When it comes to growing your business, finding your perfect partners is a crucial step that will make or break success. Thankfully, serial entrepreneur and Rare Birds Ambassador and Mentor Phil Hayes-St Clair has been there, done that, a few times. This excerpt from his article on ‘Intel Inside’ & A Growth Path For Startups’ shares his wisdom on what to look out for.
Identifying partners doesn’t start with going straight to LinkedIn and looking up who you might know at a ‘big brand’ and then trying to formulate an introduction.
It’s also not about blindly accepting suggestions from people on the sidelines about who your company should partner with. After all, unless they have specific introductions they can make, their ideas often add to the noise to company building.
I’ve come to rely on an 18 point framework to identify business to business (B2B) partners. It serves as a filter to save time and:
- Ask fundamentally important partnership questions that often get lost in the ‘we should partner with [big brand]’ ideation process
- Expose how incentives can be aligned with partners
- Identify why a partnership should be avoided
Why you should partner matters
When I answer YES to the statements below, I’m usually convinced there is a there, there in terms of a partnership.
- We can access new markets and distribution networks
- We can generate revenue
- We can access specialised knowledge and expertise
- We might be able to access strategic investment or exit
- They don’t have resources to build what we’ve built (e.g. wanting to licence intellectual property)*
- Their brand benefits from partnering with a startup (innovation halo)
- They have a strong reputation/track record in partnerships*
- Both companies can share risks and benefits of testing new markets
- Both companies can make revenue*
- We can focus internal resources on core activities
- We can leverage the scale achieved by partnering
- We can positively change customer perceptions of our brand
However, these 12 factors shouldn’t be considered in isolation.
Why you shouldn’t partner matters more!
There are six factors that usually counterbalance why you should not partner with another company. These include they:
- Have similar/identical IP
- Aren’t financially secure or have credit issues
- Have a poor reputation/track record in partnerships*
- Have just been involved in a corporate transaction (disrupted near term)
- Are philosophically opposed to partnering at all (“did it once, disaster, never again!”)
- Don’t have values alignment*
There is nuance in both of these ‘for’ and ‘against’ partnership creation arguments as denoted by the asterisks.
There are three super incentive alignment factors under ‘why you should partner’. In other words, when YES is the answer to each of these factors, the chance of the partnership being productive increases significantly.
My most productive B2B partnerships shared these three factors. First, my partners had a clear ‘buy’ (instead of build) mindset. Second, they had a long history of partnering with smaller companies. Third, they were excited for both businesses to make money. And if I dig a little further into the last point, my partners wanted my business to be there for the long term as much as they wanted a small startup to succeed.
Red flags live on the other side of the ledger. Be aware if a company has a poor track record in partnerships. This is easily discovered by reviewing a companies last five press releases that relate to partnerships. Spider senses should start tingling if there is a spate of one-off press releases for new partnerships. Especially for companies that aren’t followed up by continued stories of partnerships growing.
If I’m unsure, I reach out to the founders of the businesses that have entered into a partnership with the bigger brand. Their view is often very telling of what you can expect.
Once you have a list of companies that are likely to be accepting of your brand as a key ingredient, it’s time to leverage every relationship you have to gain warm introductions that plot a path to decision makers.