05001 The Trophy Spouse: Partnering With Startups

The value of partnering

Happy New Year! This is the first issue of the newsletter in 2005, and the 78th issue since December 2002. I hope you’ll continue to find this material helpful.

Two issues ago, I wrote about partnerships between companies, which are so important in technology and software, and how to make them successful. In the last issue I talked about the challenges facing a small startup which partners with a big company. This issue covers tips for large companies facing the opposite situation, where they have partnered with a startup.

Many staid, established companies look with envy at the sizzle, creativity and sheer sexiness of startups, and wonder about how much of a dent they could make in the market if they combined the startup’s cool product with their own marketing, sales, and operational riches. But two companies of such a widely divergent size and strength have just as widely divergent cultures, and happily marrying the two is not a given.

Read on below for tips on how a large company can work well with a startup to make their partnership a shining success.

(Here’s more about how a Product Manager can help a partnership between two companies succeed. And here’s more about how a Product Manager at a startup can maximize the success of a partnership with a large company.)

Stability Means a Lot to a Startup

Always keep in mind that startups are struggling with a cash flow that is most likely insufficient and most definitely unstable. Having a partner that can provide a steady inflow in terms of royalties, commissions, or success stories makes a world of difference to the startup.

What this means for you as the large company is that you need to make an effort to provide a steady rate of sales. If your sales pattern is uneven over the course of the year (for example, a middling first quarter, nonexistent second quarter, good third, and spectacular fourth quarter), you might even consider payment arrangements that anticipate the uptick at the end of the year and prepay a certain amount to keep income steady.

A Startup Can’t Afford to Wait

As a big company, you have probably experienced the slow turning of the very big wheel as you try to set a new product or initiative in motion. Lots of hands get involved, lots of people push (some people get in the way, or even pull in the wrong direction). That big old wheel takes a long time to gather momentum. And the experienced managers at your company are used to this. They aren’t discouraged and they have the resources to wait out the slow start.

But a startup doesn’t have the luxury of waiting for a venture to get off the ground. Cash is scarce and investors are impatient. Remember that they need results faster. Shortening what would be a bearable wait for you may, for the startup, make the difference between having layoffs and keeping vital members of the team.

You’ll be a much better partner to the startup if you push your company to move a little faster than it habitually does. This is bound to ruffle some feathers with your coworkers and counterparts in other divisions, but I’d bet top management would have no objection to seeing things happen faster than expected.

A Startup Brings Flash to a Partnership

The startup can add a whole lot of sexy technology and splash to a stodgy product line. That’s usually their function in the partnership. Since you have a partner who turns heads at the trade shows, make the most of it. Bring them in to do joint presentations with you. Have them speak at trade shows and all-company meetings. Put them in front of as many of your customers and prospects as you can.

As the big company partner, you need to be continually on the lookout for opportunities to show the product on stage. And the more you’re seen together, the more the flash begins to reflect on your company, too. The market knows that if nothing else, you were clever enough to recognize the value of that great new technology.

You Hold the Doors Open

But the little startup with the fancy new technology can’t invite itself to the many opportunities out there. Your company’s reputation in the industry and membership in multiple industry groups can afford your partnership the opportunity to present, speak, and exhibit.

One of your jobs as the big company partner is to get your startup partner invited to as many events as possible (and pay for a lot of the expenses involved).

They’ll Bring the Ideas, You Bring the Cash

Speaking of paying, your startup partner is usually long on creative ideas but short on cash. Conversely, while large companies sometimes buy the best advertising and marketing talent, they often have developed a less than leading edge marketing organization whose output reflects the restraints and second-guessing that a large, public company inflicts upon itself. On the other hand, your big company has a solid budget for larger marketing efforts.

Encourage your own Marketing folks to listen to the creative ideas that your startup partner has tried in the past, often to great effect considering the limited funds they had to make it work. A startup is small enough that their Marketing department has plenty of direct exposure to the product’s appeal in the market. They have seen marketing and sales successes and failures up close.

You Know How to Work the Ropes

Realize that, when you introduce your partner and its product to the various brother and sister divisions in your company, the fact that you’re making the introduction is crucial to the startup being well received. A startup could spend months and years trying to get a fair hearing in just one business unit at your company. Because you are working things from the inside, and because you understand the politics, your partnership makes deeper inroads, and faster.

A Product Manager has had the opportunity to get exposure to and experience with many individuals at a big company. He or she plays an important role in explaining the politics and leverage points to the startup, keeping them patient. The Product Manager can provide vital coaching to keep the startup employees on message when they present your joint product.

Get the Two Families Working Together

With a partnership between a big, established company and a young startup, the two cultures are bound to be very different. While top management may see the perfect fit, chances are the many mid-level managers and front-line employees at your company will not at first. Your organization will need time to understand the startup and learn to appreciate it. The employees at the startup will need time, too.

The sooner you get joint teams working together on projects across the spectrum, the better for your partnership’s success. Product Managers can provide tremendous help because of their familiarity with everything from sales to engineering matters. They can help introduce team members to each other and smooth out the wrinkles as they learn to work together.

The goal is to have people from both partners working together on projects in Sales, Marketing, Engineering, and Professional Services. As more people participate in projects, the two organizations understand each other much better and break down barriers that otherwise would impede your partnership’s success.

Be the Ambassador At Your Own Company

Having two different cultures and people from two separate companies work together is not an easy task. The Product Manager in charge of the product partnership at your big company must play the role of ambassador time and again. This includes introductions, helping each side of the partnership understand the perspectives and imperatives of the other party, and untangling knots, both big and small, as they become apparent. It requires a tireless effort.

By expecting to play an ongoing diplomatic role within his or her own company and across to the startup, a Product Manager provides a key ingredient to the success of a product partnership between an established company and a startup.

— Jacques Murphy, Product Management Challenges