Sunday, February 24, 2008

venture funded start-up seeks "freebies" from vendors

I replied directly to Charlie O'Donnell's post a week ago. Charlie has successfully raised some money behind a very solid concept and is blogging his way through his experience . I don't see his rant on the company blog but you can find a link to it on his personal blog here:

Charlie is bothered that salepeople are soliciting his business and not offerring him "freebie" incentives. Charlie has strong opinions on a lot of subjects.

You don't need to be a salesperson or a recruiter to appreciate what it takes to do either successfully. I wonder if Charlie has ever sold anything? I did not ask.

Charlie wrote:

"I'm busy right now. Really busy. I'm running a company that's trying to get product out the door. You want me to make time for you, but what have you done for me? Clearly, you're reading blogs enough to notice when people raise money, but you're not actually reading them for content. You seem to have missed the new business model: provide as much value as possible and demand less."

Charlie, we the salespeople, recruiters, insurance professionals, lawyers, accountants, etc... We provide as much value and service as possible so that we can justify our fees. Isn't that the essence of capitalism? You can find your own executives and write your own contracts for free if you feel it's the best use of your time.

Charile continues:
"...Talk to us how we talk to our community... in an open and interactive way. And how about throwing me a freebie? What's the lifetime value of a recruiting client that runs a successful business? What's your margins? I'm surprised that recruiters don't ever offer heavily discounted or free referrals because if they found someone good for me, I'd be convinced of their value and probably use them again and again later on... and probably also make lots of referrals. Right now, I'm still convinced I can find people on my own, so show me someone I would have never ever found."

Good recruiters are looking to develop strategic relationships with a handful of clients so we can get paid. Throw you a "freebie"? We work for our money - nobody is giving it to us in the hope of a payday down the road. We (speaking for all us) look out for our clients, provide a service and value. We avoid clients who don't have the experience to appreciate us because they waste our time and time is the only real asset we have. Contingent recruiters are not asking for your hard earned money unless we are successful. That sounds like a fair value proposition. Don't worry about our margins. If we can help you achieve your goals before you run out of money then our margins are affordable and have value.

If you are trying to grow a company you can't quantify or overvalue the contributions your vendors can make. You will need good ones that don't waste your time. They will have skill, desire, hustle, chemistry and competence. Successful business owners and managers usually recognize that... You very often get what you pay for.


bbergman said...
This comment has been removed by the author.
bbergman said...

Every business owner is a salesperson. Charlie doesn't explain what his startup does in any of the blogs I read, which is a pretty good indication that he's not much of a salesman.

I've worked solely startups my whole career, and I, too, am very busy getting a product out the door. Hence I don't have time to read all of the blogs of every client prospect I want to pursue, in spite of Charlie's recommendation, and presumption to speak on behalf of "every other entrepreneur and new business". One of the ironies of professional services that I often point out, tongue-in-cheek, is that if a client could take the time to engage my services (i.e. get past "the sale") s/he wouldn't need my help! Outsourcing is done not because you can't find talent yourself. Rather, recruiters' expertise and practice focus make the process much more assured and efficient, even after you factor in the price. If Charlie is really so busy and doesn't see the value of outsourcing recruitment, then he clearly either doesn't have significant human capital needs or doesn't really appreciate the value of people to his organization. I get the sense that he is not familiar with what makes start-ups succeed or fail.

Alienating the professional services community publicly and with derision is not a good long-term strategy. We have influence and a wider network than someone struggling with a product behind closed doors. Keep in mind that recruiting is like any other professional service in that there is a wide variance in quality. You have your murder defense attorneys, and your ambulance chasers. I wonder - does Charlie outsource his legal and accounting functions, or does he hire in-house attorneys, or does he write out all his contracts and returns personally (by hand, with a quill)?

Sales is an art and a science. A lot of techniques employed are cheesy and unsubtle - transactional rather than consultative - but there are more sophisticated approaches, and some salespeople are more deft than others. The underlying principles are not only sound but compelling in their insight into human nature. To wit, one Sales adage is that "people do not appreciate what they don't pay for". This both refutes the inane suggestion of freebies, but moreover validates retained engagements. If Charlie just closed a funding round and is so happy with his group of Angels, he should more deeply appreciate the importance of all stakeholders "having some skin in the game".

Charlie said...


"Charlie doesn't explain what his startup does in any of the blogs I read".

Seriously? So, you've read the Path 101 blog and never clicked on the "About" section?

If you can't figure out what we do from there, I don't know what to tell you.

Also, it's not about the value of outsourcing recruitment, it's about the cost. I simply do not have the cash to increase my people costs by 20% per hire. It's just out of the question.

@David I have not been a salesperson, but I have done business development and certainly been sold to lots of times. In both situation, having a "starter" version of a product that is no-cost (especially when the product is your time--a service) always leads to increased product usage and revenues down the line. We've seen lots of vendors adopt this strategy. Sun is giving away servers at a loss (they did that with us) to get word of mouth going in the community about their servers. It's called a marketing expense. Instead of just paying for advertising all the time, they're placing their product with high profile, well connected startups.

When I was at GM, McKinsey tried to sell is research for a million/year. We said "give us six months free and get us hooked". They balked, and they got no sale from us. We were a leading LP in our space and if we started buying from them, they would have had at least 20 other clients, no question. Seems like very short term thinking to me.