This is the second in a three-part series on strategic investors and startups.
“When we cut this deal, we will have money, distribution and credibility. It is going to be fantastic!” exclaimed the entrepreneur.
“Hold on a minute,” I said. “Big companies move slowly. Just because they have everything you need doesn’t mean it will be available to you.”
“Then why would they do the deal? Don’t they want to see our company be successful? Wouldn’t they do all they can to help us?” he asked.
“Of course, they want you to be successful. They just don’t want to risk any of their hard-earned brand and employee and customer relationships to get you there,” I said.
“Remember, if you fail, you lose it all. The big company simply goes on like nothing happened. You are interesting, but they don’t really need you.”
Here’s how you build a more valuable startup when partnering with a big company.
They Need to Pay to Play
Money is oxygen to your startup. It gives you the opportunity to build out the team with A players who can make the product vision a market reality. And you’ll do it on an accelerated basis.
The strategic partner’s investment spells credibility to future employees and financial investors. The big company’s money helps you attract the right lead investor who will define the term sheet.
Once the lead investor is partnered with the big company, all the other investors will jump in to complete the funding round.
With the big company’s money invested, you can be certain their people will treat you as a priority. Somebody in the big company is responsible for those funds. And they will be working closely with you to be sure you succeed.
Access to Their Salesforce
You have to develop a plan of how you’ll work with their salesforce. Your job is to make sure you get to know their salesmen so you can qualify them. Although many of them will appear to be interested in working with you, you need to find the handful of key salesmen who are willing to do it.
View the salesforce as you would your market. There are early adopters, innovators, and mainstream salesmen. Big company salesmen are even more risk averse than the company they work for. Their personal income and job is on the line. You must find the guys who do need you.
Find early adopter salesmen. Work closely with these few people to prove that by selling your product, they will sell more of their existing product. This is how they make their money and keep their job.
Your goal is to make these few people wildly successful. Build on their success by selling to the next set of salesmen. Baby steps. Baby steps.
Get in Front of Their Customers
Just as there are early adopter salesmen, there are early adopter customers. Just as you qualify the salesmen you initially work with, you need to qualify the customers they will try to sell to in their territories.
When you finally get the opportunity to work with the big company’s early adopter customer, it is all hands on deck.
The level of attention and service the startup provides has to exceed everyone’s expectations.
In the end, the customer has to love you, love the product and thank the salesman. Anything short of this is a failure.
Betting the Company
Partnering with a big company by taking their money and working with their salesforce and customers is a bet-the-company strategy.
It will take all of your resources to satisfy them. If you are successful, you’ve dramatically increased the value of your company. You are on the path to fast growth. Miss the mark, and you won’t get a second chance.