For a startup company, signing on that first "reference" customer isn't easy, but it is essential to the viability of the business.

It took Icinergy Software Company nine months to land its first big-name customer, local firm Chrysalis-ITS.

A reference customer is generally a well-known company the smaller startup can refer to in its search for new customers.

Icinergy president and CEO Scott McLellan says the personal relationships his team had with management at Chrysalis-ITS helped but, ultimately, the client signed up because it believed in the direction Icinergy was taking with its product.

Chrysalis-ITS provided valuable input and helped shape Icinergy's software to the level it is at today, he says.

"You find a customer who shares the same vision as you and then you work with that customer to understand exactly what are the features required to make that vision," says McLellan.

A large Canadian company was the second key customer to sign on with Icinergy, although McLellan cannot name the client. Despite this, the second customer has given references to potential new customers, as has Chrysalis-ITS. This has been helpful, McLellan says, in increasing the credibility of Icinergy.

The key to landing that first or second customer is to build relationships, he says.

"You have either known these people from a technical point of view or you hire salespeople who have sold to them previously and have a good relationship with them."

If a startup does not have contacts in the industry, McLellan suggests building relationships through venture capitalists or angel investors who bought into the business.

Elliptic Semiconductor is days away from signing its first customer.

Al Hawtin, vice-president of marketing and sales for Elliptic, says the company is in licence negotiations with a Silicon Valley corporation. The location of this lead customer is perfect for Elliptic, says Hawtin, because his company research shows high-probability accounts are mostly outside of Canada. Specifically, Elliptic is concentrating on Silicon Valley, Taiwan and Japan.

"For a venture capital-financed company, it is very difficult to get a first customer, particularly after the meltdown," says Hawtin. "I think it has had a predictable side effect that makes it that much harder for early stage companies."

The one-year-old Elliptic quickly realized it had few local opportunities and needed to look globally. The company's strategy was to combine web site relationships, through its own site and by paying to join industry portals, with direct mail campaigns through e-mail and public relations tactics to get its message out to prospective customers.

"(This marketing mix) alongside the necessary sales and channel activities have brought us very close to our first customer inside a year, which was always our goal," says Hawtin.

Elliptic expects to breakeven late next year after following its main strategy of building out the management team to find the right channels for its product.

One piece of advice Hawtin has for companies looking to find global customers is to utilize the services of the federal government, specifically departments such as Industry Canada and the Department of Foreign Affairs and International Trade.

"They have excellent folks overseas and they helped us on our last Japan trip, including access to meeting space at the embassy. This is something we'll take more advantage of in the future."

Terry Ledden is the managing partner for Sales aboutFACE Inc. His advice to companies looking for their first reference customer is to centre conversations with prospective customers on business issues with which the company or individual is dealing. A sales pitch will only turn off a prospective customer, whereas asking questions about business issues will create the relationship necessary to sign a deal.

"By getting the prospect to tell you what their problems are, the relationship will be much more collaborative, leading to potentially some co-development effort to finish the product design."

Ledden says after a company has determined its prospect's business issues and that an opportunity is there, it should have a conversation with the prospect about what it is going to take to do business together.

Discussing whether a prospective customer is willing and able to invest in areas such as funding and human resources will help the startup decide whether to pursue a relationship with the customer.

Ledden says the market has changed over the past few years and the "old boy network" is gone. Instead, making the case around business issues and having a conversation about the prospective customer's world as opposed to the company's world is far more productive.

"Companies have to focus on what is important to the prospective company and what is important to the prospect company's customers. (If) they understand how you are going to solve some key problems they've got in their business, (then) they want to be working with you.

"You want to create that desire on their part as opposed to being in a traditional push mode where you are trying to push your value proposition at people."

McLellan's overall advice for startups is to land a customer early.

"The best thing you can do is land a customer before you have completed the product and have them pay for it early."

- by Ellen Tsaprailis