Stacking It Up
Your ambitions as a startup, or so they should be, are to be the best-in-class at everything you do. From Day 1, it’s you against the world, trying to ship a new product to improve the lives of your customers and hopefully execute on your ‘step-change’ vision…
And here-in lies the problem, by challenging the status quo, it is usually you (and your team) against the world. Or is it?
Over recent months I’ve seen first-hand various Founders’ innate self-belief (and that’s why we invest in them by the way haha!) to go it alone; trying to build everything in-house from the ground-up.
Commendable as it is, there are alternatives to consider…
Through partnering with a third-party or another startup, you can quickly scale up your stack or business, getting to market not only quicker, but with a potentially better product.
Look for instance at Stripe… Now commonly considered the standard for startups world over, with their simple and easy to integrate code, that anyone can drop into their own codebase and suddenly have a world-class payment processor on tap. So this leads to me pose the question…
why would you try to solve a problem that has already been solved for you?
If a potential investment comes to us and suggests that they will build their whole stack solo, when clearly a cost-effective/high-quality off the shelf solution already exists in the market, I’d ask “why?”
Debatably it will:
- Slow down your time to market
- Likely be a less well developed and unreliable solution
- Be more costly
So now I’ve hopefully persuaded you a partnership could be a positive strategic manoeuvre. It lends to its own problems to overcome…
When you are a small startup you have no power with your suppliers. You have neither a solid trading history, nor a solid trading forecast.
Your business idea is non-conformist and is going to take an investment in time and resources from them to help you. It’s all stacked against you.
So how do you attract a supplier (who could be 100x times bigger than you) that is the best fit for your business long term…?!
Strategic Alignment
Always identify third parties with an alignment of interests, whereby they already ship product to others in your market segment and it is a proven solution.
Purchasing Power
Taking #1 a step further, if you will be allowing the third party to access a new area of the market that they currently don’t serve, you are enabling a new potential revenue line for them, and so making you an attractive potential partner.
The substitute
[A metaphor for you football fans out there….] Olivier Giroud has repeatedly illustrated himself to be a fantastic substitute to the misfiring Alvaro Morata this season. If you end up building your stack to engrain the third party so deeply into what you are doing, and Morata starts to have an off season… You need to be able to quickly substitute in a different third party of the same ilk… I.e. Tall, strong and fantastic with his head, to match your style of play.
On a serious note there is a lot more to consider, from legals (watch out for the contract length/binding terms) to the costs (which can ramp up with users), but putting in place a healthy partnership can lead to some that works for you and your customers.
Don’t be afraid to bring in others for help, particularly when they are experts in their field…
For this reason, at the InsurTech Gateway we have heavily invested in creating a Platform of plug ‘n play Service Providers for our startups to use, from Stripe to AWS, to enable our portfolio to quickly scale, and also saving them up to c.£500k in build costs!
Ps. Before you judge me… I am actually a Watford fan 😊
