Benefits and Roadblocks of Corporate Partnering for Startups
Fifteen years ago, the expansion model of a startup was fairly linear: The first three years were dedicated to building the business domestically. Year four generally saw European expansion. And by year five, the company was starting to explore the Asian markets.
The emergence of the Web as a viable commerce vehicle, though, brought about a paradigm shift in the startup world that obliterated that model—and forced entrepreneurs to change their plans. Rather than ignoring the global marketplace, today’s smart startups need to think with an international perspective from Day One—and work quickly to expand their footprint.
Of course, becoming part of the global network during a company’s formative days (when budgets are tight and research and development is crucial) isn’t easy, even with the advances and inroads the Web has introduced. At Allegis Capital, where I am managing director, many of our portfolio companies have found that the surest path to becoming an international company is by partnering with large, multinational corporations.
It’s a strategy that might sound curious at first. Big business works at a different speed and with different priorities than the startup world. But the backing of a large corporation can not only supplement a startup’s bottom line; it can also open doors that might otherwise remain firmly shut.
Beyond that, this sort of strategic partnership can provide market analysis that is impossible for startups to gather on their own, acting—essentially—as the ultimate focus group.
Naturally, there are some challenges that accompany these relationships. A successful pairing takes plenty of foresight and planning. You’ll need to not only find the company that best suits your startup’s philosophies, but also determine how best to take advantage of it (and navigate the hierarchy of that company) once the deal is finalized.
Allegis portfolio company Axcient has been particularly adept at learning to make things run smoothly with its strategic partner. After striking a non-equity partnership with Hewlett Packard in July of 2010, Axcient CEO Justin Moore quickly noticed the differences in how the two companies ran their operations. To ensure that his company saw the greatest possible benefits from the relationship, Moore developed four strategies to ensure things ran smoothly on a consistent basis.
These have not only helped Axcient grow, they’ve carved a path for other startups that might be unsure of how to get the most from a big business partner. Here are summaries of the techniques Moore has shared with us while growing his company:
Triangulate—Larger organizations tend to have an overlap in reporting. They also tend to have management shuffles with relative frequency. As such, there are often multiple people whose responsibilities for different areas of the business overlap.
Rather than maintaining a single point of contact, it’s important to develop several relationships in the organization, as this allows small business owners to have multiple allies to help accomplish a specific goal. When your company works with a single individual and that person leaves the company or their position, it’s a blow to momentum, which can be deadly.
Be Adamant—No matter how solid a startup’s partnership with a larger company may be, the people running that startup are going to have to occasionally break down walls. The best way to do this is with dogged persistence.
The ugly truth is: Partnering with a startup is not going to be the biggest priority for the big corporation, but it’s certainly the biggest priority of the entrepreneur. Therefore, it’s the startup’s duty to … Next Page »