Paid Pilots: A hard lesson about selling into Enterprise customers

I’m starting a new series at Second Opinion called “The Operators’ Manual” where I’ll co-author pieces or publish guest pieces written by operators sharing first-hand insights from scaling and running health-tech businesses. These pieces will be written for the benefit of our paid subscribers.

This first piece was written with Ankit Jain, serial entrepreneur and CEO of Infinitus Systems, as to why most entrepreneurs should only do paid-customer pilots. As part of the discussion, we’ve included a downloadable PDF which provides a check list fore evaluating your pilot strategy. Following his column, I included some additional perspectives via friends at health systems and health plans. Most of the experts I spoke with directionally agreed with him, but a few folks had some additional nuance to share. Jain’s company is an AI healthcare company that automates phone-based workflows, and his customers are providers, including health systems, payors, pharmacies and pharmaceutical manufacturers. His advice may be less relevant to companies with a different GTM, including those who sell to smaller provider offices or build up a big customer base through patients first.

Stop Doing Free Pilots: Why They Kill Health-Tech Enterprise Deals

By Ankit Jain, Infinitus AI

Ankit Jain, CEO of Infinitus AI

As a serial entrepreneur, there’s a mistake I’ve made more than once while selling into enterprise-sized clients. I agreed to free product trials that didn’t result in a sale. And now I’m here to tell you the hard truth: Free pilots in health tech are almost always a bad idea — especially if your goal is to land enterprise deals. Don’t do them (generally).

I also recognize that you won’t necessarily sell a multimillion-dollar contract overnight. Doing a paid-pilot for anywhere from $50,000 to $250,000 gives you the essential signals:

• Does your internal champion have budget authority
• Is the problem big enough to justify real investment
• How big are the legal and procurement hurdles you’ll face
• Can you survive the customer’s buying process

The bigger the amount you can contract for with the potential customer, the better, as larger amounts require higher levels of approvals ensuring strategic alignment. The key question you need to answer through the process is this: Do you have the right champion and do they have the political capital needed to push through the enterprise bureaucracy and get a deal done? If both of those things are true, then a deal can get done if the product meets a real need. If one of these things or neither is true, then a potential customer might be lost because of reasons of bureaucracy or process management, which may not have any bearing on the quality of the product itself or the need. Either way, it’s important to find out and get ahead of the problem as quickly as possible.

I think back to our initial engagement with one large national retail pharmacy chain in 2021 and their insistence that we do a free pilot because they “don’t pay for pilots.” It was the first - and only - free pilot we’ve done at Infinitus, the company I started in 2019. The project was wrought with issues. The champion couldn’t pay for it. The champion couldn’t get the legal team to be OK with sharing protected health information with us so we automated calls with fake data. The champion couldn’t get the operations team to take the results seriously because it was done with fake data so no one believed it would work in a real-world production setting.

We learned a lot through this process, but one lesson stood out: paid pilots must mirror real-world situations, even if it means going through time-consuming procurement processes, AI review boards, security and privacy reviews, and payment system onboarding. It sets up the long-term project for success, even if it requires more work upfront.

There’s no magic formula linking pilot pricing to long-term contract value – we’ve had pilots that started out at $100,000 but became $5-$7 million contracts over a few years. It’s just important that there is a fair exchange in a process that requires a lot of work from both sides.

It’s also important to ensure that the length of the pilot is reasonable. What healthcare startups should be wary of is year-long or multi-year pilots. The end of a pilot is a forcing function on making an ongoing decision. And it is natural for companies in their infancy to want more time to fit in that extra feature. But I’ve rarely seen one feature be the difference between go-live and not. As a CEO, I want a decision and signals as early as possible so I can make decisions about the future of the product and the probability of success with each given prospective customer.

At my company, we run 6- to 12- week pilots where we define the success criteria, conversion terms, and the incentives for converting from a pilot contract to an ongoing contract in a pre-specified amount of time. In retrospect, having a shorter pilot is also good for customers because it forces your champion - someone who put their neck out for a paid pilot – to give feedback as efficiently as possible to increase the likelihood of the pilot being successful.

There are three things that I believe are critical to drive pilots to conversion:

1. Define success and conversion criteria ahead of the pilot. These can include performance metrics, integration requirements, ongoing pricing and service level agreements.

2. Treat each customer as a major opportunity. There is no small or large in enterprise sales. A $250K customer should get the same love you give a $5M customer. Everyone’s systems are bespoke and unless you do everything diligently, you are unlikely to see success with enterprise customers. This is counterintuitive but there are multiple benefits of doing this beyond conversion. We’ve seen that the smaller enterprise customers eventually turn into your most publicly vocal advocates. In one case a Fortune 20 company acquired one of our smaller enterprise customers. It led to us growing the account into a multi million dollar account due to the service we provided.

3. Maintain frequent, detailed communication with clients during the pilot. This is essentially because it build trust, ensures fast issue resolution, and keeps both teams aligned on goals and progress. Pilots move quickly, and strong communication helps surface early wins and address challenges in real time. Don't think about a pilot as just a test; it's the beginning of a sales and change management process, which means frequent communication also arms your champions with the language and data they need to advocate internally.

What I want to avoid at all costs is waiting a year only to determine that the contract isn’t going anywhere.

One metric we track closely is the conversion rate from pilots to ongoing contracts. For products we believe have product market fit, we see a 75% to 80% conversion rate. The products that clearly aren’t working have conversion rates less than 25%. I used to think the biggest risk was building something no one wanted. The truth is, it’s building something people “kinda want.” To me, these are products that have 30-50% conversion rates. They create just enough noise to drown out the signal that you’re not solving something urgent. The team works hard, the feedback loops are confusing, and growth is inconsistent. Product managers feel that they are just one feature away from that big breakthrough.

The reality is that customers will buy a product lacking bells and whistles, if there is a clear set of differentiators with impact and outcomes to speak for. I look for signs of irrational love or clear business necessity before scaling anything. If you have to squint to see product–market fit, it’s not there. One way to gauge this is to see a very high pilot conversion rate, and to measure that closely.

So I’m not anti-pilot. But I am anti-free pilot (for the most part). I’ve written this long screed against giving away your product for free, but I acknowledge there is a bit of nuance to making this decision (for ex… mature products vs early PMF products). To that end, I’ve included a downloadable PDF here that I created in collaboration with Christina for teams to evaluate their pilot strategy. For founders in the early days, it’s imperative to find that conviction, both in terms of the product and the customer championing it. There's an opportunity cost to spending time building products that aren’t a customer’s “heck yes.”

Reactions from the industry

By Christina Farr

As I surveyed founders, operators, colleagues and executives in the industry, I found that most seemed to agree with Jain’s perspective. But with some nuance. Some of the health system executives I spoke with said that a free pilot might be acceptable in cases where the entrepreneur is experienced, and knows who the sponsor is and how to get approvals. Free is also a flexible concept, startups can sometimes negotiate coverage for costs associated with the implementation, notes Tom Cassels, a managing director at Manatt (disclosure: I work with Tom), who advises startups on how to sell into health systems. “There should be milestones written into the contract that when met, flip the contract into a paid one.”

And then there’s the matter of the champion, and ensuring it’s an individual or team that actually has decision-making authority. “If an innovation center is in the mix,” it’s a hard no, said one health system executive that I spoke with, who shared their view anonymously.

Another health system exec – Jonathan Slotkin from Geisinger agreed - noting that if the decision-maker(s) behind the purchasing decision are tightly involved with the free pilot, it might be workable. Or if the health system has equity tied to the project, milestones tied to participating, or some kind of financial incentive that encourages them to convert the free pilot to a larger relationship. There are cases where Manatt’s Jared Augenstein has coached startups related to co-developing projects with a health system, where there’s also an exchange of equity involved. But Augenstein emphasizes that even in those cases, health systems must commit real resources: budget, staff time, data use agreements, and more.

In general though, Slotkin is not not a fan of the free pilot strategy and does not generally advise startups that it’s a good idea. Slotkin is also a GP at Scrub Capital.

Finally, I spoke with a handful of founders on the topic who have had experience with free pilots. Only one of the five would recommend them to other entrepreneurs. They noted that more consumer or patient-focused companies might work with health systems for free to build a patient acquisition pathway, or leverage their brand.

The other four agreed that it diluted the company’s brand value to the health system or health plan. And without skin in the game, the potential customer may stop paying attention or care about the success of the project. That tanks the startups’ chances before the company has gotten off the ground.

All in, I’d say that 90% of the individuals I spoke with on both sides - the operators and the customers - did not speak favorably of free pilots. So if you choose to do one, make sure you’ve got a clear strategy in place - inclusive of a contract that spells out the milestones and clear resources allocated - to have a shot at making it successful.

Like what I’m writing? Here are ways you can support me!

• 📧 PLEASE Share this email with other friends in the healthcare space! A lot of our newsletter is free, and we’d love to engaged as many smart readers as possible.
• 🌟 Leave a review for the Second Opinion Podcast
• 📢 Become a sponsor and get your company in front of the best minds in healthcare