Partnership Principles for Startups
Lessons for building partnerships at early-stage startups
In speaking to founders and early startup employees about building their very first partnerships, I have a few pieces of advice to share. These mostly come from lessons learned leading early partnerships at Stripe with companies like Apple, Facebook, Google, Twitter and Xero and leading partnerships at Pulse (acquired by LinkedIn) with Amazon, Bloomberg, HTC, Verizon and The Wall Street Journal.
Don’t Do Them, If Possible
As a startup, partnerships are resource-intensive and difficult to do with large organizations. A partnership could be trajectory-changing for you, but it is unlikely to be trajectory-changing for the larger company you’re working with. As a result, your partner will be far less motivated than you are to have a successful partnership.
Ideally, you have a product which doesn’t require a partnership with another company to get to market (you’re in control of your timeline to launch) and you have organic customer growth (you don’t need a partner to dramatically accelerate your expansion). That said, partnerships do have the right time and place at an organization, including startups. Keep in mind that you’ll be in a better position to source the best partnerships for your company and negotiate them on the best terms if you’re not reliant on the partner to make your company successful.
Choose Your Partners Wisely
Work with smaller companies
If you do need to work with a partner, try working with a smaller company to build a prototype. Smaller companies tend to be easier to work with on everything from getting an NDA signed to contracting, product integration and marketing. This may mean your first partner may not be your long-term partner, but your first partner can often get you off the ground faster and help you bridge the gap until your long-term partner is in place. If you know you’re not working with your long-term partner, make sure you avoid burdensome deal terms that may lock you into working with this partner longer than you’d like.
Don’t pitch your top partner first
If you’re in a position where you’ll be partnering with multiple companies, don’t start by pitching your most important partner first. You’ll need some time to refine your pitch, determine how to handle objections, and find out where your ideal stakeholder sits in a partner’s organization. Start pitching your third or fourth most viable partner to work out the kinks in your approach so that you’re better prepared for pitching the most important partner. These partners will often be far easier to work with.
Ladder up
Once you’ve closed a deal with your third or fourth most viable partner, you now have something to bring to the table to pique the interest of partners at the top of your list. If these partners are in the same space, the top partner may feel some fear of missing out (is there something the smaller players know that they don’t?), which can often be the driving force for the partner to engage with you.
When a partner shows you who they are, believe them the first time
It’s easy to think that partners that were difficult to work with on negotiating business and legal terms will become easier to work with once the partnership has been signed on the dotted line. However, the hard work typically comes after. You’ll often work with different external stakeholders at later stages (product, marketing, and operations for example), who need to be educated on why this partnership matters and align their resources to it. If an organization was difficult to work with in the deal stage, expect that to be the case in later stages when you’re launching, operationalizing and scaling the partnership.
Play to Your Advantages
Who do you pitch?
You can get radically different outcomes depending on who you’re pitching to in an organization. Determine what function within an organization is most likely to be an advocate for working with you. Where have you seen the most success in the past? If this is your very first outreach, try connecting with the person most likely to say yes to meeting with you. If that person doesn’t respond, wait a few days and reach out to the next most likely person to say yes within an organization (and so on). Reaching out to multiple people within an organization on the same day (what I like to call spraying and praying) is a pain for the organization to deal with and shows you don’t have much faith in your own pitch. Ideally, ask for an introduction from a mutual connection. If you don’t have an introduction, reach out to a potential point of contact via email. LinkedIn should be your last resort as many LinkedIn members don’t check their messages.
How do you position yourself?
In your initial outreach, keep it brief (no more than four sentences) and explain who you are, what your company does and why you’d like to partner together. Craft the “why” based on what would be most appealing to a person in that function. For example, if you’re pitching someone who is focused Growth within a company, share how you’ll grow signups or monthly active users. If you’re pitching someone who is in a Sales org, share how your product grows revenue or sales efficiency. You’ll have a much greater chance at getting someone to respond to you when you can articulate what’s in it for them specifically.
Your advantage helps you prove your worth
It’s unlikely that you’re the first company in your space that’s pitching a potential partnership to this company (just as Stripe wasn’t the first online payments infrastructure company to pitch our initial partners). Think about what makes your company truly different from the competition. This could be your initial market focus, the ease of use of your product or your fast-growing user base. Make sure you articulate why you’re different from the rest of the pack and worth taking a chance on.
Know Your Audience’s Incentives
Does this partnership truly benefit the partner?
It’s surprising how often small startups pursue partnerships without clearly stating why the partner should care deeply about the opportunity upfront. It’s often clear why the partnership would be good for the startup (your product couldn’t launch without the partner, you would get significant distribution from the partner, etc.), but if there’s no significant benefit to the partner, the partner has little incentive to do the deal or move at a pace that works for the startup.
Does this partnership benefit the individual person working on the partnership?
When doing a partnership with a large company, you should also ensure that the individual you’re working with has a strong incentive to work with you. Aim to understand what their mandate is and what will make them successful in their role. When crafting your pitch and doing the partnership, think about what you can do to make your individual counterpart look good. The greatest outcome for you is that the counterpart who took a chance on your startup gets promoted for taking a bet that ultimately paid off.
I hope this advice is helpful. Let me know what’s worked best for you in building partnerships at an early-stage startup.
