Why strategic partnerships should be on your radar

Several influential entrepreneurs have written about getting a startup to growth stage and had negative remarks about the reliance on partners to do the selling. In principle, that notion is correct. The “idea guy or inventor” SHOULD be able to get the basic product or service to a customer for both validation and also make initial sales.

In the case of young engineers and business grads (or seasoned first time entrepreneurs), they may have the savvy to develop something and articulate a clear value based presentation. This could land some great feedback and in many cases, get some early sales. (Many mergers and acquisitions are completed by companies who are strategic partners first.)

What we are seeing is that these small teams don’t have the connections to reach large markets nor the demonstrated success required to penetrate vertical industries. Pitching these companies takes a bit of preparation work and some negotiation ability and legal input to succeed.

Craig Stark

Many incubators are surrounded with mentors who have lots of connections and can bring “sales” talent to the startup as required. The typical sales manager has end customer experience and not a strategic partnership development mindset. The perils of hiring a VP Sales have been discussed at length in the Lean Startup series. Check your mentor group for these partnership skills over purely “sales”. (If you don’t have a mentor group you can ask us)

Executing a quarterly calendar of marketing events and tactical support plus a hand culled and vetted sales pipeline is the best method for creating success for both companies. The worst thing to do is create a “paper only” relationship and get onto your daily grind. The partner relationship manager will focus on leverage they get from many relationships (mind share and activity) so they balance their bingo cards with the old 80/20 rule. (20% of the activity/ number of accounts and all activity= 80% of revenue attainment)

You need to factor in the time and commitment it takes to be part of their growth 20% vs. a hopeful part of the other 80%. You could look to add this responsibility to the co-founder who has the role of business development, however there are usually a few pitfalls in execution based on inexperience.

Many smaller firms are looking at “channel development” with a couple of clear goals. The first is alignment with revenue requirements. Meeting stakeholder expectations is critical when operating with a seed round as all activities are measured against this for go/ no go. The second is creating a sustainable funding engine and potential exit option. (this is where the partnership can cross over into the “Joint Venture” realm where core technology R+D etc. can be shared vs. sales and marketing as in partnerships or alliances)

Be careful not to look at the relationship as simply “reseller partners” as they tend to fall into sales channel dynamics are subject to the mind share and sales activity dilemmas. The program requires a lot of tactical hand holding to make any real progress in terms of timely revenue building. A startup cannot afford to get this wrong.

Craig Stark

Operating as a successful subsidiary with a partner can show your team’s ability to lead by example in all the Lean Startup functions. They could see new value and market share, new categories of products, services or hit the “EASY” button and make the strategic alliance investment in your firm (Private Label or OEM deal, LBO etc.)

Hiring a Strategic Partner Manager is one way of getting started. This would require someone well versed in targeting, approaching, negotiating and closing contracts vs. a corporate sales person. The ability to take your value proposition and put it into simple “short deck” presentations vs. the feature – benefit sales approach is mandatory. (This function can be outsourced – ask us if you need help)

Creating partnerships requires a higher level of non-partisan vision and perspective vs. selling the company via solutions frameworks and the typical capabilities presentations. There is a time to get to this level, but the first sale is how you are going to help them with their challenges. Show how disruption is inevitably surrounding them and how an integrative partnership can add the secret sauce they need.

You have to be able to demonstrate leadership and become a strategic partner in boardroom (C-Suite) vs. another technology vendor in the hallway of the IT group for example. Considering partnerships should be an ongoing and iterative process. It’s not something you table once and either go to the path of least resistance (Let’s sign a distributor) or come to a notional conclusion and agree to “revisit” at some predetermined time (next year’s planning session)

As we pass into 2016, you should consider strategic partnerships an essential step to fuelling the funding engine and courting potential alliances.

Tagged under: