Gregor Stühler - Co-Founder & CEO, Scoutbee
Scoutbee was founded in 2015 by Gregor Stühler, Christian Heinrich, Thimo Schraut and Lee Galbraith. The startup maintains a supplier discovery platform powered by artificial intelligence and big data. With currently 130 employees, scoutbee serves more than 100 customers from its offices in Southern Germany. To date, scoutbee has received $76 million in venture capital funding.
On founder sales:
In B2B, there is no alternative to founder sales. Today, we have hundreds of employees and I’m still involved in many important OEM sales. Not because my team could not handle it, but because I need to know what keeps the customer awake at night. Otherwise, I risk losing touch with the market.
On the first sale / pilots:
I would say the first sale to a big Automotive Player was 50% hard work, 50% luck--we had an excellent inroad and perfect timing as the right stakeholder had heard about us already from an event in Silicon Valley. That’s how we got in.
In our first pitch, we were supposed to present in front of two ‘big guns’, and 4-5 project managers. It was all about having understood their problems beforehand and then deciding what to pitch. Then we had to read the room about what strikes them and what doesn’t.
Eventually, we agreed to do the pilot. We then hired an entire operations team just to handle this one pilot. We developed everything just for our Lead Customer, while trying to maintain a standard software. In the end, we were extremely successful. The results went directly to their Board, and they ordered so much that we almost couldn’t deliver. But on the other hand, it required a big upfront investment from our side, too.
We were very open with the fact that we’re early in the game and that our pilot is an investment into us and our vision. We sold it as a chance for them: to become squad leader in the digitalization of procurement. If they didn’t want to be that leader--no problem, we’d find someone else. And we described the alternative to them and said, “Of course, you could just go to SAP for this. But then you likely won’t get a masterpiece of innovation, but an off-the-shelf solution. With us, you could define how procurement will look like in the future.”
On determining the initial pricing:
We had a beer with the customer project team after work and asked them casually where they felt our solution could generate value. Afterwards, we took what they had chatted about and did an ROI calculation based on that--granted, a rather shirt-sleeved approach.
In the automotive sector, the budget thresholds are around €9,000, €40,000, €100,000, €250,000 and more than €1 million. We knew that our direct Champion had a signing power of up to €1 million. So we had to limit the price and our offering to an amount below that, so he could sign it off comfortably without having to go through the committees.
On identifying the decision-making unit/the Champion:
For our first customer, it was important to understand their particular organizational structure. As a big corporation, they have unique roles and management levels. Some of the names at the top level were publicly known. We had also found a career website where they described their career levels, which we then compared to the job titles in the email signature to find out what level we were talking to. This is how we worked us in from the bottom up and from the top down at the same time.
The main criterion in lead scoring for us is that we have a Digital Champion internally, or that we can build one.Procurement in itself and the procurement leadership isn’t typically very digital. We try to find someone who might even tie his or her career to this. There typically aren’t many rapid ways to advance your career in procurement, but this kind of side project makes our Champion shine and give them a chance to advance internally. Once someone has tied their career progression to us, we have so much more punch internally than we would on our own.
It might be a bit of a German phenomenon to be in love with your technology. I learned very early on that the customer doesn’t care about how things function, why they’re so fast. They only care about how fast and how much better. The problem is much more interesting than the solution.
Since we generate a lot of value, and we can demonstrate a clear ROI, there’s never any big discussion on price. Consider the dimensions we’re talking about. For example, if we benchmark 10-20 products for the customer, that quickly comes to €200-300 million. By just saving them 5-6% from better offers and maybe 20-30% in process costs, we generate several million Euros in savings. It’s pretty straightforward for the customer, and for us, it’s a very comfortable situation to be in.
You can easily mess up with your ROI calculations if you don’t understand what the customer actually wants and how they calculate their ROI. For example, we usually share an efficiency calculation with our customers, where we explain how our scouting solution saves them the 8,000 hours they would have to spend scouting for the same number of suppliers the traditional way. Amazing, right? But then they say, “In theory, that’s nice, but we don’t do any scouting in practice, so there’s no savings.” That’s super frustrating to us. On the other hand, sometimes we find that they don’t primarily need savings, but just want to implement the most innovative technology--that’s the best case. It just doesn’t happen too often.
There are three steps in each negotiation. Each one involves different stakeholders:
Solution. What does the customer want? What’s in our portfolio that we could sell to them? What do they need right now, what can be rolled out later? We typically discuss these questions with the End User and the Digital Champion.
Scope. How many licenses do they need? How do you package them, in which price tiers? Are there discounts? This negotiation usually involves the Digital Champion and the Primary Economic Buyer.
Price. This is the very last step. These pricing negotiations happen outside the standard organization. Usually a professional negotiation team from Procurement comes in to try and get the price down by some additional 5-7% percentage points.
We’ve never failed at the procurement stage. Sometimes we lost a single-digit percentage. Most discussions here are on minor issues, like a Service Level Agreement that doesn’t comply with their standards. But negotiations have never failed because of the price.
So far, we’ve always accepted the customers’ T&Cs. At least today we have our own corporate lawyer. Before that, we just went in rather hara-kiri: we accepted everything and hoped for the best. All of those contracts we had to clean up at a later stage to be more fundable.
The issue of software licensing is extremely important to us - specifically, to make sure customer-specific code adjustments belong to us. These are pitfalls that you need to watch out for, because they disappear in the fine print otherwise.
I always try to negotiate multi-year contracts. Instead of negotiating a renewal every year, I try to get them to sign a big three-year contract.
The question is always: what liability scenarios are we talking about, actually? If our software was ensuring the stability of their production, I’d worry like crazy and hire the very best lawyers to avoid possible liability cases. But in the end, we sell a recommendation engine, where the customer is the one making the final decision. Our liability risk is relatively limited.
Typically, the customer doesn’t invest their first million right away. It works rather like a review cascade after we have sold the first couple of licences. That’s why we get the customer to implement reporting committees and KPIs for measuring success as soon as they start using their licences. We advocate for the committee to be led by our Digital Champion, and then aim to constantly communicate success to the company. For this to lead to upselling, it’s important to use the right KPI. If you pick the wrong one, it can kill your entire upsell process.
Our sales process was very customer centric in the past and we pivoted recently to standard SAAS.
Our team is split between pre-sales, sales and aftersales functions: The Biz Dev team qualifies the leads generated by our Marketing or Lead Gen teams and makes sure the right personas are included before handing them over to Sales. And Sales is a buddy program between the Account Executive and the Customer Success Manager, who take care that the customer isn’t just closed but also growing well afterwards through customer success management.
Making the commission component relatively high has significant advantages especially for startups: you just attract the big hustlers. If your base salary is higher, you quickly end up with people who sit it all out, and then you have to micromanage them or let them go.
The ratio between base salary and commission is around 60-40, but with an open-ended commission. If the AE is doing well, he or she can easily earn triple that amount. In actual numbers, that’s between €50,000-70,000 for a middle to senior AE, with a commission of €40,000-60,000.