In the EDA sector, about 80% is turned over by the three market leaders, who have a tremendous world wide sales force. Does this market still allow new players to sell their products in different parts of the world? The only way to compete is not to compete: focus on the areas that large corporations are not good at.
The traditional EDA direct selling process is very heavy weight. Many start-up companies with great products have a very hard time bringing the product to the market, boosting sales and bringing their company to profitability. The more their sales force grows, the more revenue is required to reach profitability.
Here are some of the problems with a traditional direct sales model.
- The sales process may be long because it requires technology evaluations and prices negotiations.
- Installing the software, even for an evaluation, is complex and time-consuming.
- It may take a large effort to evaluate the a tool, and evaluation is only possible in a certain phase of the design process.
It is the best interest of large EDA vendors to focus on their bigger customers, which can produce more revenue for the same sales effort. This is a good example of Pareto principle of the Vital Few. In the past, when producing ASICs was reserved for a select elite of multinational corporations, this was surely the best strategy to take. However, today we see an increasing number of small design teams, consisting of less than five engineers. The traditional heavy-weight direct selling method is inefficient to reach these Long Tail customers.
In addition to direct sales in our local market of Belgium and the Netherlands, Sigasi focuses on web based sales and marketing. Web sales has important advantages compared to direct sales, but there are some strict boundary conditions.
Web sales scale extremely well. In our early days, we sometimes wondered what would happen if our next press release would attract too many visitors to our website. If you sit down and do the math, you can easily see that there is no problem at all. Even if every VHDL designer in the world would visit our website in on week’s time, a simple call to our web hosting company would give us enough compute power to serve them. Compare that to your sales team being flooded with phone calls. You would loose customers and it would takes weeks (or months) to hire and train new sales reps.
Another advantage is the low cost of sales. Our customers can choose to send us a purchase order, or just buy online using their credit card. Many corporate customers prefer the traditional sequence (price quote / purchase order / invoice / wire transfer). But especially smaller businesses and contractors prefer to pull out their credit card. The latter causes less paper work for everybody.
Web sales only works under certain circumstances.
First you need good online marketing. We work with a mix of Google Adwords, SEO, blogging, white papers, twitter and press releases. If you haven’t already, you should read Inbound Marketing.
Second, you need a price point that is acceptable for online sales, and thus for credit card transactions. Our price is set at 499€ for one person for one year, which can easily be paid using credit cards.
Third, it should be very easy to download, install and evaluate the software. Our customers sign up for a trial license on our website, and after a few minutes, they are up and running with the new tool. This is very different from some of the large EDA companies, where you request a trial license and nobody gets back to you. Installing is merely a matter of unzipping and we have a tutorial embedded in the tool to teach the basic principles.
Next, you have to be able to support the tool without leaving your desk. In this business you’re lucky if your customer is in the same time zone. Without an army of Field Application Engineers (FAEs) in five continents, you need other means to provide high quality support. You need a product that produces just enough forensic data that customers can send back to you. You need to use all communication channels that help you in determining the problem: phone calls, Skype with screen sharing, twitter, emails of code snippets, sceenshots and screencasts, photographs of whiteboards. Anything works.
Lacking an army of sales people and FEAs is no excuse for not listening carefully to your customers. Rather, it is an opportunity to let the end users communicate directly with the decision makers and developers with your company. To us, it hardly matters if our customers are in the USA, Norway or in Liechtenstein.
Billion dollar companies are very good at many things. There is no use in trying to play along, let alone beat them at something they are good at. As an early-stage EDA company, we focus on our strengths and our flexibility. To us, web bases sales, which is not common in the world of EDA, is as important an innovation as our technology. While the big players focus only on very large customers, our strategy allows us to serve customers anywhere, and of any size.
Harry “the ASIC guy” Gries (Xuropa) has asked us how Sigasi accomplishes "More with Less". This blog post explains how we generate sales without a large sales force. I share this information with the world, hoping that more people with good ideas start their own company and bring their technology to the market. Please consider voting for this article on the Xuropa site.