Introduction to Startup Partnerships
“Our success has really been based on partnerships from the very beginnings” — Bill Gates
Partnerships and alliances are all around us, from a group of high school friends to international organizations like the WHO. People are always looking to be part of groups which they can contribute to and that can benefit them in return. This is no different for companies in general, especially startups.
I’ve seen this up close throughout my career and from both sides of the aisle. First, I saw it at SuperDerivatives when we partnered with data providers and FSIs to improve our pricing accuracy and refresh time, and then with deeper involvement during my time at Accenture Ventures and Open Innovation where one of my responsibilities was building partnerships with startups in cybersecurity and fintech.
In this blog article, I want to talk a bit about why a startup should work with partners and will try to answer a couple of the first questions that B2B startups ask themselves when considering starting a partnership program.
Let’s start from the beginning: why should a B2B startup early on work with partners?
If you’ll forgive my cynicism, in business every decision is ultimately aimed at one thing: improving the bottom line. This broad goal can be segmented into 4 more specific approaches:
Given this, what are the main benefits startups gain from partnerships, and how does it relate to the 4 segments we previously discussed?
Dealflow — the main goal and benefit of partnerships is to generate dealflow (for both sides).
– Benefits — Revenue Growth
Access to clients and markets where the startup does not have a previous relationship or sales teams — expanding to new geographies and verticals usually requires hiring dedicated salespeople with relevant contacts in the geo/vertical, so partners with local presence can greatly reduce the need to hire such teams or augment existing teams.
– Benefits — Revenue Growth and Cost avoidance
Reducing the need for large professional services teams — many b2b solutions require dedicated professional services for their integration and deployment. Partners can greatly reduce the need for hiring and maintaining such teams.
– Benefits — Cost Avoidance
Connection to complementary technology which enhances the startup’s own product value — This generally relates to partnerships with other ISVs (AWS, NVIDIA, etc.).
– Benefits — Revenue Growth/Revenue protection
Co-development of new offerings — Often partners will discover close synergies between their products that can lead to the co-development of new offerings combining the best of both solutions.
– Benefits — Revenue growth
Information shared by partners works to inform product teams regarding client needs — Partners are a great source for information about clients’ needs and priorities, both from direct conversations with the partner and from analysis of the data collected.
– Benefits — Revenue Growth/Cost Avoidance
A successful partner program allows technology vendors to reduce the cost of acquisition of new clients and focus on what they do best, building world-class technology products.
What kind of potential partners are out there?
Let’s look at the 4 main types of partners, what kind of commercial structures each utilizes, and a few examples:
While each of these partner types has a different threshold, approach, and commercial structure to working with Technology Vendors, the end goal is the same — grow their business through partnerships. However, it’s essential for startups to understand beforehand the type of partner they are approaching and how they can best contribute to the specific partner objectives.
For example, a distributor will care about selling as many licenses as possible, so it’s important to create a simple pricing structure that they can easily communicate to the end client in addition to simple sales materials that they can utilize in their outreach.
On the other hand, a GSI has a significant workforce which they need to keep chargeable on client projects as much as possible. When working with such a partner it’s more important to understand and reflect the number of professional services required for the product implementation.
Just like every customer is different and requires different messaging, so is every partner unique and will require a different approach.
When is the right time to start developing partnerships?
Startups, being resource and time constraints organizations, need to be laser-focused in pretty much everything they do, from product features to deciding on the best GTM approach. So, while it’s never too early to start thinking about your channel and partnership strategy, the decision on when to actually start putting the time and effort into it depends on two things. The first is the level of effort required in implementing the solution and the second is the type of client you are targeting.
Generally speaking, a product that requires lower implementation effort can be sold through partners (distributors and marketplaces) sooner. This is due to the ability to quickly train new partners and the minimal professional services required. More complicated solutions, usually designed for enterprises, will require a much more robust partnership program focusing on GSI/SI partners.
Similarly, from a client perspective, SME/SMB clients are usually easier to reach through distributors and therefore can be reached by partnerships sooner. Enterprise clients are traditionally the hardest to reach and usually require developing personal ties with the right champion to generate a lead. An initial focus on direct sales is usually advised for such clients, however, once a few large enterprise clients are secured, GSI/SI which already has a relationship on the client side would be much more open and relevant to exploring a partnership.
To summarize, partnerships are an extremely useful method to improve your bottom line at a relatively low cost. However, startups first need to do their homework in order to identify the right partner and adapt their value proposition in order to attract the right partners.