If you only quickly scan this post, you may get the impression I’m suggesting that relationships with companies larger than your start-up are not a good idea. If you are getting that impression, please keep reading. For almost all B-to-B types of start-ups, corporate partnerships can help in a variety of ways. They can provide investment, credibility, a path to customers and important supplier relationships and you SHOULD seek to formalize them. My clients have had many successful corporate partnerships in all these areas…and many unsuccessful ones as well! The impression you should get from this post is that, although probably unintentionally (but not always), some partners can turn out to be dirty rotten scoundrels.
The prospective partners take you to the brink of forging a formal and enthusiastic business relationship, or sometimes even do formalize the relationship and then – poof – all those promises turn out to be false. Were they really scalawags…or were they just victims themselves of complex competitive businesses? Ultimately, to your start-up, the reasons are irrelevant when the realities are so important. Here is some advice for finding and managing your corporate partner relationships.
TechonomicMan Guideline #1: Don’t get fixated on one potential partner. I’ve seen numerous clients land the attention of one big potential partner, work that relationship for 9 months under the impression that the partner and “start-up” were in love, only to have the partner evaporate. Big partners have internal complexities that your start-up cannot imagine. If they’re publicly traded, the complexities are compounded. Big corporate strategies and fortunes and personnel can change overnight inside a large partner and your little start-up is certainly in no position to handle the strength of a stormy wind of change from a single corporate partner by which you’ve set your sails. Never stop prospecting for new corporate partners.
TeconomicMan Guideline #2: Let your love blossom inside your corporate partner. If your relationship with a corporate partner begins advancing, develop multiple other relationships with individuals inside that corporation. Some of the best potential relationships can run aground when your start-ups sole champion inside the corporate partner disappears. Your champion can get promoted, demoted, relocated, or in the occasional headline-making change, arrested! If that person was the only one inside the partner who really knew what your company does, you’re doomed. Your champion, in truth, becomes your weakest link to that corporate partner. You must work with that person to begin deepening your relationship network inside the partner and this usually means that you need to be able to explain your value proposition in ways that appeal to an ever-wider array of people and roles inside the partner. In other words, the Head of Engineering who is so stoked about what your technology can do probably isn’t the one who can turn that excitement into money for you. You’re going to need help from product managers, business development people and, probably, higher echelons of executive management. Ask your champion for help in making these connections happen and for help keeping them moving.
TechonomicMan Guideline #3: Guard against trophy hunters! Large companies sometime get the strategic urge to pursue new technologies. Competitive forces inside industries change and occasionally, being able to make headlines for acquiring and generating new technologies can help one large company compete more successfully for customers, and so they are drawn to your start-up. Sometimes this strategic direction is not fully or deeply backed inside the partner. Your relationship may allow them to say to their customer base, through public relations and marketing, “Look at our new wild and crazy technology. We’re actually old and shriveled, but man don’t we look good standing next to our new tech?!” In these cases, your partner’s love for you is not likely to last…it is only skin deep. Their sales force might never be fully empowered or engaged to sell your stuff. The biz dev team may quickly move onto other sexy technologies and have decided to impress the market with quantity rather than quality of new tech rollout. In your agreements, do all that you can to create “take back” clauses so that only a limited amount of time can pass between your marriage and a chance for annulment.
TechonomicMan Guideline #4: Develop a set of targeted partner characteristics that would be desirable. The best bet is to determine what a perfect partner would look like. They have to be the right size, so that your opportunity provides them with enough incentive to sell it. If the partner is too big, they won’t be motivated. If the partner is too small, they won’t be effective. If they don’t have a history of successfully rolling out partner capabilities…they probably won’t get better with your stuff. Target partners who are experienced in your target industries. Target potential partners in the same way you would target potential customers. Just because they found your website and called you does NOT mean they are the perfect partner. Evaluate each new opportunity critically.
Like the Steve Martin and Michael Caine characters in Dirty Rotten Scoundrels, appearances are not always accurate representations of reality. Most professionals working for large potential partners do not intend to cause you strife. But they can tie up your technology, keep you out of markets and burn your limited resources even if they mean well! Partnerships with larger entities are probably critical to the success of your business. Do not trust such a critical factor to chance…take a proactive approach to targeting and securing these relationships.
Here are a couple of other related posts/thoughts on building your start-up: