#100- The problem of perpetual pilots

Navigate the pitfalls of perpetual pilots and convert them into revenue-generating contracts with strategic insights for early-stage startups

Pilots are valuable for testing the waters, but they're worthless if they don't lead to paying customers. Early-stage startups cannot afford to get stuck in the cycle of perpetual pilots. Founders must set clear milestones for converting pilots into revenue-generating contracts, and if progress is lacking, they need to reassess their approach. Remember, pilots should serve as a means to an end, not as an endless loop of free trials.

One of our portfolio companies was trapped in an endless pilot loop for years with just a couple of large customers. Nearly all of the development energy was diverted to customizing workflows across the breadth of the clients’ processes. The founders ended up becoming project consultants instead of CEOs and CTOs. Additionally, all hiring was put on hold until that big win of turning a pilot into a large paying customer, which never materialized. In a startup, even if one of these things happens, it spells doom - imagine all of it happening for a prolonged period!

What should founders look for to avoid the above from happening?

Focus on depth vs. breadth

Early adopters within enterprise settings seek to validate your solution's value proposition in a highly specific and contained manner. This entails addressing a singular use case, targeting a particular team, or focusing on a specific point within the organization's value chain. If a pilot customer is asking for detailed roadmaps, broad plans, and a finished product, it ceases to be a pilot anymore - it becomes a full-fledged solution.

Ace your positioning as an expert

Large enterprises are inherently risk-averse and hesitant to introduce new partners into their ecosystem. Most enterprises have an internal requirement to not onboard a vendor with less than $Xmn net worth - to avoid insolvency or shutdown risk. Startups cannot increase their net worth overnight, but there are other ways to overcome this barrier. Always position your startup as a subject matter expert in your niche domain! By demonstrating deep expertise and understanding of the specific pain points, problems, and challenges faced by your target customers, you can give them the confidence that you are a differentiated player amidst a sea of competitors.

Know & limit your decision-maker(s)

Too many cooks spoil the broth. The broader your solution's coverage, the more decision-makers are involved in the evaluation process. And that means each decision-maker’s distinct preferences and perspectives on how to solve the problem at hand, potentially leading to decision-making stalemates or prolonged evaluation cycles. Our portfolio company was conducting daily stand-ups with the R&D, procurement, and supply-chain departments of their pilot customers while simultaneously creating a complex, broad, all-encompassing solution to fit all of their needs. At one point in time, they were speaking to 57 different individuals over 9 separate chains. It was a nightmare. Founders should focus on simplifying the decision-making process by offering a focused solution tailored to a specific use case, thereby minimizing the number of stakeholders involved. In case of pressure from the customer, founders should ask for a central point of contact.

Recognizing early adopters

Enterprises genuinely interested in innovation and early adoption will always prioritize value validation over feature requests. If a pilot customer insists on seeing additional features before committing, it's likely they are not an early adopter and may not be the ideal fit for your solution at its current stage of development. Remember, if it's not a ‘Hell Yes, it's Hell no”!

Founders should keep the following in mind while dealing with pilots:

• Pilots are preliminary assessment tools, not end products.

• Pilots should be a means to an end, not an endless loop of free trials.

• Pilots should have a clear exit strategy to avoid wasting time and resources.

• Pilots should have predefined & clear milestones to convert into revenue-generating contracts.