How to Convince Large Companies to Work With Your Startup
Every year, we publish the Entrepreneur 360 — our list of the 360 most well-rounded companies in America, based on an evaluation of impact, innovation, growth, leadership and business valuation. This series spotlights some of this year's honorees. For more 360 content, view our 360 content hub.
Llamasoft provides supply chain management software to more than 750 of the world’s most innovative companies — and its first clients consisted of multibillion-dollar companies with household names. How did the company convince larger organizations to change their old supply chain habits and take a chance on Llamasoft before they hit big? Toby Brzoznowski, founder and CEO, shares his strategy for redesigning the supply chain management industry.
This interview has been edited for length and clarity.
What was the biggest challenge in Llamasoft's early stages?
The biggest challenge was that we were selling to multibillion-dollar, multinational customers. So in most cases, their risk tolerance is low, and the competitors were, in many cases, established companies. We had to have a clear differentiator, and we knew we had that very early: a unique combination of simulation and optimization technology. We could articulate the value for the customers, and we had to find companies that were willing to be early adopters. There's a certain culture, and some companies don't have that culture — their procurement organizations just won't allow it — while some do.
How did you find those companies?
You have to speak to all of them. You talk to as many as you can, and it comes down to whether they are willing to experiment or not — or whether the pain they experienced is so severe that they have no other choice. In either case, we needed to make it easy for them to do business with us. We had to remove the barriers that a procurement organization would put up, and that's why we created these more risk-averse contracts — milestone-driven, deliverable-driven contracts. So they really didn't pay until they achieved the value they were looking for. That allowed us to sell to a company that typically wouldn't buy from someone our size.
Was your growth a slow process in the beginning?
For those first five years, it was all very much organic, one customer at a time, one new developer at a time. Once we realized that the customers were evaluating our solution and we had everything they needed, we realized that we were becoming a market leader in terms of capabilities. That's when we first decided to look for an outside investment because that was the time we could scale and could accelerate our growth.
Did you intentionally choose to grow slow and steady?
I think our Midwestern, blue-collar roots shaped our approach to building a business. We were very conservative and frugal with our spending and our equity, and we felt we needed to establish strong market proof and traction before considering growth capital. For us, it worked out well because we built a higher company value before bringing in outside investors. However, the pace of business is faster today, and this same approach may no longer be practical.
With tech companies growing so quickly today, do you still recommend this approach?
It's dependent on the solution, and it's dependent on your capabilities. If you have unlimited resources but also have a really unique solution that you know no one else has, and you know unlimited resources could build that within a year or two, then it makes sense to just take in money, capitalize on the idea and be the first to market. But, in doing that, you give up something. You give up control of the organization. You give up equity in your company and ownership of your company. And there's no guarantee that you are going to get that to market, so it's typically a higher risk for the investors. My personal opinion is that when you can, go as long as possible without taking outside money. That's because you go further along in proving your solution, proving what differentiates you, getting customer references and getting market validation, and that increases the value of your company.