Johnson Cook

Energized. Seeking perpetual inspiration as entrepreneurial fuel.

Johnson Cook - Energized. Seeking perpetual inspiration as entrepreneurial fuel.

Thoughts for Startup Service Providers

 

I couldn't resist at least one lawyer joke in this post...

I couldn’t resist at least one lawyer joke in this post… I promise, I’ll be serious after this photo. Ok, I’m done. Seriously.

My first post in a series about Players in the Startup Ecosystem.

Service providers have an interesting relationship with the startup ecosystem. They play a critical role, however and many startups don’t appreciate the true value in the right providers.   I for one certainly did not appreciate early in my entrepreneurial journey the importance of having the right lawyer, banker, accountant, HR people, and real-estate brokers.  It’s not that my service providers did anything wrong, it’s just that I didn’t intentionally select providers that were active in the community and could add value to my company beyond their scope of work.

Some service providers don’t get startups and don’t ever have any intention of building deep relationships to add value beyond their invoice.    As a community grows and entrepreneurs become more aware of the value of tight relationship networks, they will continue to place value on an informed, connected, and proven service provider.   Providers on the outside of the ecosystem may find it hard to get in. Here are some thoughts.

Service Providers: Why you should care about startups.

First of all, it’s not because you can make a ton of money. Working with startups is going to be an expensive pain in the neck. They will be low margin for you. They will negotiate every chance they get, and they will demand the highest level of service you can or can’t provide.

The thing is: startups don’t stay startups forever. If they do, dump them as a client. If they don’t, they will become your best success stories. Helping them grow is rewarding and powerful for your business. They also are typically led by entrepreneurs who will become involved in future businesses and community leadership organizations. Those long term relationships are not forgotten.   The ones who help us when we need it most are the ones we feel closest to when we are the ones offering the help.

How you can get involved most effectively in startups.

1. Make a lot of bets.  Unless you can magically see the future, it is unlikely you can pick one or two startups to work with and have a giant success story. You need to place a lot of little bets. If it takes creating a standardized services package that startups can afford, then try to do that. If it takes giving away time, maybe that’s worth a try as well.  No VC has ever made money in early stage companies by picking only a couple of investments.

2. Help them with the things they need most.  In my experience, the things startups need the most that service providers can help with are: customers and talent.  Refer customers as often as possible. Perhaps your other clients are potential beta users of a startup’s product. If so, get involved and make it happen.   Talent is easy as well. Never hesitate to send good people to a startup. Even if they aren’t hiring, entrepreneurs love meeting with smart people.   Good entrepreneurs are always looking to build new relationships.

3. Manage your expectations.   It’s hard work building startups, and it takes a lot of time. Remember that most will fail. Remember that many times failure is not spectacular crash, but it’s rather stagnation after a certain point.  Be ready for this and work through it with your clients.

What you should expect to gain.

Service providers who figure out the startup formula have a world to gain by being involved in such a fast paced, constantly changing ecosystem of innovation.  Aside from the benefits discussed above, you will also very likely be considered cutting edge in your own profession.  I’ve seen lawyers, accountants, and marketers become “startup experts” in their field and start to win over their colleagues and entire industries.

Cracking this code isn’t easy, but once you get involved, there is great satisfaction from helping create companies from thin air as a service provider.

 

  • Scott Lewin

    This is a key topic for any startup. Having access to the right network of “partners”..(and these service providers are partners in your startup) is key. From your accountant – who should help minimize your accounting responsibilities and make sure you are structured properly, lawyer (corporate – who helps set up your entity and your deal attorney who helps on customer facing activities), real estate pro who understands your cash flow situation, furniture guy, insurance guy, printer, and on and on and on. These partners need to understand the requirements and constraints in a startup. When you find the right partners, they will help you succeed, even beyond their own core focus. The best partners know that the investment they make in your first startup will pay off for them over time.

    • http://www.johnsoncook.com/ Johnson Cook

      Great response. I only wish the word “partner” wasn’t so over-used. It’s a true representation of what you need in service providers, but unfortunately every damn one of them says they want to be your partner. The only way I’ve found to measure their BS is by asking how many other startups they are “partners” with… and to tell me their names and something about the startups product/service.

  • Baker Barnett

    Johnson, Do you believe the current Atlanta early stage company market is big enough to support a bank solely focusing on SaaS lending due to its relatively predictable recurring revenue?

    • http://www.johnsoncook.com/ Johnson Cook

      Baker- Fantastic question!

      Short answer: Not even close.

      Long answer: Tech/SaaS friendly banking is a massive opportunity for a great community/small/local/regional bank to dominate. Having recently gone through a excruciatingly painful search for a Tech/SaaS friendly LOCAL bank, I just gave up. There’s no such thing. It’s SVB (SV based, obviously) or there is nothing. To combine the awesome southern value of relationship based banking with some savvy about tech companies, VC financing, SaaS, MRR metrics, etc… is a great opportunity. I’ve even thought about offering myself up as assistance to any Bank Board of Directors who wants to make this market a priority. ;)

      • Baker Barnett

        I don’t have any affiliation with these two, just have read their marketing material and it seems like Square 1 Bank and SaaS Capital provide similar services to Silicon Valley Bank but on much smaller numbers so potentially an option for early stage companies who have proven revenue and don’t want to get diluted