A $27 million investment by Andreessen Horowitz fueled Pinterest’s explosive rise on the startup scene. A partnership with Starbucks elevated the mobile payment company Square to a whole new level. Every high-growth enterprise can name a moment of affirmation that changed everything – that first big win that established credibility and created the launching pad for what followed. But how does one actually close that crucial deal?
Based on many years as a business founder, advisor, and investor, I would argue that getting the green light has as much to do with understanding human nature as it does with business fundamentals and finances.
Specifically, closing a deal requires identifying three key stakeholders who have the power to influence the decision: champions, decision makers, and blockers. Even more, it requires understanding their motivations.
Getting a foot in the door, the first hurdle in closing a deal, requires identifying the right champion within the target organization. While a champion has influence over the decision, he is not the ultimate decision maker. In fact, champions rarely have significant power in the organization—but they know who does and their expertise is usually respected. Champions understand the personalities and processes on a granular level and can navigate the culture within an organization.
The primary motivation of the champion is status: champions want to feel important. The champions I’ve known have been motivated by a host of related factors – generating personal visibility, drawing attention and resources to their domain, or being perceived as innovators. Whatever the specific reason for endorsing a deal, the common thread is that champions are at a point in their career where they are willing to take a risk.
In 2008, I was on the business team at OnLive—a high-flying start-up in search of huge amounts of cash to turn a big idea into reality. In the face of the global capital meltdown the only way to procure large sums was from corporate investors. OnLive’s product enabled high-end video games to be hosted in the cloud and played from any device. AT&T was the ideal partner and investor for OnLive: they were playing catch up with Comcast in high-speed internet access for the home and with Verizon for wireless. Adding video gaming service to their broadband offering would give AT&T a unique advantage over their rivals. The ask: invest $35 million for exclusive bundling rights to the US market.
Our champion, Pete, was a mid-level executive tasked with bringing gaming opportunities to AT&T. Pete wanted to gain respect within AT&T both to improve his chances of advancement, but also (and maybe most importantly) to feel like he mattered. Realistically, Pete’s best hope for getting promoted was to raise his visibility—and OnLive was the perfect vehicle to do so. Cool new technology, new market for AT&T, competitive pressure, etc. Pete worked tirelessly to help us understand all the players within AT&T.
A champion, by definition, is deeply invested in getting the deal signed, and the key to working effectively with him is to focus on collaborating to convince the decision maker to say “yes.”
While champions are risk tolerant, decision makers are the opposite. Generally senior executives, decision makers have the power to say yes to a deal and are held accountable for the final outcome. As such, they have a lot to lose and their anxiety level is in direct correlation with the level of expected scrutiny should the deal fail. Regardless of where they started their careers, most decision makers spend the majority of their days dealing with macro issues and are unlikely to have the expertise required to have a detailed understanding of your company or product. This means that they rely on the advice of others for recommendations.
The decision maker at AT&T was CEO Randall Stephenson. His goal was to effectively capture the potential upside of an emerging market and shut out AT&T’s competitors without sacrificing his own credibility. The key to winning over a decision maker like Stephenson is working with a champion to provide enough data, analysis, and outside validation to ensure that those who would question his decision see a trail of sound and thoughtful due diligence. Pete spent 9 months helping us build a solid platform of credibility that would limit Stephenson’s risk if the investment turned out to be bad.
Blockers are the potential deal destroyers that stand between champions and decision makers. They have the decision maker’s ear. While champions are aggressive and decision makers are risk averse, blockers are subversive. Blockers don’t have the power to say yes, but they can get in your way and make it hard for the decision maker to give the go-ahead. For a variety of reasons, blockers are intent on derailing the deal. He or she may have an “alternative” idea that rivals what the champion is pushing or they may be concerned about losing the limelight to an adversary.
At AT&T, the blockers were VPs sponsoring competing deals, various subject matter experts, and an army of corporate finance people.
Like champions, blockers want to feel important, but their importance stems from being the naysayer. Whatever the motivation behind the detraction, it’s critically important to pay attention to blockers and either win them over or neutralize their misgivings. In the end, Pete and OnLive convinced the blockers, including Stephenson’s lieutenants, of the merits of the deal by proving considerable outside third-party support for their vision.
With that, Stephenson felt he could defend his decision. The end result was over $75 million in financing, an exclusive nationwide distribution deal and a credibility point that ultimately allowed OnLive to sign other distribution and financing deals worth over $250 million with companies like HTC, British Telecom, Juniper Networks, Hewlett Packard and Warner Brothers.
The secret to closing deals lies in mastering this balance – if you can support your champion, coax your blocker, and convince your decision maker, you’re golden. Each of the three stakeholders brings a unique set of motivations to the table – your job is to understand them in order to align their interests to get the deal done.
Originally published in the Harvard Business Review: https://hbr.org/2014/07/the-stakeholders-you-need-to-close-a-big-deal