Hacker News new | past | comments | ask | show | jobs | submit login
Bending over: How to sell to large companies (asmartbear.com)
130 points by jonpaul on May 24, 2010 | hide | past | favorite | 28 comments

When you say bending over… is that bending over backwards or forwards?

One important point with selling to large companies is to understand their price points. At some price, lets say $1000, a middle manager will have to go through several layers of purchasing approvals. Below that price, and they can make and act on the decision without approval.

Once you've gone over that price, you should go waaay over it to make it worthwhile. This is one of the reasons why you see so many corporate products that throw in the kitchen sink. They've gone over the purchasing approval limit and having a lot of features helps drive the price up, which in turn helps support the steak-dinner sales cycle.

One of the hardest things I ever did was walk away from an over $300k licensing deal with a major corporation. I was selling them my polymail email classifier to improve their anti-spam product. They had already done all the work and proved that it was way better than their existing anti-spam component for their personal security suite.

But they were unwilling to pay a reasonable price and I wasn't willing to be screwed.

Their product's anti-spam still sucks.

and you're still short $300k. Even if they low-balled you it might have been to your advantage to license it to them for a year and then put your foot down.

If it's "one if the hardest things" he ever did, I'm guessing that option occurred to him.

It did occur to me, but given how badly they treated me through the entire process I decided that $300k wasn't worth the hassle of dealing with them.

You could have hired somebody else to handle the hassle dealing with them.

One thing I've learned about their slow payment system is that you should follow up immediately when the payment becomes overdue. That's often the first time they'll tell you that you haven't followed their procurement protocol.

Is their an open-source EULA available? Paying even $1000 right now for a lawyer is untenable.

Selling to large companies can encompass all sorts of possible licensing arrangements, including patent licensing deals, source-code OEM deals, object-code OEM deals, site licenses, white-label deals, and license/development deals, among others.

Because the deals can vary so widely, the legal agreements that are required will vary as well, making it impossible to rely on any one standard form (of course, a "EULA" in the narrow sense of that term, i.e., the canned form signed by end users of licensed software, is highly standardized but that is not what is involved here).

The kinds of issues that can arise under these variations really go over the board, from who owns rights in various forms of development work that might be done with the licensed technology, to the scope, duration, and limitations of the licenses themselves (source, object, field, site, etc., exclusive, non-exclusive, or some hybrid), to the nature of the distribution arrangements permitted for the licensed technology (stand-alone product versus bundling, channel limitations, etc.) to the nature of the legalese that shifts risks one way or the other in the arrangement (IP infringement warranties, product warranties, liability caps, indemnity provisions).

Thus, from a legal standpoint, this is a complex area that does not easily lend itself to standardized forms.

As a starting point, however, you will be able to find excellent forms for these sorts of agreements by searching the EDGAR filings at sec.gov.

The Wordpress.com/Automattic Terms of Service (http://en.wordpress.com/tos/) and Privacy Policy (http://automattic.com/privacy/) are available under a Creative Commons ShareAlike license.

Good intentions on Wordpress's part, but it might be seriously problematic in view of intervening case-law developments. I did a write-up at http://www.ontechnologylaw.com/2010/05/using-wordpress-coms-....

some kind of open EULA for various common SaaS models would be a great resource.

If there isn't one maybe those of us who are having to pay to have one written, could instead pay for an open one to be commissioned?

Your comment made me think an obvious thought that has not occurred to me before: If we have open source code for systems as complex as the Linux kernel, why can't we have open source legal documents. You still would need to consult with a lawyer to go over it (similar to how you need a coder to add features to a source-code project), but the savings could be enormous.

Any lawyers among us care to elaborate?

Most lawyers I have dealt with for business needs like commercial leases, liability waivers, etc all use boiler plate documents for a starting point.

I'm not a lawyer, but I think the bulk of the cost that you are paying as their customer isn't for the text of whatever document you need to procure, but rather for their professional analysis of your business's specific situation and any changes that need to be made to that boiler plate.

There's got to be. I was looking for something like this as well. Hopefully some smart user will chime in.

How does an umbrella insurance help with liability? Where can I learn more about this?

This is a good guide for once you have an agreement, but I wish it dealt more with how to get started with a big company as a client, especially when you're a bootstrapped startup.

I found Selling to Big Companies (http://www.amazon.com/Selling-Big-Companies-Jill-Konrath/dp/...) helpful.

A referral is very helpful. That's not always easy but it's worth racking your brain to try and find a connection.

It's also worth aiming as high in the organization as possible. In large companies most people don't have the authority to purchase anything of significance.

It's not just an issue of money. If buying your product changes the way they do business in any meaningful way then some authority will be required to approve those changes. Does the person you're talking to have that authority?

It's much easier to start high and then have that person push you down to someone lower in the org to do the leg work than to find out after months of effort that the person doesn't have the authority to consummate the purchase. If VP X tells manager Y to look into something at least you know VP X thinks it's worth the time.

This implies that you need to craft your value proposition and benefits in a way that is appealing to someone further up the food chain.

Read "Selling To The Top" by David Peoples.

We sell this kind of software... it's both a pain and a dream in one go. (note: while we are an actual company the software side of things is very "indie" so a lot of this stuff applies)

It's a pain because managers can be really awkward sometimes if their ass appears to be in any way on the line - one piece of software we offer manages the auditing of classified material and, for obvious reasons, selling it has been hard (even though pretty much every company is just using a NAS with the files on it....)

It's a dream because apart from the odd manager you can predict exactly how everyone at the company will react (from legal through to tech). After about 10 sales you will be able to pitch it in a way that leaves them with no questions :D

Regarding this article...

Please read this 100 page document about our invoicing process.

We've actually had success just saying "I'm sorry this will incur an extra admin cost of X, if you like this is how we generally invoice...". All these companies like to think they have a highly efficient invoice process compared to everyone else - but the truth is that pretty much every company has the same basic ideas :) (note: YMMV - we sell to specific/specialized companies in the same fields who all tend to be quite similar anyway)

"We will release the funds after you provide your US social security number."

This has proven a problem for us in the past - some of the companies (about 30% of our sales are in the US) genuinely don't believe anyone in the UK is able to write/sell software on an enterprise level :P You'd also be surprised how many times we get asked to come out and do a demo of the software - and they can't understand that is a non-trivial trip :)

"We only pay using Bankers' Scrolls made from papyrus"

This is absolutely the biggest ball ache. Especially because they want US bank details... Paypal is, in my opinion, a complete no-go anyway once you are over about $1000 (and possibly a lot less). We've set up a merchant account and threw up a really simple payment gateway for clients. This has proven pretty popular and has yet to be refused; in fact I think once a company becomes aware that we "handle our own payments" they are willing to work with it. Credit Cards have proven to be perfectly acceptable even for the biggest companies.

"If someone sues us over your product, you have to pay our legal costs."

Just outright refuse this if you can. Mostly because there is wide possibility for them to try and screw you with it if they make a mistake. If they insist I always make sure it explicitly deals with what circumstances can be considered "our fault" (i.e. bugs etc. rather than misconfiguration).

Most companies seem reasonably happy if you offer them free "on-site" technical support in the case that they run into difficulties which might lead to legal issues (usually through a claim-back of tech support costs after the fact).

(as always - your experience may differ, all companies are different)

One trick the article didn't mention is that you can often get your payment a little faster by offering a small discount for early payment. They don't have to know that you price it in by adding a penalty fee for anyone who waits until the last second to pay you.

The editor states

"Most small companies start by copying a EULA from a similar company, possibly even a competitor. That's a copyright violation, but perhaps you can use it as a guide with a lawyer of your own."

I'm naive in legal matters, so I cannot understand how a relatively entry level EULA can be copyright. Aren't these things pretty similar?

I have never seen a legal contract protected by copyright. Most contracts use very similar language because--although it looks like English, it's not--you want to use wording that already has settled definitions in case law. I am not a lawyer and spending 1% of the value of the contract on legal fees is a reasonable rule of thumb.

Copyright arises automatically in the U.S. and much of the rest of the world for "original works of authorship." Legal contracts can qualify. There have been cases where Law Firm A sued Law Firm B for wholesale copying of, say, bond-prospectus documents.

OK. Are you aware of any claims of copyright infringement for a software license for commercially available software (not a custom contract).

Haven't heard of any. (But remember Murphy's Law.)

It's no trick to play upon fears. It's not a useful trait in an advisor.

Great post. On a slightly related note, are there people in the HN community who are awesome salespeople? Any of you looking for a job?

I've found that selling to enterprise customers isn't the hardest part - it's find really awesome salespeople.

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact