Paladion suffers a double challenge: their product targets larger customers, and is also in the information security area. Multinational corporations are not exactly clamoring to take extra risk with their security.

When Raghavan invested in Paladion, the "somewhat young team of very good technical people" had done a great job of developing a product, but Raghavan felt there were some issues on the marketing side.

"They were going for small projects, fixed size, fixed money" which is a good way to get started, but limits a company's growth. NS Raghavan advised Paladion, "We should get out of this and get long term projects from customers. Even if you get a little lower rate, it doesn't matter. You need to develop the relationship over a period of time."

Paladion had an opportunity: a large insurance company in Boston was interested in a multi-year contract. In fact, the technical team at the insurance company was excited, all the due diligence was done, and Paladion had a proposal ready.

At that point, Paladion was sent to the insurance company's legal department. They took one look at the startup, and told them they would need "so many million dollars of insurance for this, and put this deposit, etc. You don't have financial credibility? How big are you? We realized that it just couldn't go anywhere," recalls Raghavan.

Raghavan's advice? "Don't try to meet the requirements. Find a different way."

Raghavan believes, "There is always some way to convince a customer." Perhaps it is through discussions with the technical people, working with the purchasing department, or providing reference checks that demonstrate the startup's capability. The key is to alleviate their concern that the startup will disappear, explains Raghavan. "I think it is slightly more difficult but that is the only way startups can handle this," he says.

This recipe has worked for Paladion. The company has three year contracts with several financial institutions now. And they are working to bring an even larger customer online. "It's a very big opportunity - they are evaluating and they are more or less very happy," says Raghavan.

The breakthrough for Paladion came with the first contract. Raghavan summarized, "A long term relationship has leverage, even if it is small. The key is to get that long term relationship."

After voluntary retirement from Infosys, N S Raghavan set up Nadathur Holdings to promote entrepreneurship on a broader scale. He is an
NEN Contributing Expert.

N.S. Raghavan has funded over 15 startups, spanning a wide mix of areas including pharma, life sciences, spices, automation and agri-biotech. www.nadathur.com