Selling to the Fortune 500, Government, and Other Lovecraftian Horrors

While I've certainly heard justifications for this relationship ("they provide good support"; "we don't need an inhouse ops team this way"; etc.) there are more than enough examples of these being pragmatically false to convince me that there's a whole lot of lag between a service not providing a compelling net value add and being cleared out of institutional process and culture.

And there are usually feature/function levers to pull to select out government clients for different price points.

I don't remember government RFP processes being a whole lot different from those of banks and tech companies.

I do remember that the fedgov team I worked with had a whole bunch of skeezy government-specific sales tactics it tried to leverage.

And that, in a nutshell, is why the myriad defense and intelligence agencies have always been easier for startups to work with than the civilian government. It is virtually impossible as a startup to have a profitable relationship with the civilian U.S. federal government due to the mind boggling overhead and an extremely slow, paperwork driven, and politicized process that makes enterprise sales seem easy.

Mind you, defense and intelligence is the same but with one important exception: if you can address a critical operational need, they have the ability to make the absurd overhead go away and pay real money. It is why startups have always had much better luck there than the government at large; you are not automatically subject to a Byzantine multi-year process that will probably never pay off. But even then, it is a challenge to get to the right people. Nonetheless, they are constantly inventing vehicles like In-Q-Tel that have no civilian equivalent to funnel money to startups.

Enterprise is definitely easier than government in most regards from the perspective of a startup. The mechanics are more transparent and businesses understand ROI.

My nightmare scenario is when of the K Street wonders (or I street) gets their software required for a grant program. It is always awful which leads to a nice side business in training classes. I've had to deal with too many of these wonders.

To give a nice example, one piece of software needed an "update". This update came in the form of a PL/SQL file that needs to be applied. This file was 762 megabytes. No install program just a list of steps to run the sql file that took over 4 hours to complete.

Most (all?) are required to the take the lowest bid that satisfies their requirements, but they are free to craft their requirements so that only one vendor can possibly meet them.

I raise my rate when working with government entities (to account for the significant administrative overhead and lead time on payment), as compared to private companies, and still have no trouble getting POs for my asking price.

This depends on the organization. At my university, my boss can spend $1,000 at a time on his company credit card on an whim. If I make a convincing case for something that's $900, he tosses me his card and it's here in two days with Amazon Prime. He controls a budget closer to $10,000 but large purchases require the approval of his own supervisor and the invocation of the University purchasing/accounts payable system.

If I ask for something that's $1,100 then he needs to schedule a meeting with his bosses to start a long and arduous process involving a sales guy, quote, purchase order, etc. My last purchase was held up for a week because the designated sales guy was on medical leave. It was also $200 more expensive from the preferred vendor, which did not offer free shipping over the phone (despite having it on its own website). Delivery is going to happen approx. 10 weeks after I asked my boss for it. Contrast with two days. The University purchasing department may not care about price, but most of my boss's budget already needs to go somewhere and $200 is not insubstantial in terms of the extras/upgrades I can propose.

This is what I think the article is referring to. Sneak in just underneath the (completely arbitrary) limits that make the difference between an impulse buy and something involving fax machines.

If you're not just doing one time deals, find a lobbyist in the branch of government that you're interested in. It will cost $40-100k, but will get you in front of the people who matter. Usually these people can hook you up with the right partners as well.

I assure that most office furniture is absurdly over-priced and indeed would dwarf a $500 license. Just a desk chair with modest comfort and ergonomic features will be priced in that ballpark, with anything that you'd consider "nice" being higher than that.

Or, something about your pitch or follow up is turning people off. Have you sought out some advisors? Just getting meetings with all these companies is a good accomplishment. So perhaps you need s neutral third party to review what you're doing and try to find out where it's going wrong.

You absolutely will find jerk VPs and bait-and-switch. Patrick's article glosses over that, only briefly mentioning all the times he shot for enterprise and "missed."

If you want to talk more (I know nothing about what you did but it sounds interesting and I could possibly get you hired at a bigco), please shoot me an email: large.companies()gmail.com

The primary reason you didn't hear anything back is because these people, if they had any signing authority at all, are used to sales people pushing the deal along, and being the passive partners of the deal, no matter how enthused they were at the beginning. It is normal to see lots of initial excitement, followed by silence to repeated daily/weekly calls/voicemails/emails/letters/gimmicks for weeks/months/year, then a mad rush to purchase in just a week or two. I would go into details of why it generally works this way, but it would make an already too-long reply execrable.

Your description of what you were pitching was too vague for me to tell for sure, but the general rule of dealing with those licensing agreements is to get a company counsel to talk with you and express what their concern is that prompts such an agreement/clause, then in a friendly manner suggest alternate wording that protects that specific interest while not infringing upon your interests. Generally speaking, once you are exchanging legal/purchasing/contracts paper, F500 folks cop less "my way or the highway" attitude, and are more willing to meet you halfway if you are reasonable and negotiate friendly-like. Hire an attorney to teach you the wording you want to protect your specific interests if you are unsure of how to make the changes.

For some classes of software, you can separate out the R&D to a standalone company, designate yet another company as a retailer/distributor, and sell only licenses through the retailer/distributor. The R&D company will not sell direct, "as policy" (if pressed, just say the R&D team just doesn't want to get into the retail/wholesale side of the business, preferring someone with the appropriate skillset handle that for them). Anyone else who wants to be a retailer/distributor, has to have the appropriate skillset to support the product. It just so happens that only one company in the world so far can do that. As far as the F500 is concerned, you are now a third-party selling and supporting licenses, not the actual product itself. There is an exclusion of the "grab everything we can" clauses in every purchasing contract I've seen for third-party licenses. This is because the F500's realize Microsoft won't sell them Office (for example) if they made a grab for IP via purchasing of licenses.

I've said this before, but it bears repeating. Hacker effectiveness follows a power law, and business savvy does as well. You denigrate and ignore the high-effectiveness business people at your peril, as you have found out. Just because the majority of business people are mediocre like the majority of programmers, does not mean you can do without them.

Also this seems easy to massage, you can just resell a commodity under cost to generate all the 'revenue' you want (at negative margin.)

As an anecdote, we had "small business pricing" published on our site and organizations like The World Bank, Koch, and a few others were paying $279/month which was insane. We made a few thousand a year on those plans, and a few hundred thousand on "enterprise" clients.

We don't have small business plans anymore.

It is inexplicable.

Customer/vendor is a very different relationship than employer/employee, even for consultants to say nothing of SaaS vendors. You don't have to run your vacation plans past them, you can moonlight at 10 jobs simultaneously without of running out of hours or having any of the jobs think this is odd, you can hire people to do the delivery in a way an employee cannot, you can sell your relationship, etc etc.

No lie: occasionally more stressful than working for W-2, and you largely don't get the option to just focus on delivery, but it's a very different beast.

[1] Never been in that position; have been in the "Oh, good, you're finally here. THE SKY IS FALLING!!!11!" position, though.

[2] Actually the clocks don't work that way. But I don't understand them anyway.