Startup partnering – 10 do’s and don’ts that make successful partners

I work with a lot of startups as a mentor, advisor and as a CEO on my own.  I am often asked about how, who and when to partner with other companies.  Here is what I usually say;

Don’t partner until you have product/market fit – It is very easy to be distracted by partners early in the life of a startup.  In these early days, you are still looking for the right blend of customer-value proposition, feature set and business model. Until you have this working pretty well (~10,000 users or 10 paying customers), I would not recommend doing much partnering.  Focus your very limited time and resources on building and iterating the product.  Once you know what you are all about and where it works, you will have a much cleaner story.

Don’t partner with other startups – Both companies are small and trying to find their way in the world.  They have high variability in what they are doing, when they could deliver and in what direction they are moving.   For partnerships to work, they generally take about 2-3 months to negotiate (if they are meaningful), easily 3 months to get implemented and then another 3-6 months before they start bearing fruit.  In that time (6-12 months) a startup could have easily changed direction a few times.  Here are some common scenarios that could happen during this timeframe:

  • The startups move toward each other and become competitors (bad partnership).
  • They move away from each other and then do not have the resources to deliver on what they agreed upon (bad partnership).
  • In many cases, they run out of money and then all the hard work is for naught (bad partnership).

In addition, most startups have very limited working code or value (customers, market share, other partners…) so before partnering ask yourself what you will really attain from the partnership. Don’t get me wrong, partnering with other software companies (assuming you are a software company) can be a good idea if it’s the right fit. If you’ve decided partnering is right for your startup, here are a few tips to help.

Focus mostly on marketing managers – These are the people who control marketing budgets, sales conferences and events.  This is where you will acquire customers or market awareness.  These guys are also usually frustrated that the product teams are too slow in delivering certain features that they deem important to the market or customers, and are more eager to fill the void with partners like you.  They also know what is happening on the ground (vs. biz dev people who talk a good game but cannot actually make too much happen) and can give you a good view into what go-to-market programs are applicable.

Start small and informal – It is easiest to start with inclusion in a specific event or marketing program.  Get a tactical win and learn from it. Do not try to over-engineer a broad partnership before you understand how you will be marketed and what some potential customers think of the value of your combined solution.  I like to pick events as it is time-based and usually puts me directly in-touch with a bunch of the partners customers and often times carries some press potential as well.  Attempt to “get on stage” by being the “cool new thing” that a marketing manager can show off or at worst try to lead a session in your specific area of expertise.

Look for a lead customer example/win – Assuming you can get inclusion in a tactical event or program, try to identify 1-2 potential high profile customer wins.  You should be able to know from talking to the marketing manager who the important customers are at any given event and double your effort there to meet them and develop a game plan for success.  In parallel, find the “most innovative and aggressive customers” the partner has and try to get traction there.  They are not likely the biggest, but are more likely to try your solution, quickly.  Focus on two big ones and two innovative ones and do not let yourself get spread to others until you win there.  As you make progress, keep using the specific names and examples as you talk internally at the partner. For example, “we are working with (marketing manager) and (salesperson) to deliver a joint solution at (important and well known customer) to show off and promote (important customer/scenario) as a leader in the space.”  If you can do this, everybody wins.  If you can get interest, you can leverage this to expand with other sales/marketing people.  You will need to keep this rhetoric going in every venue you can find as you broaden the story and footprint inside the partner company.

Find areas that they think are important, but do not have committed resources – This can be an emerging trending area in the space (e.g. adding social media to CRM applications like we did at Gist) or an area where a major competitor has good traction.  Give marketing and sales managers (and your now joint customer) useful market data and examples of others who are having success.  You need to be seen as the expert in the space and having data, examples, news articles and references from other thought leaders makes the story all the more real and creates pressure on the partner to see you as strategic and critical to their success.

Focus on working code – Big companies are slow.  This goes for the company you are partnering with and their customers.  So, focus on real working code and demos of your stuff and theirs.   Nothing gets execs more excited than seeing something working and it really greases the sales cycle or on-stage marketing demos.  In the absence of working code, do a really good job of “coding in PPT” which would include high-quality mock ups of the solution you are proposing vs. a bunch of bullets on a slide.  Make people think it is real and they can deploy it tomorrow and keep in mind “tomorrow” for them may mean months vs. days.

Focus on public APIs – If you are partnering with someone on the data or service level (e.g. Facebook, Twitter, LinkedIn…) focus on working and public APIs.  Anyone with good data gets a hundred requests a day from random startups like you to get access to something special.  Even with a good VC connection, they are not likely to want to give this to you, so don’t ask, just focus on making something cool and meaningful using their existing APIs and then demonstrate what you could do if you had more.  Also, if you have real user data in phase one (using only public APIs) that is compelling (> 10,000 for B2B and 100,000 for consumer services) and/or clear market differentiation, you are more likely to get a meeting, but asking for anything special is going to slow everything way down.

Try to do everything with a handshake until you have traction – Contracts take a huge amount of time and are usually very expensive (legal fees, travel and time).  So, try to do your first trial runs without any agreements in place (other than a standard NDA using the big companies standard forms).  Focus on the market (customers and market awareness) vs. looking at each others code.  If you can get good interest from the market or customers, then you can start looking at something more formal or longer term, but wait until you get strong interest from ~5 customers, sales reps, marketing people…

Finally, partnering like other things in a startup is a competency.  So, to be good at it, everyone in the company should have an understanding of what is required, that you are choosing this as a key way to expand the business and that everyone (investors, marketing, dev, test…) should expect to be engaged to make it work.

Overall, I generally think time is way better spent focusing on your own product, your own users and iterating as quickly as you can without the distraction of partners.  Have a different opinion or success story, share it here.  If you choose to go after deep partnerships, I wish you the best of luck!

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5 key trends on the future of social and mobile

I am confident that a few things will be really important over the next few years (mobile and social).  Esteban Contreras put together this deck with lots of good stats.  Here are the ones I found most interesting with a few takeaways for entrepreneurs;
– WRT to social networking users, Indonesia and India are growing very fast, >50% year/year.  – learn what you can from scenarios that work in Indo and India
– Over 50% of Facebook users are “daily active users” – bet on Facebook and connect your apps, leverage the OpenGraph
– US social media ad spending to reach $9.B by 2016 – it is very early days for the social ad space, Facebook has lots of page views, but ads perform poorly relative to other strategies, focus on ways to make ads more powerful and relevant for FB users 
– over 6B mobile phone users, ~1B are smartphone now but growing rapidly, Android leading the volume game (~400M) – keep investing in mobile scenarios and despite the dev/test fragmentation challenges, think hard about Android
– Video will be really important in the near future (especially in developed markets).  Things like Viddy or YouTube Channels or Google Hangouts…lots of room for more “what’s next” scenarios, especially when you combine it with brands (placement and advertising)
Thanks @socialnerdia (Esteban Contreras) for putting this together.
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When should you quit your day job to launch your startup?

Within entrepreneur groups, there seem to be lots of questions about when you should quit your day job and go full time on your new startup idea.  Generally, I am a fan of keeping your day job as long as possible as everyone needs money to live and having a day job means you keep that income and reduce the stress of paying rent and buying beer and pizza.  In addition, when you start your new company, you are likely to be working nights and weekends so training yourself, your friends and your family on this new lifestyle is a good thing.  Also, by having very focused time on your new startup (part-time vs. full time) you will focus on the most important issues, the “critical few vs. the important many”.  Finally, you will find that doing your new idea will take alot longer than you planned, so letting that time play out while you have an income is a good thing.  Here are some rules that I would apply;

  • Spend at least 3 months on your new idea – this means telling people what you are working on, finding customers, finding other people to work on it, making prototypes and getting comfortable that this is the one…
  • Develop a workstyle that involves at least 3 nights/week and 1 weekend day, preferably with other people who you want on the team.  This will get you into a rhythm.  You might try to do some specific things on each night (product dev, customer dev…) and get you/your team into some form of Agile sprint process where you can define meaningful progress on all relevant aspects of the business.  Get into the hard working habit.
  • Consider having 6-12 months of living expenses in the bank and discuss this with your family/partner/roommates…you need to know how you will pay the bills while you do the startup.  Depending on your progress, you could be courting investors at this time so that investment in the company is a trigger to quit your day job.
  • Have a commitment of 3 people who will join you and quit their own jobs and understand their parameters ($, focus, understanding of equity stake…) – to build a big idea, you need people and having them lined up before you jump it will be important.
  • Try to get verbal commitments from at least 10 customers (for b2b companies) or 100 consumers on how they would pay for your solution.   This is the hardest one to get, but if you are working on a big problem and you know where the market is, you should be able to have a group of people who are begging for the solution.  Sometimes not having a real product yet is even more powerful in the early days, but keep working on customer development, it will be critical.  Steve Blank has written about this extensively in his book The Four Steps to the Epiphany and you should read it.

If, after all these steps, you still have increasing excitement about the customers, problems, solutions and team, you can really consider taking the plunge.

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Perfecting your startup pitch

Over the past month I have had the privilege of attending or speaking at a StartupWeekend in Boise, TechStars “for a day” in Seattle, TechStars New York,  Microsoft Kinect Accelerator in Seattle, TechStars Boulder (with Jason Mendelson) and finally mentoring at a Startup Weekend in Medellin, Columbia.  It’s been great to meet so many new and aspiring entrepreneurs in so many cities.  In the process, I’ve heard lots of pitches and coached many on how to make their presentations better.  Here are a few tips;

1.  Find the emotional hook (pain is better than opportunity) – most great companies solve a painful problem and as an entrepreneur you should be able to characterize the user/pain in a way that the audience connects with.  People should hear the pitch and say, “damn, that is a massive pain and I hope they can solve it” and the more they feel it the better.   Bonus points if the pain has some social benefit or very direct and quantified monetary cost.

2.  Compelling data points – For a good pitch you need to have 3-5 strong data points that make the audience think, “wow, that is a big space”.  This is usually the number of users who will be affected, the “cost” of not having the solution and a few examples of similar companies who have been successful solving a similar problem.  Pick the data points and weave them into the story vs. showing complicated graphs and forcing the audience to guess the meaningful numbers. For example, the winning team at SUW Medellin focused on the thousands (they had the real number) of women in Medellin who reported being the victims of violent crime last year and provided them a quick way (the red button on their phone) to report their position to police via sms and Twitter.

3. Show the solution – screen shots, live demos or video of the product are way more compelling than a verbal description of the solution.  Show vs. tell.  Worst case, make realistic screen caps and/or real wireframes of the product, but make it visual as if it really exists.  The closer to working product you can get the better!  Keep the demo to ~30-45 seconds and/or have an animated screen-cap version that you can narrate.

4. Develop your “it’s like” metaphor – Everyone is busy and inundated with ideas, companies, products…so you need a simple hook that they can remember.  Often this can be done with a “it’s like” which combines something they know with something new.  Or, it could be a combination of 2 well known things.  One of the compellig teams in Columbia developed a product that they described as “instagram meets graffiti” – without even seeing the solution, you could imagine what it does, why it would be cool, who might use it and even guess on a freemium business model where you could have virtual spray cans, fonts or other treatments.  Check it out at

5. Stick with one business model (and advertising is not usually very compelling) – I have seen countless teams pitch their idea with several business models (advertising + sponsorships + premium content + paid features…).  Each of these models requires different things from the user and likely different feature prioritization in the product.  Pick one and make a clear case on why it will work. If possible use other comparable companies in your space to validate that this model can work.  For example, with Gist we focused on business professionals and planned to charge a monthly subscription fee.  We based on model on the same users (sales guys) who already paid for solutions like and Blackberry that delivered them an information advantage.  While we could have had targeted ads (like LinkedIn) or API licensing deals (like Full Contact) we wanted to stay very focused on one model.   If you need help developing this, check out this post.

6  KISS – most good ideas are simple or at least sound simple of the surface.  Under the covers, it is likely that there are lots of problems (small and large) that need to be solved, but if it seems simple, people can remember the solution and often they believe the solution can exist quickly vs. it being too complex, complicated and therefore hard to implement, communicate and get right with too many variables.   Keep it simple, stupid.

7.  Passion – You, as the entrepreneur, need to show your passion for the company, the problem, the users, the solution, the team…People want to connect with others who have passion and commitment.  Passion will take you through the tough times, get your teams to work harder and keep your customers engaged when your product is less than ideal.  Get excited, get loud and be passionate when you talk about what you are doing and how it is going to change the lives of your users (and potentially the world)

If you can keep these points in mind, your idea will come across as much more compelling for investors, your team and most important, users who have the problem!

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Good advisors (and investors) want to be managed

I get asked for my advice on new startups alot and I like to give it.  I have also been very fortunate and had great mentors, advisors and investors.  So, I can say that the best relationships are ones where the entrepreneur works hard to manage his advisors.  This generally includes;

  • very regular updates – I like to do every 2 weeks.  This gives enough time for substantive progress, but not too much time to forget what is going on.  It also gets an early entrepreneur on the right cycle for future board meetings (monthly).  It can also usually be aligned with a software sprint releases so you usually have some good product news to share. Stay on schedule and do them religiously.
  • provide the context  as backup – sometimes I can give advice with very little context of the exact specifics of the business, but if I think I need more detail, provide me links to supporting docs, your thinking, the choices you are weighting (pros/cons)…  You can also provide a summary of other thoughts from the team or other advisors to help me know the overall context of the decision.
  • ask for specific help  – investors and advisors are usually busy and yet they really want to help. So make it easy for them to focus their time, effort and expertise on the things you really need as an entrepreneur and where they have specific expertise.  Laying out where you need help in an email, an update or a meeting is really useful to direct an advisors focus.  And, if applicable or when sending out to a larger group, be even more direct and ask a specific person to do a specific thing for you.
  • choose the right venue – sometimes email works, sometimes a call, sometimes a 1:1 and in many cases you are better off to get the group together to discuss a more complex or important issue.   Choose the right venue  with a focus on the most efficient and timely way to get the input you need and no more.
  • keep track of time – most of us advisors have a mental model of how much time we have to give to any one company.  This varies depending on our level of engagement and/or the specific needs of the company at any one time.  But, as the entrepreneur, keep this time in mind and try to balance it across advisors and across a timespan so we can stay fresh and alert.
  • give credit and say thanks – it is always nice to give public credit to people who are helping.  it shows that you are listening, appreciate help and it often spurs other advisors to raise their game and do more.

As for the specific updates, I have written about that here and here and here so hopefully I am giving enough, specific advice.

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