Private Tech Companies: Buyer Scrutiny, Challenges, and Hidden Opportunities

Solutions Review’s Contributed Content Series is a collection of contributed articles written by thought leaders in enterprise software categories. Matt Kunkel of LogicGate breaks down the buyer scrutiny and challenges private tech companies face, and reveals hidden opportunities.

The global economy has changed dramatically over the past two or three years, and the recent downward trend has left tech companies feeling the strain. Widespread layoffs have been making headlines weekly, and the IPO scene has frozen over, with more organizations either delaying going public for the foreseeable future or opting to revert to private ownership.

Naturally, this uncertainty and instability has given some buyers of enterprise IT software pause when considering doing business with smaller, privately held firms. They want to be entirely certain that the cloud service provider they’ve selected to support a critical part of their business will not simply evaporate if the economic forecast worsens.

This has caused many buyers to give public companies the edge during vendor evaluation, simply because doing so feels safer. And it’s true: small, private companies should face more scrutiny than those with proven track records. But avoiding private vendors altogether is just as big of a risk, and — frankly — a mistake.

Private Tech Companies: Buyer Scrutiny, Challenges, and Hidden Opportunities

Innovative and Agile Advantages of Startups

Some of the world’s most forward-thinking, innovative companies are small, privately held startups or in their growth stage. For example, Uber’s strategic partnership with Twilio marked a transformative alliance, leveraging Twilio’s robust cloud communication solutions. The collaboration empowered Uber to enhance its ride-sharing platform’s communication infrastructure significantly, integrating Twilio’s services to enable real-time notifications, efficient messaging, and scalable communication capabilities. As a result, Uber witnessed improved customer engagement, increased operational efficiency, and elevated user satisfaction.

The Uber-Twilio partnership is an example of why small private companies should not be overlooked. Many private startups are building products and offering services that are truly game-changing, even mission-critical. Some of the world’s most successful companies are the ones willing to invest the time to explore and evaluate private companies that offer innovative solutions that meet their specific business needs, rather than select the largest provider because they feel like a safe bet. While name recognition and perceived stability give larger businesses an advantage, smaller, more agile businesses that put in the work to build trust and prove their reliability can often bring even more to the table than their public counterparts.

Building Trust Through Transparency

In LogicGate’s early days, we’d routinely open up our books and send audited financial statements to prospective clients. That transparent approach helped us establish our dependable reputation in the market and highlight our broader financial note and trust package. We still routinely receive questions about our procurement processes, but we’re able to address 90 percent of them right out of the gate. A bit of transparency can go a long way in easing your prospective customer’s concerns. We’ve never lost a deal due to being unwilling or unable to provide financial information to a potential customer.

So, what can — and should — private companies be doing to gain the trust of large organizations over publicly traded competitors? When opting to go with a private vendor over a public one, buyers usually ask two main questions:

1. What is the risk involved with the investment?
2. What is the potential ROI of the partnership?

Everything comes down to being proactive about addressing those questions and making the due diligence process as seamless as possible. I recommend developing a standard trust package that includes information on:

• What your risk landscape looks like and how you’re addressing enterprise cybersecurity, and other types of risk.
• Any industry-standard security certifications your organization holds, such as SOC 2, FedRAMP, NIST, or ISO 27001.
• Your penetration and vulnerability testing programs.
• Your cyber insurance coverage.
• Any geopolitical risks associated with your organization’s location, any past security breaches you’ve experienced, or any lawsuits your organization is a defendant in.
• What types of data you’ll be storing, processing, or accessing, and what you’re doing to make sure it all stays secure.
• Your network of third-party vendors, any fourth-party risk assessments you’ve done for them, and how your third-party risk management program operates.

For Private Tech Companies, Trust Is a Strategic Asset

No organization is perfect, and none will be able to provide 100 percent transparency — and nor should they, for a whole host of reasons — but the more information you’re able to provide upfront, the more likely a large client will be comfortable doing business with you. Transparency and trust are not just necessities, but strategic assets. Establishing a comprehensive trust package, incorporating details on risk management, cybersecurity practices, industry certifications, and more, becomes instrumental in instilling potential partners and customers with confidence. By prioritizing transparency and consistently delivering on promises, private tech companies can navigate market challenges adeptly, positioning themselves as valued partners in the ever-evolving landscape of enterprise IT.