David Cummings on Startups

Startups Should Say No to 99% of Partnership Opportunities

Written by

David Cummings

in

,

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?

Comments

5 responses to “Startups Should Say No to 99% of Partnership Opportunities”

  1. John Avatar
    John

    Totally agree. I came to this same conclusion in my end of year review recently. This year are are totally nearly totally inside org focused, instead of hoping for a boost from 3rd parties.

    Wish I could get the countless hours back from the past many years that we spent chasing partnerships that amounted to nothing 🙂

    Reply
    1. Mike Schinkel (@mikeschinkel) Avatar
      Mike Schinkel (@mikeschinkel)

      Hi John, to add to what you said:

      Back in 1995 we in my former company were anxious to get Microsoft to distribute our catalog of Visual Basic developer tools in the Visual Basic box; we viewed the ideas as a panacea even though it wasn’t likely to happen. Through a stroke of luck they needed catalogs and we had them so we got 100,000 of our catalogs distributed in the VB box.

      And then we woke up the next day and continued busting our asses to grow our business, just like all the days before.

      Moral of the story: There are (almost) never any panaceas in business, so don’t expect them or waste lots of time pursuing them.

      Reply
  2. Bart Foster Avatar
    Bart Foster

    I absolutely agree! Maybe not 99%… But at least 80%. For us, some of our early partnerships with large companies actually provided much needed credibility. Plus, if what you has is valuable to a larger company, a partnership could be the first step to an investment or strategic commercial deal… That is how it worked for us.

    Best,

    Bart

    Reply
  3. Mike Schinkel (@mikeschinkel) Avatar
    Mike Schinkel (@mikeschinkel)

    Hi David,

    Excellent advice.

    As a corollary I love Caterina Fake’s approach to partnerships which she calls BizDev 2.0. In a nutshell the idea is to build an API and let would-be partners proof themselves by building to your API. With this approach startups can focus on only doing partnerships with the would be partners who gain traction with tons of time and efforts saved.

    Ain’t the new world of SaaS with APIs just grand? 🙂

    -Mike

    Reply
  4. Stephen Reid (@smileysteve) Avatar
    Stephen Reid (@smileysteve)

    If the larger company has an API, it creates a way for the smaller company to create a starter ‘partnership’ that uses limited or no resources of the larger, adds a feature to the larger, and substantially helps the smaller’s marketing and feature list.

    Reply

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