hands.  Because there is no contractual obligation between the parties, the system provider incurs a risk and cannot guarantee that the other company will eventually produce the piece it needs – after all, the winds of change blow through a company alongside their planning and budgeting cycle and the project may be de-funded. As a result, the system provider hedges its position by working with multiple vendors in hopes that at least one with come though.  

I’ve been on both sides of this situation. More than once, I’ve been the system provider where the other company de-funded a project because something more lucrative came along, and we had no choice but to proceed with the start-up’s solution. Sometimes I work out well for the start-up. I’ve also been on the start-up side and had the other company come though, and dashed our hopes of landing a high profile customer.

Think outside the box. These situations exist because the established company doesn’t want to spend its money today and wants to avoid contracts, so what else can your start-up get from them? What else can be of great benefit to your start-up but still meet the immediate deal criteria of the established company.

Trust Your Gut Response and Always Be Willing to Walk Away

The best solution is for the start-up team to trust its instinct and its gut response.  If it isn’t a good deal then try to turn it into a better deal for your start-up. Stalling is one of the most common tactics and never a good sign. Never be afraid to walk away.  Continue pursuing every other avenue until you have a contractual or firm obligation.

Read part 1 for more tricks and tips for interacting with large companies – Learn About Tricks Played on Start-ups

Filed under: From Concept to Start-Up,Marketing & Sales

Tags: business development, customer development, start ups, start-up strategies, start-up tricks, tricks