Scaling with Enterprise Partners — Thoughts for Startups

This article is part of a series exploring how large enterprises might think about partnering with innovative startups (pre-Series A). Part 1 will identify essential points of consideration for startups beginning conversations with a potential enterprise partner. Part 2 will focus on crafting an initial pilot with your chosen partner, including pilot design, management, and reporting.

In today’s world, some of the largest and most well-established companies have found themselves needing to adapt quickly to the evolving needs of their customers. This is especially true with the onset of the COVID-19 pandemic and the rapid changes that have taken place in consumer life over the past two years. However, many large companies find it difficult to remain at the forefront of innovation while focused on adapting and optimizing internal operations. With that challenge comes an opportunity for quicker, more agile startups to partner with and create efficient new ways of working in historically traditional industries.

As a startup, there are many benefits to partnering with large enterprises that can provide you opportunities for guaranteed demand growth and rapid scale expansion. Gaining built-in customers, distribution, and operational leverage are all significant ways an enterprise partnership can help turbocharge your growth. All of this is easy to say, but how do we actually get there?

Here are a few questions to think through as a startup looking to do business with a potential enterprise partner, prior to approaching them with a partnership proposal:

1. What is your company’s value proposition?

This is the first step to identifying how your goals align with potential external opportunities: what do you have to give? What is the value that your company is bringing? In a pitch deck presentation, this can typically be seen through your company mission statement, the problem you are trying to solve, the solution you are offering, and a user/customer journey. Try digging into the existing problem your startup is able to solve — you know this is valuable to current customers, but it is also something large industry players are likely struggling with today.

Another key point to consider is that you need to demonstrate the ability to scale. Some ways you can think about this include transparency in your revenue model, a clear market differentiator, traction to date, and your growth plan for the future (i.e., how do you see a potential partnership transforming your business)? How are your operations positioned to support future expansion (e.g., will you have to hire new types of dedicated teams)? One way to frame this is by identifying the operating model that allowed you to service your first 50 customers. What would need to change or scale in your operating model for you to service 500 customers?

2. How will you find the right enterprise partner?

Finding the right partner can be challenging. A good starting place is to go back to your value proposition. In which industries are you currently operating? What is the most important problem you are able to solve for your customers? From there, you can start your search.

One way to think about this is to identify a list of legacy industry participants who play in a similar space and service similar customers to you. From here, try narrowing that list down to the top 5 and learn everything you can about their customers, their business model, and how their strategy can benefit from what your customers are now benefiting from. With the industry knowledge you’ve gained as your startup has scaled, try to put yourself in the shoes of a legacy player to identify their pain points. This research is crucial to approaching an enterprise partner and will help you prepare for your first conversations.

3. How might you prepare for a conversation with internal enterprise stakeholders?

Prior to approaching a potential partner, make sure you understand their customer base and the customer’s pain points to increase your potential stickiness to this enterprise. Remember that all enterprises have at least one customer set that their core offerings are tailored to, so how will your startup enhance that?

As Henry Sohn from Morado Ventures wrote, does your Product/Service Market Fit address the needs and desires of enough customers willing to pay for it? Does your offering address common and/or niche customer pain points found in the industry? In the eyes of your potential partners, is your offering a need-to-have or a nice-to-have?

Some of the stickiest startup pilots identify the importance of the legacy business customer experience and adapt their offering to fit the existing enterprise customer needs. In turn, this increases customer conversion, reduces churn, and aligns closer to internal enterprise incentives and goals. When integrated and managed well, these types of partnerships can become a cornerstone of innovative enterprise strategy.

4. How will you negotiate with enterprise partners?

Most importantly, we need to close the deal. After identifying an appropriate partner, it is key to find an internal stakeholder with decision-making power that believes in your value proposition. As they internally champion the opportunity to work with you, adaptability and flexibility are important startup qualities as they will likely need additional internal teams to buy into the concept. This could include strategy executives, legal, sales and marketing, and any other teams that would be impacted across the business.

On flexibility, consider other levers you can pull for successful contract negotiations. Are you open to white-labeling your solution? Are you willing to adjust your pricing structure (e.g., making the pricing cheaper to partner customers with a heavier upfront licensing fee)? How are you considering the core business and their breakeven point on the upfront investment?

An effective way to get early buy-in is to adapt to the language of each team by being clear in the asks and rationale of the proposed pilot, explicit about the benefits that the organization and the stakeholder teams stand to gain upon pursuit, and up front and transparent with any potential risks and blockers that you may foresee. These stakeholders are the same teams that will be executing on this partnership post-negotiations, so sharing your perspective early on will set you up for success when you have to begin adopting a change management strategy down the line. As Sofia Quintero stated:

Change is not about what you want to achieve, but what other people think they will achieve if they embrace change.

Remember that the thought process outlined above are just a few of the critical questions worth exploring to ensure your proposed partnership will make business sense to your potential enterprise partner.