So a few weeks ago one of my friends who is a CTO at a very successful consumer facing startup was talking to me about how they do vendor selection.  We were discussing this as my team was pondering an upcoming vendor selection for a new project.  It was apparent almost immediately our two companies had *very* different approach to vendor selection.

One of us posed the argument that it was better to use more established companies with a track record and strong customer base, while the other said that it was better to select a hungry startup.  Here were our arguments:

Established company

  • Track record — if they have customers bigger than you there is no doubt they will be able to service your needs
  • You know they will be there in 6 months, 1 year, 2 years
  • Less bugs/issues in a mature product
  • Products are more likely to be stable and meet SLAs
  • Less room to negotiate on price
  • May or may not build the feature you need/want

Hungry Start-up

  • Premier Treatment — if you are their biggest customer (or one of their only customers) they are going to respond to any of your issues very quickly
  • Better pricing — hungry companies are going to be willing to work with you more on price
  • Better chance of getting “your feature” implemented
  • If they don’t have enough funding they may not be around (and then you will have the cost of adopting something new)
  • Earlier stage products can have more bugs or stability issues

Both sets of criteria seem valid and certainly represent a sound way of thinking about picking a new vendor.  What mechanism do you choose?  Do you use criteria like amount of funding, number of employees/offices/servers, etc?

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