The great thing about startups, especially ones in small, fast growing markets, is that there’s no shortage of opportunities. One area that often comes up is larger, more established companies reaching out to talk about technical partnerships with startups in more cutting edge, complementary spaces. The bigger companies have a core competency that’s working, a limited number of engineers, and only so many resources. A tiny startup working in a related space is seen as a quick way to augment the bigger companies’ solution, often through a white label or OEM integration.
95% of the time startups should say ‘no’ to these opportunities.
When should you say ‘yes’ to an opportunity like this? Let’s look at a few potential reasons:
- The partnership has guaranteed revenue minimums for the startup, and the money is meaningful (I did one of these is 2002 and it was worthwhile)
- There is no custom technical work to be done (e.g. the startup has an API and the bigger company can do everything they need to without customization)
- Partnerships like the one being proposed are part of the startup’s core strategy and it will be the first of many that look the same
It is flattering to have these kinds of discussions with more established companies, but without a plan and strategy in place they can also drain a good deal of time and energy. My recommendation is to not get too enamored unless it meets one or more of the criteria listed above.