Networking startup vendors always generate a ton of excitement in the market.
Whether it’s the Data Centre, WAN, or other areas, they often solve specific long-standing challenges in new innovative ways.
They often have really cool product features and a nice GUI that is very enticing. However, it’s important to remember to avoid falling into the trap of shiny new object syndrome, and ask specific pointed questions to gauge their long-term viability.
Along those lines, here are some key questions you can ask a smaller/emerging network vendor.
How many paying customers do you have?
This is foundational to understanding their market traction, and don’t be surprised if the answer is low - this gives you an idea of their scale and experience.
There is a big difference between being customer #1, customer #11, Customer #51 and Customer #101. Similarly, ask them how many customers they currently have in Pilots/POCs, as that gives you an indication of where they’ll be in 120 days (assume a 30 percent win rate).
What is your funding and revenue?
Funding is pretty easy to determine, and often reported publicly. Revenue is a little trickier as most startups will not give you this precisely (even with a confidentiality arrangement), but they can usually bracket it into a range (less than 1M, 1-5M, 6-15M, etc.).
How many employees do you have?
This gives you an idea of their scale, but ask them for the breakdown. How many FTEs versus contractors? How many developers? How many in technical support. Also ask where these employees are based.
Take this information, combine it with revenue and funding to develop a rough idea of the company’s burn rate (how fast they’re running thru cash) - this can give you an idea for how long their runway is until they run into problems, assuming current conditions persist.
Who are your friends/partners?
When going up against incumbents with strong account control, it is often very difficult for startups to take share in the mainstream, over the long-haul.
Obviously, you have to have a good product, build a channel, identify clear differentiation and use-cases - this is table stakes.
One clear area startups must cultivate are technology partners. Do they have OEM/distribution relationships with well-known and trusted IT vendors?
Do they have deep product integration with big-time players in peripheral markets like virtualisation and security? The amount and depth of their technology partnerships and eco-system is likely highly correlated to higher-level business relationships.
These relationships are key to long-term viability, or in other words… an OpenStack plugin may not be enough.
Where’s the Differentiation, and please don’t tell me about architecture?
This is a no-brainer but if your startup doesn’t differentiate, then why go away from established incumbents.
Make sure the differentiation is clear, and valuable to your organisation. And consider the impact/likelihood that an existing supplier will be able to provide that capability within the next year.
Who is your buyer?
Focus is key here. To be successful in the long-term, startups must have a strong market understanding of their buyers.
Yes, their product maybe a fit globally, for all verticals and GEOs, but if the startup is trying to sell to network, security, DevOps, and cloud architects across Service Providers, Enterprise, Midmarket all at the same time and has 17 employees, it will be difficult to succeed at any one.
So look for a startup that has traction and understanding in a specific segment or use-case. Then make sure you fit into this segment - if their customers are an eclectic hodge podge, that is a red flag.
Ask for References
If they cannot provide references willing to talk, be afraid, but also use this as leverage with them (hey, we can be your first reference customer). When you get the reference on the phone, here are some questions to ask them.
Tell me about deal(s) you’ve lost
The key thing is to discern what (if anything) the startup learned from losing. Will they avoid similar situation(s) in the future, or behave differently in similar situations. The startup’s ability to adapt in this way is key.
If they told you they’ve never lost, that is also a red-flag as it speaks to extremely limited experience. My high school baseball coach once told me: show me a player that’s never struck out, and I’ll show you a player that’s never played in a game.
By Andrew Lerner - Research Analyst, Gartner