Securing a partnership with a major brand may seem like winning a golden ticket for startup success, and it certainty can be! Not only can such a partnership be a really strategic way to scale, but it can also save your startup money, time, and sales effort, leading to a long-term return on investment.
However, to create a winning partnership, it’s crucial to perform due diligence on the brand as well as on your own company. A haphazard alliance between a company that’s just starting out and a well-established brand can be a recipe for disaster. If you dive in before you’re ready, you may find yourself betting everything on the wrong horse and derailing your operations entirely.
Here are four things to consider when assessing whether a partnership is right for your startup:
- Find the Right Fit First
Before you pursue a partnership, make sure you find market fit for your product. For instance, if you’re building a tool for small businesses, then you should begin by testing your product with small local companies. Only approach enterprise-level clients when you’re ready to scale.
If you partner with a large company too early, you may end up being forced into customizing features and building the jumbo-jet version of your tool for bigger parties. By going in this direction, your tool may no longer be viable for the small business market you initially planned to target.
Instead, test your product on a smaller scale. Once you have a solid product that works and that people are using, seek out strategic partners who have strong relationships with your market. This will save you the hassle and cost of hiring salespeople and trying to sell your product to multiple small businesses.
- Wait for a Win-Win Scenario
The most effective partnerships are mutually beneficial. A larger partner is more likely to listen to your pitch if you clearly express how your product will provide mutual benefits.
Samsung and Dropbox forged a partnership in 2012 that was a win for both parties. Samsung agreed to preload its S3 devices with the Dropbox service. It wasn’t merely an icon that users might never open, but rather, it was a service that was fully integrated into the smartphone’s functionality.
Dropbox gained access to as many users as possible for its premium service, and the built-in functionality was a real differentiator for Samsung devices, giving the company a competitive edge.
A partnership is much more likely to succeed if your product has the required features in place or you have enough brand recognition to build a win-win partnership. On the other hand, if you go into a deal before your startup is ready to provide these benefits, you may hurt future opportunities and potential relationships.
- Approach the Right Brands and People
Just because a brand is large and interested in your product doesn’t mean it will be a good partner. You should evaluate the companies you’re talking to, based on their appetite for risk.
Determine if the brand has previously innovated and how well it understands technology. If it thinks anything that’s new media or digital is high-tech, then it’s probably not worth pursuing. Read the news, and Google a little bit to see what integrations the company has made.
You also need to be strategic about how you want to partner with another brand, because that will determine whom you need to talk to within the company. Startups attempting to integrate with other brands should connect with individuals involved in products, operations, and sales. And if you want a revenue share agreement, you’ll need to get in touch with seniors in business development.
Have a clear understanding of what kind of partnership you want before you seek out any type of relationships.
- Seek Common Customers and Complementary Offerings
You want to make sure that your potential partner has the same customers as you. At the end of the day, it’s not a good partnership if your target audiences don’t coincide — that’s the whole point.
Starbucks and Wells Fargo built a partnership in 1997 that allowed the coffee provider to set up shop in certain California branches. The two brands determined that they had the same customers, and the partnership resulted in a win-win for both parties.
Startups should also ensure both sides of the partnership have complementary offerings. For example, if your startup has a strong user base but doesn’t have the technology, then a company that does have the technology could be a valuable partner for you. Or if you have a product to help drive monetization, your startup might partner better with Pinterest, which has yet to monetize, than it would with Dropbox, which is well into its monetization model. Bottom line: A brand will pay attention to your pitch if your offerings work toward the goals it cares about.
If your company is ready and you invest your time into conducting research, a partnership can offer great benefits. There’s no golden ticket, but with enough hard work and patience, you can turn two or more brands into a powerful partnership.
Image credit: CC by stuartpilbrow