Life in Business Development at a Startup. How it’s Different from Sales.
Do you want to enter the exciting world of Business Development in a startup? If so, congrats!!! The good news is that it’s an unbelievably rewarding career in the tech world that involves a great deal of strategic thinking. The bad news is that for many companies Business Development is a sexier name for sales. At some point in the last 5–10 years, Business Development as a career became intertwined with sales.
That’s unfortunate because it leads to confusion for individuals looking to get into Business Development and limits its scope. Business Development is a highly strategic function in a startup that allows you to develop hypotheses about markets / tech trends and their potential impact on your business.
Below you’ll find a perspective on what Business Development actually means, how its different from Sales and how successful Business Development professionals spend their time.
Definition of Business Development
To get a better sense of what Business Development entails, it is useful to take a step back and define what it means.
Business Development is the identification of opportunities, either externally or internally that drive growth for the company. This is done mostly through third-party partnerships, but it can also involve evaluating new business / product lines and corporate development.
To be clear:
Business Development = New Opportunities in existing markets with existing products that leverage partners.
Corporate Development = New Opportunities in new or existing markets with M&A. Depending on the stage of the company, Business Development responsibilities may include Corporate Development.
Product Development = New Opportunities in new or existing markets with new products. Business Development works closely with Product as they have a great perspective on what’s happening in the market. Business Development can be valuable in recommending /evaluating potential new business / product lines.
In summary, Business Development spends time working with the groups above to help identify new opportunities in new or existing markets with new or existing products.
Difference between Business Development and Sales
Business Development as a term is thrown around quite a bit which leads to confusion. In my world, Business Development is not sales. There are similarities between the two functions (i.e. generating revenue), but Business Development is a highly strategic sales process that tends to focus on large-scale partnerships that align with the long-term strategic goals of the company.
Most Business Development deals take time to develop and are driven by networking / relationship building, whereas sales is more transactional and tends to involve shorter sales cycles. Sales is about driving revenue today, whereas Business Development is about selectively targeting partners that can have a material impact in the growth trajectory of the company. I’m defining growth trajectory as revenue-generating activities or partnerships that add incremental value to a company’s existing product offering.
For example, this could be adding third party data sets or other features to your product to enhance the user experience, which creates stickiness with the customer. When Business Development is done well, it can have a major impact. One of my favorite examples is Yahoo selecting Google in 2000 to be its default search engine.
So how should Business Development professionals spend their time?
I’m outlining how Business Development folks should spend their time.
- Networking / Relationship Building —You need to be an extrovert and enjoy speaking with others. You’ll be sending cold e-mails and having lots of phone calls / meetings to communicate your company’s value to potential partners. Developing relationships is the lifeblood for a Business Development exec as they lead to partnerships and help drive Corporate Development efforts (if you have the coin to spend on Corp Dev). If a company is looking to fill a gap in their product offering you need to be in their consideration set if what you offer meets their needs. If you aren’t, that’s a problem, especially if TechCrunch publishes a story about a partnership that XYZ company made with one of your competitors.
- Getting “Stuff” Done, And by stuff I mean deals, More specifically good deals — This sounds like a no-brainer, but it’s not. In most cases, less is more when it comes to Business Development. The cardinal rule for any Business Development professional is……DO NOT BURN YOUR FINITE TECHNICAL RESOURCES!!!!! This was hammered into me early in my career. It’s so important, especially at the early stages of a startup’s lifecycle. Whatever deal you bring forward, it needs to have concrete value supported by a business case for justifying tech time.
- Competitive Intelligence — The Business Development team is the eyes and ears about what’s happening in the marketplace. They thoroughly understand the competitive landscape and keep the broader organization abreast of major initiatives by competitors. Google alerts, Twitter, etc. are your friends. You should know what’s happening at the same time or before your organization does by leveraging your contacts, reading news articles, scanning competitor’s job postings, etc. Having a granular understanding of competitors and new tech trends (see #4 below) will aid in your Business Development efforts.
- Being a Futurist — A good Business Development professional is thinking about the future and “connecting the dots” so your company can capitalize on future technological developments. It’s such an cliche to use the Wayne Gretzky quote about skating to the puck. Instead I’ll use Steve Jobs’ quote speaking about Wayne Gretzky’s quote, so it’s not as cliche.
For example, how does the “Fight for $15” wage increases impact delivery for restaurants? If you think it’s going to cause restaurants to pass along costs to diners, that could reduce delivery demand, which could have an negative effect on online ordering companies’ volume. Or you may think it will cause restaurants offering their own delivery to do away with the service altogether. If either of those occur, you can make the business case that developing your own delivery capabilities may be a worthwhile endeavor, especially if delivery checks the box on other strategic initiatives.
You need to critically think about how technical advances (e.g. AI bots, self driving cars, IOT, etc.), proposed legislation etc. may impact your business. From there, you can develop hypotheses about how you might be able to take advantage of these new trends.
5. Scaling Business Development — Business Development as a discipline is hard to scale, given the amount of interpersonal communications that occur. Whenever possible, you should use Application Program Interfaces (APIs) to complement Business Development efforts. APIs are a fantastic way to get your product functionality in the hands of other developers / companies as a way to help scale your business. A “build it and they will come approach” with APIs does not work. APIs need to be supported and productized to help gain adoption. I’m a huge fan of using APIs to complement Business Development efforts. Adding functionality to your API will reduce the need for customization in partnership conversations and your tech team’s time.
6. Owning your time — You’ll get a ton of inbound e-mails / calls from people pitching why your company can’t live without their product. 95% of these inbound solicitations are pure noise and a complete distraction. Stick to your deal priorities. My favorite e-mail inbounds at GrubHub went something like this……
Hi my name is [insert ad network rep’s name here]. I’m with [insert ad network company name here] and I have a way to fill your advertising inventory at a rate of $x.xx CPM. Would you be interested? If so, I’d love to find some time to connect.
This would have been an awesome opportunity for GrubHub if they only had ad units to be filled in the first place. Is it that hard to do a bit of pre-work? Lift finger…press delete button on e-mail.
7. Prioritize, prioritize, prioritize. — I can’t say it enough. You’ll see some crazy e-mails come your way. Enough to build a great top 10 list. Stay focused and keep the distractions at bay. Also, keep in mind that not everything is of the utmost importance. You’ll have no shortage of folks coming to you saying something like this……”so and so company, really wants to be a partner, they do XYZ and they would be great for us to work with.” You can’t do everything. If there’s one thing I’ve learned in my career is that focus wins (learned from two great co-founders). It’s ok to say no or put something to the side for a later date. As a Business Development exec you can’t boil the ocean. You don’t have the time. Again, focus wins.
8. Business Development with an eye towards the exit — Many companies do a poor job of this, largely because they are heads-down building their business and aren’t necessarily thinking about the exit. The thinking is that if they are focused on building a big business the exit will take care of itself. There’s truth in that for sure, but in the current environment of few tech IPOs, the path to exit for many companies will mostly likely be to a strategic acquirer.
This is important to venture capital firms looking to get liquid on their investments. Identifying potential exits for your startup and using Business Development as a means to develop a relationship is advantageous. Corporate Development teams love this path if possible as it provides them insight into a possible acquisition target. It helps to mitigate risk, which is a major component of all dealmaking.
The Business Development partner path to acquisition happens more than you think. For example, Yelp bought bought Eat24 last year, after a year or two of Eat24 being an online ordering partner on their platform. A good Business Development exec networks their way into Corporate Development groups to understand what they look for in acquisitions. There is unlocked value in this aspect of Business Development.
More to Come on Business Development
Hopefully, this post has been helpful to gain a perspective on what Business Development does and how it’s different from sales. I’m going to write a few different posts on Business Development for those interested in Business Development as a career path. I’ll break it down into the topics below:
- Defining Business Development in startups, and how you should spend your time (today)
- The skills required to succeed to Business Development
- Tactics for reaching out to prospective partners
- When to consider adding a Business Development function within your organization
I’ve been in Business Development for the last 10 plus years for a large organization (Tronc, formerly known as Tribune Interactive) and for smaller startups, including one of the more successful tech exits in the Midwest as VP/Head of Business Development at GrubHub. I’ll eventually move onto other topics like startups in Chicago / Midwest, and broader trends in the technology / startup world. I enjoy B2C and B2B equally, but am preferential to marketplaces / commerce given my past experience at GrubHub. I’m a Bill Gurley fanboy, so expect to see a few posts on marketplaces.
Feel free to tweet me at @stevesanger.
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*Note with an ode to Mark Suster: any spelling or grammar errors in this post were purely intentional and designed to be sure you were actually paying attention.