Partnerships can be an attractive route for SaaS to achieve growth. But there needs to be give and take on both sides. And the partnership is like a new business with a need for its own focus and resources. Follow some simple principles before entering into this type of deal.
Many SaaS startups look to partnerships as a route to market. Larger established companies can bring both customer reach and distribution capability. For a new product aimed at SMEs this could make a big difference. Taking your software to large numbers of possible buyers might otherwise be beyond reach. The costs and infrastructure are just too onerous.
Lessons From Experience For SaaS Startups
One of my jobs in a previous life was negotiating market partnerships. Between large global organisations. Often referred to as alliances in the corporate world. Such arrangements are common and may appear to have enormous scale. Considerable resources are invested in establishing and selling these deals. But in reality the market impact is often quite limited. Damp squibs outnumber success stories by a wide margin.
I invested a lot of time and effort in some winners and some losers. I have also seen many efforts by startups to create such partnership. There are four lessons I think startups can learn from this experience.
Find Real Value For Both Parties
First is there needs to be some real business value for both parties. The advantages of scale and established distribution to a startup are obvious. Too often the win for the bigger company is not clear. Remember that your partner’s leaders need to persuade salespeople. It must be in their interest to promote your product. It may suit the CEO to support local startups but that does not cut much ice in a sales meeting.
You Need Give As Well As Take
As well as both sides winning, the two parties each need to be willing to give something up. This was often the hardest part of negotiation. The two companies each want to own the customer. To retain their own IP. And to control the sales process. This is impossible. Any partnership deal needs some give as well as the hoped for take.
A Partnership Is A New Business
When you do agree a partnership you have started a new business. It may be small relative to one or both parties. But it is separate, a combination with its own offer to the market. And its own priorities and dynamic. To make this work there must be a clear focus. Each side needs to know what it will gain. The new partnership must have objectives and ambitions that stand alone.
Allocate Specific Market Resources
The partnership must also have a strategy and allocate resources for reaching the market. Startups often misunderstand this process. A large corporate has immense market presence. Well established channels. And plenty of dollars to work for it. To the founder of an early stage company it seems this resource must lead to success. However, it is already spoken for.
Large enterprises with big brands do spend heavily on marketing. This is in proportion to the demands of their markets. And the ambitions of their CEOs. Budgets are limited. Careful plans are laid to achieve market share and brand presence. Tacking another product on the side doesn’t fit into this picture.
Commit For A Winning Proposition
This is a key test. If both sides are not willing to commit specific resource, the partnership will wither. It will be added to a long list of grand announcements with no follow up. Negotiate a deal that includes real commitment. Or don’t waste your time.
None of these suggestions is radical. They are a good test of real intent. I appreciate the efforts of the corporate world to support startups. Good intentions will not make a real difference. Proper commitment with a clear focus and objectives. A winning proposition for both partners. These will be good for everyone.
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Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.