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!