At yesterday’s Startup Riot I enjoyed talking with a number of entrepreneurs. One item that kept coming up was partnership opportunities that entrepreneurs were excited about. Here are some example partnership opportunities:
- Invite to be on someone else’s app store-like marketplace
- Desire to white label or OEM the product by a bigger company
- Exclusive reseller for a certain vertical or geography
Startups should say no to 99% of partnership opportunities. Most partnerships never go anywhere and don’t make sense for the startup to invest significant effort into the relationship due to being time and money constrained. Partnership opportunities do make sense when there is significant skin in the game on behalf of the partner (e.g. large up-front fees) or a super minimal way to work together (e.g. less than 20 hours of work to get something out the door that is useful).
Now, it isn’t that bigger companies are trying to take advantage of startups. Rather, bigger companies have more resources and less focus whereas startups are often looking for product/market fit and need to stay focused on work that’s applicable to 80% of their desired customers. The next time someone approaches you with a partnership idea, ask yourself the hard questions and assess the downside as well as the upside.
What else? What are other reasons startups should say no to 99% of partnership opportunities?