3 Cardinal Mistakes Startups Make During CIO Pitches
Since it was started in 2014, Sapphire’s Portfolio Growth arm has generated thousands of introductions between startups and enterprise customers. Perhaps, the most rewarding outcomes of these connections is new revenue or logo acquisitions for our portfolio companies. We feel an equally valuable takeaway for us, however, is the insights this has given us into the ingredients for truly successful pitches to CIOs.
Many factors shape a successful first pitch to a CIO and securing that follow-on meeting. Many stars have to align, many boxes must be checked, and the technology must actually solve a business need. But there are certain mistakes we see startups repeatedly make early in their first exposure to C-level technology buyers, that we feel hamper their chances of any ongoing engagement.
Below are three recurring mistakes -- and our advice on how to steer clear of them:
- Asking zero questions
Getting face-to-face with a Global 2000 CXO is a truly rare opportunity to not only market your company - but also to understand how they think.
Having personally attended hundreds of CIO pitches by startups, I’m amazed time and again that even the most seasoned startup CEOs don’t ask the CIO a single question during their meetings. Instead, they launch immediately into a description of what they do and how they’re different from all the other vendors. This is truly a missed opportunity on multiple levels.
Asking questions early on in a pitch gives you several advantages:
- It reveals the customer’s inclinations (or biases) around your specific technology so you know what you’re dealing with.
- It gives you context on their IT stack so you can highlight those aspects of your solution that most address their unique landscape.
- And ultimately, it engages the CXO in a dialogue that positions you as a thought partner and not merely as someone delivering a sales pitch.
In our experience, the average pitch CXO is 30-40 minutes. We think that at least 5 minutes in any such meeting should be dedicated to the startup asking the customer questions like:
- How familiar are you with [XYZ technology domain – CASB, Blockchain, DevOps, ML platforms etc]? If the CIO is already familiar, cut the “101” opening credits and focus on what differentiates you. Nothing annoys IT execs more than being lectured on “disruptive” technology they already know.
- Can you tell me about your IT landscape or stack? If you’re providing cloud management tools for example, get a quick grasp on their current and planned cloud footprint. If nothing else, find out if they’re using or have talked to your competitors!
- What have been your biggest challenges in [given domain]? Open-ended queries can help tease out what is most pressing to the CIO – cost reduction, security, upgrading their architecture and beyond?
- What benefits would you derive if you had [the end state that your solution produces]? Prompt the CIO to imagine a world where your solution is implemented to quickly give you a sense where (if at all) the potential business value of your startup might lie.
The idea of consultative solution selling is now decades-old and giving way to newer avatars, such as the idea of “Insight Selling”. Whatever the reigning wisdom, the timeless principle of engaging your target in a conversation (vs. a monologue) still holds very true for CIO-to-startup discussions.
- Shy away from discussing obstacles to success
When startups proudly present their glossy “NASCAR” slides – impressive logos of global corporations that have bought and implemented their technology – they have the CIO’s attention for a few seconds.
They can hold that attention for a LOT longer if they are also realistic and talk about the most common challenges customers have encountered in implementing the solution and how they overcame them. The challenges you bring up can include cultural change, dealing with legacy architecture, messy integrations or the pains of replacing an existing solution. By talking openly about customer challenges you build credibility and persuade the CIO that you truly understand the obstacles to working at enterprise scale – and that you are equipped to partner with them for a potentially difficult but rewarding journey.
At the growth stage that we invest in, startup CEOs have solid experience with Global 2000 companies deploying their technology, and can share that knowledge and secrets to success employed by others with the CIO. Often this type of discussion adds immediate and real value to the interaction with the CIO.
This situation is not dissimilar from startups making funding pitches to VCs for funding: showing growth charts that always and inevitably trend “up and to the right”. Just as those funding pitches are often less convincing for seasoned VCs, CIOs appreciate pitches grounded in the reality of expected implementation or adoption bumps and how you’ll deal with them, as you paint the picture of longer-term success.
- Forget that CIOs are business executives and portfolio managers
It is important to remember that most CIOs aren’t geeks – they’re actually P&L managers and chief executives of their own IT organizations. CIOs routinely tell Sapphire Ventures that reducing cost of IT delivery, increasing IT efficiencies and consolidating their vendor landscapes are among their top priorities. This literally translates into spending less dollars on IT and working with FEWER vendors. Meanwhile, startups are pitching them on adding yet another vendor and MORE expense to the mix – often the opposite of the CIOs “lean” imperatives.
So, no matter how compelling your technology is – most IT executives are thinking during your pitch: “How am I going to pay for this?” or “If I implement this technology, can I displace another vendor’s technology (and another expense item on my P&L)?” This thinking is especially true of categories that are densely populated with startups and vendors - such as cybersecurity or marketing tech - where there are likely already a lot of in-house solutions implemented at the customer.
When you’re pitching, make sure to clarify if you’ll enable the client to replace a substitute solution. If the CIO can work with one less vendor, and keep the costs stable with just a more innovation solution – that is a winning proposition. If you’re NOT allowing short-term replacement, will you be able to avoid future spending on additional solutions? Helping improve cost structures within an existing expense category makes it a lot easier for a CIO to justify new spending in many cases. That said - if you’re creating a whole new category of technology, or unlocking new business value – there can often be budget in the CIO’s portfolio for greenfield, emerging technologies. If you do go after the “greenfield” budget with new category creation, leading with a message of “disruptive” innovation vs. incremental (or “sustaining” innovation) is often the more effective path.
Finally, a typical CIO will have a series of direct reports who are making these kinds of portfolio decisions at a modular level. Work to identify these other decision-makers within the CIO’s organization and then understand their trade-offs is also a sophisticated way of paving your way into that customer’s portfolio.
Set yourself up for success
Landing meetings with CIOs is hard, and will continue to be that way – especially with the burgeoning crop of new IT startups being funded. When you finally get that meeting, maximize your chances of success in translating CXO meetings into opportunities by shifting the orientation of your pitches to gather more insights from the customer, authentically engage in a discussion about obstacles to success, and place your solution in the context of the business leadership role the CIO plays in a large enterprise. Do anything else, and you risk wasting the CIO’s time -- and your’s.
Disclaimer: Nothing presented within this article is intended to constitute investment advice, and under no circumstances should any information provided herein be used or considered as an offer to sell or a solicitation of an offer to buy an interest in any investment fund managed by Sapphire Ventures. Information provided reflects Sapphire Ventures’ views as of a time. Such views are subject to change at any point and Sapphire Ventures shall not be obligated to provide notice of any change. This article contains certain forward looking statements, opinions and projections that are based on the assumptions and judgments of the author with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the author. Due to various risks and uncertainties, actual events, results or the actual performance of any Sapphire Ventures investment or strategy may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained in this Presentation may be relied upon as a guarantee, promise, assurance or a representation as to the future.While Sapphire Ventures has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. No guarantee of investment performance is being provided and no inference to the contrary should be made. Past performance is not indicative of future results.