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At YC, we work with a ton of founders
who are navigating the B2B sales process
for the very first time. And I often
notice some very common and easily
avoidable mistakes that I want to talk
about today. So, I'm going to describe
the typical progression that a B2B
founder goes through. normally starting
with something like a a really poorly
defined and overly long unpaid design
partnership uh all the way through to
the like the pro move which is a rapid
well-defined tightlyun sales process
that results in contractually recurring
revenue straight off the bat. In other
words, I'm going to talk about how to
close your first B2B contracts. So in
general, the goal for most early stage
companies is to progress through this
sequence as rapidly as possible so that
you're able to close new ARR every week
and grow your company. And really 90% of
the time, the vast vast majority of the
time, founders get stuck in the very
early stages. It's the the very long
unpaid design partnerships. And my job
is encouraging them to advance to the
next level as quickly as possible.
Occasionally though, really only 5% or
10% of the time, founders will try and
speedrun the entire process and leap
right to the end before their product is
mature enough or without enough social
proof, i.e. other happy customers who
will vouch for you. That's pretty rare
though. Honestly, most founders are too
slow to progress through these stages.
So, let's try to lay out the different
stages and talk through them. The first
is the design partnership we've talked
about. Maybe you're very early in your
company journey. Perhaps you've got some
Figma mock-ups or really just an idea,
barely any code written at all. Or
perhaps you're selling into an industry
like law or accounting where there's a
ton of domain knowledge and maybe you
don't have that knowledge yet. And so
founders at this stage will often pitch
uh what's sometimes called a design
partnership. They'll spend a bunch of
time with a customer, often a customer
with a big fancy logo in their office
observing how they work and kind of
co-designing this product alongside the
customer to meet their needs. It sounds
really good in theory. The issue is that
these design partnerships are often way
too long, 3 months, 6 months, and
they're poorly defined in scope and
suffer from really low engagement from
the customer as a result. Since the
customer isn't paying for your time and
frankly, they've got their own business
to run, they just don't spend that much
time with you co-designing the product.
The entire engagement is all kind of, I
don't know, like vague and meandering.
You've got this fancy logo on your
website as a design partner, which feels
like progress to you and you're pretty
proud of it. And so, you don't want to
remove it from your website, but really,
you're not getting any closer to real
revenue with this customer. It is
extremely valuable to be able to sit
next to a customer in their office and
and observe their work, you know, sit
next to their keyboard and see what
they're doing uh for a few days. When
doing so, I generally suggest founders
try to identify like narrow pieces of
work that they can automate. Maybe you
ask a customer something like, uh,
what's the part of your job you hate the
most? Or if you could wave a magic wand,
what part of your work would you get rid
of? You can even offer to do the work
yourself manually for the customer so
that you really understand what's
involved. We've seen some of the best
founders even go undercover and get
qualified to work as an auditor or a
real estate agent or an accountant and
actually go and do the work like get a
job for a couple of months so they
deeply understand the problem in the
domain space. Really, the goal of all of
this is to identify a really narrow
burning problem, and you'd be able to go
away and build a narrow wedge product in
as little as 48 hours and bring it back
to the customer and ask them to try it,
see if it solves their problem. And I'd
keep iterating over different like
problem and solution sets until you find
an initial wedge product that they
absolutely love. So, if they are happy
to pay you and use your wed product, I
then actually wouldn't build more stuff.
I try and take that wedge product and
try and sell it to another 10 similar
customers. What many founders do which
is a mistake is to try and overbuild a
really broad platform which is a mistake
at this stage of your company because
you just don't have the resources. You
can waste a lot of time without any real
signal that the customer wants what
you're building. And founders often
justify this as like trying to reach
feature par with the existing software
which because you're such a small
startup is very very difficult. instead
I just focus on doing one part of that
um of that solution really really well
like really focusing on a narrow wedge.
The problem with building something very
broad is that rather than telling you
look this sucks I wouldn't use it the
design partner instead tries to be
helpful and maybe they imagine just one
more feature that they might want that
might make it valuable and really they
just don't want to hurt your feelings by
saying no this sucks. I've also seen
customers treat founders in a design
partnership as like an unpaid dev shop.
The customer gives the founders an
extremely detailed list of software
requirements that's only really relevant
to their business and the list keeps
growing. The founders understandably
want to make their first customer
really, really happy, but they're too
meek to ask for money. So, they do all
this bespoke work for free and it ends
up kind of seeming like an abusive
relationship. I'm not saying that all
design partnerships are a waste of time,
just most of them. Generally speaking,
more and more features are not the
answer. Instead, try to pick an initial
wedge product and sell it aggressively
for a couple of weeks. And if it doesn't
work, pick a different wedge. So, bad
design partnerships is the most common
problem I see with B2B startups coming
into YC and and doing sales for the
first time. Founders cling to these
long, poorly defined design
partnerships. they're just going
nowhere. They get stuck in low bandwidth
communication with a disengaged partner
and can't figure out how to move
forwards. So once founders figure out
that design partnerships can be a waste
of time, then they move on to free
trials, pilots, or proof of concepts.
These are really all the same kind of
thing, honestly. Maybe you have an
initial product built or at least an a
narrow wedge product that people can
use, but maybe you don't have the social
proof from other customers that this
thing really works yet. And so
naturally, uh, your early customers want
to try the thing out before they make a
financial commitment. These are normally
called pilots or proof of concepts. One
founder recently told me that a
customer, I think they were in France,
even asked them for a pre-proof concept,
which seems very low commitment. I I
really don't know what that is at all.
The most common problem for these free
trials is again they're too long, maybe
two or three months, and they suffer
from the same low commitment problems as
a design partnership. There's no target
or end goal, and the customer isn't
really committed uh to engaging with the
product or the design process. So, if
you're doing a proof of concept, you
need to understand what are you trying
to prove? What are the agreed success
metrics you're aiming for? If you've
seen my B2B pricing video, I talk about
defining the value equation with the
customer. So, for example, that's uh
what percentage saving or revenue uplift
are you going to deliver that makes your
product a good return on investment? For
example, if you're selling a customer
service AI, you might claim your product
might solve 20% of inbound customer
queries. The customer will be able to
reduce their customer service team from
a 100 people to 80 people, saving
perhaps a million dollars in salaries
every year. That's the value you claim
to be delivering. And in return, you
might charge $200,000 for that software.
And so, a well-designed pilot or proof
of concept is an ideal way to prove that
value. Maybe the customer doesn't really
believe you can actually solve 20% of
their queries. So you say give us a
sample of a thousand queries and let's
measure how many we can actually solve
for you. Is it really 20%, or is it 15
or is it 25% even? Once you've done
that, your internal champion can now
take the value equation that you've
defined with them and this proof that
you can actually deliver that value to
their CFO or the CEO and explain why
it's um a really good investment for
their firm. If they pay you $200,000,
they're going to get a million dollars
of benefit. It's a win-win. So, pilots
can be a way to convince cautious buyers
and overcome objections. Uh there are
different techniques. You might offer
back testing on historical data or even
sidebyside uh trials with their existing
process. So, for example, your customer
service product will be producing
answers alongside human agents and you
can compare the answers at the end. the
answers that your agent's providing
isn't really going to go to the
customers, but they're compared side by
side for a realistic um evaluation. Or
you might offer to take on just 1% of
their total customer service volume,
which is low risk. Or you could pick a a
smaller geography that they roll you out
in before rolling you out across larger
geographies. Again, this is a chance to
show that your product works in a lower
risk environment, so your champion is
not going to get fired if it all goes
wrong. But the problem with these free
pilots often is they still risk
suffering from low engagement from the
customers and founders are often very
afraid to have a willingness to pay
conversation. They feel like if they
bring a dollar amount up, it might scare
the customer off. But honestly, that's
almost always not true. It's so so
important to have the the conversation
with the customer. If I can solve this
problem for you and deliver these
metrics we've talked about, how much
would that be worth to you? you really
need to disqualify customers who just
aren't ready, able, or willing to buy
your product. So, after the free trial,
founders normally move to paid trials.
We've talked about design partnerships
and and free trials that go on forever.
When founders really get into the groove
and start ramping up their sales, they
figure out they need to make these
pilots much shorter and get a paid
commitment upfront. Getting a financial
commitment from the customer is going to
make them take your pilot much, much
more seriously. They're now paying for
your time and hopefully won't want to
waste their money. As well as the cost
of the pilot, I'd also ask upfront about
their willingness to pay for the full
product. You know, what's the annual fee
going to be and the price point. It's
better to know early if they just aren't
going to pay you any money whatsoever to
solve this problem. If it helps you
avoid going through a full procurement
process or having to talk to finance or
the CFO, you can ask your champion for
the amount that they can personally
approve. Maybe it's a $10,000 or $20,000
charge on their corporate credit card.
I'd often take less money if it allows
you to shortcut a long long approval
process. You might also ask for other
kind of commitments from the customer to
ensure that the pilot is successful
beyond simply a financial commitment.
Say you're doing work for an auditor or
an accountant. Perhaps you should wait
until there's a live project kicking off
that's suitable for you to test your
product on. So you say, "Let's not start
this month. Let's wait until the first
of next month because I know you've got
this important new project with a new
client. That would be a perfect test
case for our software." You might insist
there's client data ready to go or a
person or even a whole team that's
dedicated on the client side to testing
your product. I'd strongly advise you
also schedule check-ins every couple of
days with these people. So, if they find
any bugs or niggles with your software,
you can fix it overnight and bring it
back to them, which will really impress
an enterprise customer. All of that
might mean you delay the pilot starting
by a few weeks until there's a suitable
project. But then from the start date,
you can insist on a really high
engagement from the customer. I'd also
keep the time frame as short as
possible. really just long enough that
they can use your software and
experience the full benefit. Maybe
that's seven or 14 days if you've got
the product dialed in uh really well.
And remember, because your product is so
early, you're never really selling a
complete bug-free experience. You're
actually selling the founders and the
early team. You're selling the promise
that you personally are going to solve
this problem for them. You're promising
that if anything goes wrong, they have
your personal cell phone number and
you're going to respond 24/7 to get the
problem fixed. I'd track the time to
first value like a northstar metric,
reducing it from weeks to hours, is
often the biggest single lever for
higher pilot to paid conversion. What
this actually means is doing janky stuff
to get your product live as soon as
possible. For example, I would never do
a full API integration during a pilot if
it requires any engineering time from
the customer whatsoever because that's
just going to delay you by months. If
you can work from Excel imports and
exports, for example, that can work or
ask the customer to email you the data
you need and then email back the
completed work. So, you're really trying
to get to the point where they can
experience the value of your product as
quickly as possible. I'd also insist you
book a post-pilot meeting before the
pilot even starts. That's a meeting
where you can go through the metrics at
the end of the pilot and show hard ROI
numbers. It should be really crystal
clear to the customer at the end of this
process whether they want to keep using
your software. Now, this is all pretty
good, but the downside of a paid pilot
is you still need to go and negotiate
the full contract afterwards. It's like
a whole second sales process just when
you thought you had a customer who was
ready to buy. And this can be very, very
frustrating. So to get around this,
really sophisticated founders move on
from paid pilots to recurring revenue
contracts with an opt- out period. So
this is typically a monthly or annually
recurring contract with a 30 or 60-day
money back guarantee or opt- out period
at the very start. But by default, if
the customer does nothing and is happy
with your product, it's going to turn
into a full recurring contract after
that opt- out period with no additional
sales process needed. That's the pro
move. It's like magic. It's one sales
process that turns into a recurring
revenue contract. And it can be very
persuasive to be in a sales meeting and
confidently say, "Well, this is how
customers buy our product. Typically, we
offer annual contracts with a 30-day
grace period or an opt- out and customer
X, Y, and Z all signed on these terms."
It can be hard as a an early stage
founder to leap straight to this step
when you're just starting out. Maybe
your sales process isn't good enough.
Maybe you don't have the social proof or
maybe simply your product isn't ready
yet. So starting with an earlier step,
perhaps a free pilot for the first one
or two customers and then moving onwards
can be an option. Of course, you can't
run before you can walk. But don't be
stuck crawling on all fours for too long
either. And for me, that's the overly
long design partnership with no
financial commitment. As a side note
here, be careful what you report to
investors as MR or ARR, especially if
customers are still in that opt- out
period. Just be super clear with
investors when you're reporting these
numbers where the customers sit. I think
the tactic is still absolutely spoton.
This is just a communication point with
investors. So, when you've got early
sales really dialed in, you might be
closing one of these recurring revenue
contracts every week or two. After
you've signed these contracts, that
takes us to the next thing you should
focus on, which is customer success. So,
after you've signed these contracts, you
may often need to dedicate as much or
even more effort to actually onboarding
the customer and making sure they're
getting value out of your product. I
spoke to a company just this week that
had signed $4 million worth of
contracts, but they implemented less
than $2 million of those contracts.
They're simply missing a customer
success function. Finally, I want to
finish up with some tips that I've
learned from YC companies over the last
years. First, get Sock 2 started as soon
as possible, as well as any other
security certifications. It might be
HIPPA, ISO 27,01.
These security certifications can delay
you by months. And so, I'd get it
started today. There are plenty of YC
companies that can help you with this,
from Vant to to newer companies. I'd
figure out who your internal champion is
and treat them almost like a co-founder
inside the company. It's someone who
sells for you when you're not in the
room and fights budget battles on your
behalf. With this person, I'd try and
set and then work towards a defined
closing date. They're going to miss it
almost every time, but it can still help
create urgency within the customer. Ask
this person to tell you about their
sales process upfront. You might say,
"Describe the last time you bought
software like this. Who internally had
to prove it? What was the process?" You
can map the organization. You might have
the economic buyer, the technical
approver, the security gatekeeper, the
legal team, the day-to-day users, and
then devise a plan to win over each
stakeholder explicitly. Once you
understand that buying process, try to
drive it forward yourself. Don't leave a
meeting without the next touch point set
up. The next tip to move a contract
along is to get on a plane and
physically visit your customer in
person. It can work wonders. You might
email your your champion and say
something like, "Hey, I'm going to be in
Houston next week. What do you say about
getting lunch?" And if they say yes, you
book your flight to Houston. Don't get
caught up in multiple rounds of
reviewing contracts or NDAs. Customer
legal teams love to do this back and
forth. Their entire job is redlining
contracts, but it's going to slow you
down incredibly, and it doesn't really
prevent much risk. So, I'd be pretty
flexible on signing, frankly, whatever
your early customers want as long as
it's not going to expose you to like
unlimited liability or container clause
that's going to transfer all the IP in
your product to your customer or
something company ending like that. So,
I' I'd really ask yourself, is this
clause like company ending or just a
slight annoyance? And frankly, put up
with anything that that's not going to
be company ending. Using scarcity can
also work. You might say something like,
"We're talking with seven or eight
potential customers, but we really only
have the capacity to work with two
enterprise customers this quarter. So,
if you're interested, we'd love to get a
commitment. Otherwise, let's talk again
in 6 months." So, this has been a pretty
exhaustive list. Hopefully, it helps you
to up your B2B sales game. But if you've
discovered other tips that work for you,
please do let us know in the comments
below. And as always, thanks for
watching.
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