Dear SaaStr: A Big Potential Customer Just Asked for Our Financials. We Haven’t Raised Much. What Do We Do?
The key I think we've learned from prior cycles is being honest
Hiding this as a start-up doesn't help
They just assume the risk — or they don't
— Jason
2022 SaaStr Annual Sep 13-15
Ah, vendor viability. It can be a stressful situation. You finally get into a big potential deal, and often, you’re competing with someone much bigger. And you’re asked for your financials.
In the end, what do you do if your balance sheet — is modest? If you don’t have 10 years of runway?
You can try to obscure it, and hide it. That may even seem natural, and the right thing to do.
But most large enterprises will push back. They’ll push for your financials, and cash balance.
What I can tell you is the following:
- Yes, you may lose a deal to a better-funded competitor. It can happen. In fact, this is a top reason to IPO. It just puts you in a different risk category for enterprise customers.
- But usually, it just ends up being a risk factor big enterprises know how to deal with. They just flag it as a risk. Which it is.
- If you’re coming out of an experimentation budget, or emerging vendor budget, it probably is fine. They understand some of these vendors have weak balance sheets. They just force the sponsor to address the risk with a mitigation plan, in many cases.
- If you literally are running out of money right now, it’s tough though. You probably won’t get an enterprise deal.
- Many still won’t ask. So don’t be too discouraged in any event.
In the end, my advice is just to be calmly honest. And put together the right, simple disclosure for your sales team and others to use (as Nick Mehta suggests above). Put a little positive spin on it. But don’t hide your financials. Often, they just go into a risk assessment and don’t come up again. And if you lose the deal because of your weak financials? Well, better to know now.
A related post here:
“Vendor Viability”: It’s a Risk Big Customers Know How to Take.
vendor viability image from here
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Jason Lemkin, Khareem Sudlow
