A few days after pitching a potential investor to support his latest business venture, Steven Santamaria got a response. The answer was no and he thanked the investor on the spot.
“Your job as you’re starting a company or trying to get a deal done is to get a no as fast as you can,” says Santamaria, founder and CEO at Folio Photonics Inc. “There is a fear a lot of times to close or to ask for the business or ask for the investment because they are afraid of getting a no. A no is better than a maybe any day of the week.”
Santamaria spent 14 years at Intel Corp. leading multiple strategic projects, including a Microsoft partnership and the global expansion of the Intel Developer Program. He also started WebTuner Corp. and Envelop VR, fueling his passion for disruptive technology, entrepreneurship and dealmaking.
“Dealmaking is a constant,” Santamaria says. “I don’t care what you’re doing or what role you have in any company. You're doing deals whether it's customers, partners, employees, investors or even sometimes with my family.”
This week, Santamaria shares lessons learned from the business deals he’s made and explains why starting a business is a lot like going on vacation.
Vet your idea
One of the first things you have to do as an early-stage entrepreneur before you can think about making deals is assess your business model.
“If you think you have an idea, start researching the hell out of it and make sure it’s unique,” Santamaria says. “Make sure there aren’t 10 companies in China who aren’t doing the same thing. Your chance of winning becomes much smaller. If you can find that one unique service opportunity, then it becomes a very interesting play.”
Santamaria recalls a conversation he had with someone who wanted to build a company around a virtual reality software application.
“I said, ‘Are you funded? Do you have a customer?’” Santamaria says. “No and no. They just had an idea and it’s a great idea. But I sent them links to three other companies on the West Coast that are doing what they do or are very close to it. One of them had raised $50 million, another had raised $25 million and the other got bought by Google. They have a three-year head start. You can’t win unless you have a customer who says, ‘Yes, I’m funding this, I’m going to use this.’”
The reality is starting a business can often be like planning for a vacation.
"When we go on vacation, I tell my wife, 'Pack half the clothes and take twice the money," he says. "It’s the same thing with a startup. You need half the people and twice the money you think you do. Something always happens."
Practice brutal honesty
If you think you’ve got a great idea and you’ve attracted some interest, you still need to be sure.
“This is where entrepreneurs get tied up,” Santamaria says. “You can’t sell yourself. That gets all kinds of dangerous. For me, I use my board of directors. ‘This is what I’m thinking. Please, don’t hold back. Tell me if this is the stupidest thing you ever heard or, hmm, this makes sense. Give me the hard questions.’ You need that feedback.”
Everyone’s baby is beautiful in their eyes, Santamaria says.
“But we’ve all looked at some ugly babies,” he says. “You get yourself so insulated and people are talking about your technology, your product and saying, ‘Man, this thing is great. Billions of people need to buy it.’ You need to really step back and look at it. Be brutally honest.”
Take what you believe to be your product’s key benefit and ask yourself, is it?
“Does that really matter?” he says. “Do customers really care? You need to validate that first before you move forward.”
Set the foundation for a deal
Once you’ve validated your business model, and identified a need for what you’re offering, there are three more things you need to verify in order to set up a situation where you can get a deal done.
“Is there a budget?” Santamaria says. “Do people have money available to purchase or invest in your business? Understanding that can really shorten the amount of time a deal spends in a pipeline. Next, you need to understand the timeframe for making a deal. If we start today, here is our first meeting. If our goal is to get an investment, a partnership or a sale or get something off the ground by such and such date, what are the steps? Map it out with them and walk through it with the investor.”
The final piece is understanding the decision-making process. Is the person you’re meeting with empowered to sign off on a deal, or does someone else need to do that. If that’s the case, when can you meet with this person and what’s involved in moving toward a final outcome?
“Those four things — need, budget, timeframe and decision-making process — I don’t care what kind of deal you’re doing. You need to have those items in front of you and check them off to make sure you have them all understood before you pitch and go for a close,” Santamaria says. “Otherwise you’re going to get yourself tangled up. If you have three, but not one, that one you don’t have is always going to bite you in the butt. I’ve seen this happen time and time again.”