How startups can partner and even commercialize with BIG partnersJeff Hotchkiss@jlhkiss
The Landscape The long tail of innovation is "niching" out forbusiness. Smaller startups with innovative technologies arenow sought-after by large partners to commercialize.Startups in this zone areincreasingly doing business withlarger distribution partners
Wait, wait, wait… “Big" companies dontseek out startups tocommercialize. Its theother way around. Startups have to bangpots and pans to getnoticed by the “big”companies. So how do you do that?
Step #1: Plan Things Out Ensure your businessstrategy is well-thoughtout. Mandatory: you needto have internalalignment and explicitbuy-in across themanagement team,business operations,product, andengineering teams.
Step #2: Prepare To Run LONG Set a reasonable commercialization timeframe. Thisvaries from 3-6 months to a few years. Ensure your investors have the stomach for thistimeframe and have adequately funded the company forthe duration.
Step #3: Socialize The Ecosystem This is networking 101. Prepare to run up your phone bill and travellike mad. You can’t do this over e-mail. It helps you find partners, but it also helps you refine your focus andoverall strategy. Example: In mobile, instead of targeting Device OEMs, maybe youwant to target the Carriers because they own the "last-mile" to theend customer, or vice-versa…
Step #4: Target And ID Sponsors At every big company,you need an execsponsor. But more importantly,you need that day-to-day "worker bee"sponsor that you canconvert into the“evangelist.”
Step #5: Navigate Exposure Let your sponsors sellinternally and "steer"them vertically up theirchain-of-command. But also, you need tomove themhorizontally into otherinvolved groups likeengineering, projectmanagement, finance,marketing, etc.
Step #6: Prepare To Wine & Dine This is typically referred to as the "cost-of-sale.” Large distribution partners are constantly beingbombarded by dozens, if not hundreds of vendors,startups, partners etc. So…you have to “pay to play” to get their attention.
Step #7: Create A Unique Urgency Press a constant sense of urgency around cash-flowsensitivities. This is unique to startups, completely true, and perfectlyjustified, but don’t take it too far…you may appear weak. Explain that the hours of work that go into selling into alarge organization impacts your startup far more greatly.
Step #8: Manage All Project Tracks “Big” companies liketo spin up multiple,concurrent trains atthe same time. You need to hire or re-purpose someone tomanage all of thedifferent tracks. Stay organized and ontop of things!
Step #9: Rattle The Cage “Big” companies arerisk-averse, seekconsensus, and they willstall on decisions. Dont hesitate to walkaway from the table untildecisions are made. Hold a mirror up to theirorganization, let themsee their dysfunction,and constructively offerthe way to get through.
Step #10: Set Forcing Functions Establish a contractual forcing function toprevent negotiating against yourself. Secure contractual deadlines to force the “big”company to negotiate.
Step #11: Get A Stomach! The closing process will get messy because both parties arecoming to terms with the amount of risk they are taking on.◦ At “big” companies, executives can lose their jobs by doing deals with“fake” startups.◦ At startups, CEOs and entire executive teams can be banished to thePCB fab industry if they make the wrong distribution bet with theirinvestors money.
Step #12: Close, Then Scale The first deal is the hardest. After that, thecommercial deals get easier because you have amarket precedent for:1. Pricing2. Documentation3. Amount of risk you want to take on4. Overall validation of your strategy
Tip #1: Get A Good Lawyer! Make sure you have a good legalcounsel who can clearly explain toyour executive team the amount ofrisk the company will be taking on,especially with Liability, Reps andWarranties, and IP/Indemnity. If your product list is less defined,then definitely ensure your legalcounsel in an expert with IP and APIintegration. If youre a biz dev person, youdbetter make sure you understand allof this and can explain therisk/rewards of the business terms.
Tip #2: Biz Dev IS NOT Sales Understand thedifference between asales person and abusiness developmentperson when hiring forlengthy, complex,close processes. Most of all, do notever put a businessdevelopment hire on asales quota.
Tip #3: Place The Bet! If youre currently runninga startup and feel youreworking hard withoutviable commercial deals,then you havent seenanything yet. “Placing the bet” is gut-wrenching if youre afounder or CEO/CTO, butit’s your job. Youll be rewarded by howyour organizationcontinually exceeds yourexpectations if you pushthem.