Startups and Partnerships

Every startup I worked with was keen on strategic/channel partnerships in its initial time. These partnerships happen where product or service is complimentary and has great possibility of going together. For the startup, the idea behind partnering with established organization is to have access to their customer base and sales force. For the large organization, primarily it is the breadth of products/services they offer to their customers and some customer acquisition as a bonus.

Image Courtesy: SPRING Singapore

This looks like win-win for everyone and that's why so many strategic/channel partnership deals get signed.

However, I have never seen any customer acquisition happening in reality for the startup. Initially, when my primary role was on tech, I used to ignore these partnerships. By the way I am not the only one saying this, Paul Graham also says in his article:
"Partnerships too usually don't work. They don't work for startups in general, but they especially don't work as a way to get growth started. It's a common mistake among inexperienced founders to believe that a partnership with a big company will be their big break. Six months later they're all saying the same thing: that was way more work than we expected, and we ended up getting practically nothing out of it."

After moving to the business side, I started talking to partners myself and at the same time started investigating why things don't work and how to make them work.

When following up with the partner leadership, I heard the constant answer from everyone, "We shall let you know when any of our customer asks for your kind of product."

Later, a friendly sales person told me his point of view:
"Bringing money from anyone's pocket is a tedious job. So we (the sales people) sell only the items we are most comfortable with and what gives us most benefit meeting our numbers.
Any new product doesn't fit into this criterion. Especially when it comes from a partner startup because customers also don't feel very comfortable with a new product and the original deal may also get derailed.

So! partnerships don't work.
But approaching every small customer with all sales effort is a tedious task too.
Look around, you will see so many partnerships working. What they did to make it work? Is this just the brand name that works? Or there is some solution in this chicken-and-egg situation.

Paul Graham also says in his article that scaling is a good-to-have problem. But till you reach there, founders has to sell themselves. They have to do it manually in a way that doesn't scale and they have to delight the customers. That's the only way to acquire initial customers.
To add to that I have seen that even professional sales people fail to sell a new product during initial times. Founders and other entrepreneurs of the team have to do it.

The trick for making partnerships work came from another friend who is a sales person himself and developed/managed partners for his company.
According to him, you need to sell and give first customer to your partner rather then expecting them to bring first customer to you. When they (partner) see new money (and customer relationship) coming without making sales effort, they start taking interest as they need to service the customer, keep him happy and get more orders from him.
Image Courtesy: RoI Investing

In this process their teams get more familiar with your product and establish a process for repeatable business. You may need to do a lot of effort in this process for the first time (and may be couple more times) but when the channel is setup, it really works best.

According to him, it takes about 2 years for fully nurturing a channel partner.
Though the trick looks fully logical to me and my friend has earned success with this, I am yet to try this. Will post my experience further.

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