As a founder and mentor, I begin each week with pipeline meetings and the question: “What are the barriers to close?” I teach this method to Alchemist startup founders to help them identify the barriers that can stall each deal. Too many first-time founders provide a forecast to potential investors without allowing for the possibility that procurement may stall or kill their deal. A deal is not done until it is signed. Here are 5 best practices that will help you navigate the procurement process like a pro.
Tip 1: Know Your Path To Close
Your buyer approves the “budget” but doesn’t approve your Vendor Status. “That’s Procurement’s job,” they say. This is a key point: they are different departments. The Path To Close means understanding the buyer’s decision making process AND Procurement’s new vendor setup process and requirements. Any delay in the new vendor setup process will stall your deal. Understanding the procurement process and barriers will reduce the time it takes for your deal be executed by weeks.
Tip 2: Remove the MSA Landmines that Stop You from Getting Your Vendor Status
The procurement New Vendor process could take months. Founders must factor this into their forecast. Don’t forecast a deal to close in 30 days if the procurement process takes 90 days. Since our goal is to help early stage startups close faster, consider using your client’s Master Service Agreement (MSA.) This document can reduce the friction getting your deal signed. All deals have key sections that need to be negotiated, like IP ownership, indemnification, payment terms and cancelation. All of these terms will be in the MSA, so it will save you time and legal fees to redline your client’s MSA.
Tip 3: Understand Data Ownership and Data Security – ISO 27001, ISO 27017, ISO 27018
Some deals you will have to walk away from, because you are not able to pass their Data Security requirements It is important to know data protection requirements as early as possible in the sales stage so you don’t waste cycles. For example, If you don’t have independent verification of security, privacy, and compliance controls, through achieving certifications, you will not get vendor status. A great resource for you to learn about ISO security is Google Cloud, which does a good job clearly outlining data security requirements. Here is the link for your reference.
Tip 4: Build a Relationship with Procurement
Deals are done between people. Never underestimate the power of a human relationship. Ask to be connected with the procurement lead who is responsible for your deal. Procurement teams negotiate hundreds of deals a year. They can tell you what barriers will kill your deal, and set the legal review timeline.
Tip 5: Pro Tip: Factor in Legal Team Bandwidth and Planned Vacation (PTO)
Don't be surprised when you are told that the legal team is slammed with other deals, or on vacation for the next month. This delay may not seem like a big deal to them, but it stalls your deal and can have a waterfall effect on your quarter and fundraising roadshow. If you know this, you can plan for it. So ask your procurement lead what outside factors could delay your deal from getting signed in the current quarter.
About Darren Kaplan
Darren Kaplan is the co-founder and founding CEO of hiQ Labs (www.hiqlabs.com), a data science company, informed by public data sources, applied to human capital to make work better. Mr. Kaplan is an Alchemist Accelerator mentor, working with Augmented Reality, Cyber Security, and HR enterprise SaaS startups.
About the Alchemist Accelerator
Alchemist is a venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. We give companies around $36K, and run them through a structured 6-month program heavily focused on sales, customer development, and fundraising. Our backers include many of the top corporate and VC funds in the Valley—including Khosla Ventures, DFJ, Cisco, and Salesforce, among others. CB Insights has rated Alchemist the top program based on median funding rates of its grads (YC was #2), and Alchemist is perennially in the top of various Accelerator rankings. The accelerator seeds around 75 enterprise-monetizing ventures / year. Learn more about applying today.