Startup Should Sell, Not Business Develop

By Adelyn Zhou

Many industry leaders have said that there are only two roles in a startup, a builder or seller; the prevailing wisdom for startups seems to be “focus on sales first, and only later on business development.”

In the Dropbox case taught in TEM last year, founder Drew Houston initially tried to pursue partnerships with large corporations.  However, after a series of trials and errors, he realized that it was very difficult to sell the Dropbox product directly to company IT managers.  Therefore, he did a “Trojan Horse” approach and targeted company employees instead.  Using great referral and viral techniques, he incentivized consumers to download Dropbox directly onto their computers.  Ultimately, the combination of IT department employees using the product and the internal demand from company employees tipped many companies over the adoption hurdle and into being Dropbox customers.

Mark Roberge, SVP of Sales at Hubspot echoed similar sentiments on how a start-up should be focused on sales rather than business development in its early days.  Sales is a central communication channel between the company and customer and important to testing hypotheses about product use and the willingness to pay.  The best sales teams not only close attractive deals, but also funnel back user insight to the product teams.  Focusing on sales allows the company to build stronger customer feedback loops, iterate faster, and ultimately find product market fit.   The sales learning process allows a company to refine its value proposition, and only then can it really deliver value to its future business development partners as well. 

Many startups believe that if they can land that one large enterprise customer, then all their troubles will be over.  However, the cycle for business partnerships is typically months long as larger companies go through various signoff processes, waiting around for these deals closures this valuable time lost.  Furthermore, there is a large imbalance of power – potential partners may force startups to build features that are not part of the long term strategic map.  There is a fine balance between listening to customers and being visionary.  Steve Jobs famously said "It's really hard to design products by focus groups. A lot of times, people don't know what they want until you show it to them."  Even though one large partnership can provide validity of an idea and help acquire additional customers, those large customers may also stretch a startup’s system too quickly before the startup is ready to scale.  For example, due to a glitch in scaling the IT system in March 2012, the Eventbrite ticketing system crashed during the sale of 40,000 Googa Mooga Festival tickets, leading to a PR disaster.  A slower ramp-up with stronger QA testing controls may have avoided such challenges.

However as with everything, there is a time and place where business development is vital.  Business development is especially important to certain industries such as ones with heavy OEM or product integration requirements.  For example, cell phone manufacturers need close relationships with carriers who will ultimately dictate their product specs and a large part of their success.

Yet if given the choice, the choice seems clear: start with sales and only later, business development.