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 yourdistribution strategy iswell-thought out. Mandatory: you needto have internalalignment and explicitbuy-in across themanagementteam, businessoperations, product, and engineering 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 yourphone bill and travel like mad. You can’t do thisover e-mail. It helps you find partners, but it also helps yourefine your focus and overall strategy.
Step #4: Target And ID Sponsors At every bigcompany, you needan exec sponsor. But moreimportantly, you needthat day-to-day"worker bee.” This is your“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.” Most large distribution partners are constantly beingbombarded by dozens, if not hundreds ofvendors, startups, partners etc. So…you have to “pay to play” to get their attention.
Step #7: Create A Unique Urgency Create a constant sense of urgency aroundcash-flow sensitivities. This is unique to startups, completely true, andperfectly justified, but don’t take it too far…youmay appear weak.
Step #8: Manage All Project Tracks “Big” companies liketo spin upmultiple, concurrenttrains at the sametime. 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 stall ondecisions. Dont hesitate to walkaway from the table untildecisions are made. Hold a mirror up to theirorganization, let themsee theirdysfunction, andconstructively offer theway 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! Your counsel must explain toyour executive team the amountof risk the company will be takingon, especially with Liability, Repsand Warranties, andIP/Indemnity. If your product list is lessdefined, then definitely ensureyour legal counsel in an expertwith IP and API integration. If youre a biz dev person, youdbetter make sure you understandall of this and can explain therisk/rewards of the businessterms.
Tip #2: Biz Dev IS NOT Sales Understand thedifference between asales person and abusiness developmentperson when hiring forlengthy, complex, close processes. Most of all, don’t everput a businessdevelopment hire on asales quota.
Tip #3: Place The Bet! If youre currently runninga startup and feel youreworking hard withoutviable commercialdeals, then you haventseen anything 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.