In my first start-up, I was mostly hunting whales — seven figure and eight figure deals.
I had no experience doing any of this.
For our First Big Customer, we’d been negotiating a $6m/year contract for quite some time (they always take time). We finally had the “all hands” meeting with all the C-level and VP execs involved. And they told us the deal was completely approved, AND they’d back us in the market, AND they’d even give us $1m in additional financing to help us. At 0% interest! And that we didn’t even really need to pay back for a long time!
We’d be on the map, and in business. But. There was a but.
The effective price would have to be 60% of what we’d been discussing for the past 8 months. And all future upside was capped.
I couldn’t get the model to work in my head. Yes, it was a huge contract, and we’d make payroll, and we’d have a business — but at that pricing, we’d never ultimately have a sustainable company.
I >> politely << walked. I told them I was 1000% committed to their success, and the relationships. That I would do whatever it took to make them win in the market. But at that price point, I couldn’t stay in business. I needed them, but still, I had to politely decline.
My colleagues were stunned. This was the one chance all the C- and SVP execs were together. In one room. And without this customer, we were dead in the water. But it was clear in my mind it was a binary moment.
The next day, they called me back. They agreed to the original pricing we discussed, as is. I gave some other concessions (without pushback or questions). But I didn’t yield on our business model. If I had, it would have been short-term smiles traded for long-term disaster.
(note: an updated SaaStr Classic post)