Working with partners

I can't tell you how many early stage companies I talk to tout their great list of partners.  I always step back in amazement at how a small company can support more than one, really large partner in the beginning.  In fact, I remember being in a meeting with a strategic partner once and having them tell me that we would break if they put their resources behind our product.  You have to realize there are 2 kinds of partners - technology partners and real partners.  In my mind, if you and your partner are not generating revenue for each other than it isn't a real partnership but rather just a Barney press release.  Yeah, you know the "I love you, you love me" kind of partnership that sucks precious resources from a startup and yields no value and no customers.

So how do you make a real partnership work?  In theory, it is very simple but requires a ton of hard work.  Here are a few rules I like to use when working with partners. 

Rule #1 - Don't rely on corporate; engage at the field level. 
Many early stage companies try to create partnerships from the top down without recognizing that the real action is in the field.  If you can bring your potential partner customers and lots of customers, you will get attention and be in a much better position to negotiate a real partnership.

Rule #2 - Focus, narrowly focus your opportunities.
Many of your potential partners are huge enterprises, and it is easy for a small company to get lost in the shuffle.  Try choosing a group in the large organization (it depends on how the company is organized) where you can effect a real P&L and create a strong value proposition.  In some companies that might mean focusing on a vertical like energy or financial services while in other companies it may mean picking a specific function like business intelligence or compliance.  Either way focus on groups where you can make a real impact. 

Rule #3 - Your partner's sales force needs to get comped
Once you are able to demonstrate a handful of customer wins, it is time to get a deal done.  No matter what kind of deal it is, make sure that your partner's sales force is comped for selling your product.  If there is no comp for the sales force, your product will not move in a highly leveraged way.

Rule #4 - Dedicate the proper amount of resources to make the partnership successful.
Once again, lots of companies think that once you sign a deal the hard work is done.  On the contrary, this is just the beginning.  You need to treat your partner like your largest customer and provide the same amount of focus on your partner as you do your customers.  You will have to develop a joint business plan together, figure out the proper sales strategy, put together compelling joint collateral and presentations, offer sales and SE training to your partners and their resellers, and finally get your customer support ready.  In addition, make one person responsible for making the partnership work.

Rule #5 - Don't get sucked into your partner's black hole.
Be careful of developing custom software for your partner or making too many proprietary tweaks beyond the necessary integration.  I have seen early stage companies too often bend over backwards without thinking about the real benefits of all of your partner's requests.  As an early stage company you have to walk a fine line between leveraging partners for sales but also not becoming so glued to the partner that you alienate other potential channels.  As I have said in previous posts, it is ok to say no to some requests especially if you can demonstrate why it will not help generate more sales for both comapnies.  Either way, your partner will respect you and know that you are not a pushover.

As you can see, it is quite hard to support more than one partner for an early stage company. 

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This post was written by who has written 358 posts on BeyondVC.

6 Responses to “Working with partners”

  1. iProceed Apr 18, 2005 at 3:25 pm #

    The mad rush to find “partners” even before a startup has a real product started when VCs started to ask that question. In my discussion a lot of these partners sign on in the hope of getting access to a technology prior to their competitors and to get huge discounts to buy the product. While both may be helpful to a startup in some ways, I agree that a mad rush to take on anyone and everyone who wants to “partner” is way too risky. And if a VC is not impressed with your list of partner, do not grow the list in number; simply add one or two great partners and ask the others to wait in line.

  2. Stewart Jan 4, 2006 at 3:28 pm #

    Of course partnership is first of all mutual profit. You make money for me I make money for you. But another thing is personal relations.

Trackbacks/Pingbacks

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    He’s not heavy, he’s mah partner

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  2. Strategic Board Blog - Apr 17, 2005

    Real Alliances for Startups

    I read the post BeyondVC: Working with partners and I agree that on guidelines mentioned and that they are crucial tactics  in a partnership relationship. I think that the main reason for fruitless partnerships (As it happens many times in&nb…

  3. Corante New York - Apr 18, 2005

    Beware the Barney press release

    How many strategic partners can an early-stage start-up really work with? According to New York VC Ed Sim, the answer is one. That’s right, one. Sim explains: “I can’t tell you how many early stage companies I talk to tout…

  4. Anonymous - Feb 7, 2007

    Working with partners

    I can’t tell you how many early stage companies I talk to tout their great list of partners. I always step back in amazement at how a small company can support more than one, really large partner in the beginning.

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