When partnerships should pursue partnerships (hint: rarely)

I wrote about the challenges of partnerships last year and I’m going to have another go at it today. Over allocating resources to partnership deals is one of the easiest and common mistakes that startups make.

This is from the A Founder’s Notebook:

Startups should say no to 99% of partnership opportunities. Most partnerships never go anywhere and don’t make sense for the startup to invest significant effort into the relationship due to being time and money constrained. Partnership opportunities do make sense when there is significant skin in the game on behalf of the partner (e.g. large up-front fees) or a super minimal way to work together (e.g. less than 20 hours of work to get something out the door that is useful).

You might be thinking, ok, that makes sense, but BigCo A wants to partner with me and it could be big. They won’t have any significant skin in the game, but their people are dedicating a lot of time to our discussions, so I’m sure it will be ok.

I’m afraid that it probably won’t. The important point to note here is that big companies are resource rich and spend a lot of time looking for new opportunities around the edges of their business. That’s in stark contrast to startups which are resource poor and hopefully laser focused on the core of their operations. This asymmetry leads many small company leaders to over-estimate the significance of senior large company execs spending time with them.

Big company partnerships are a bit like big game hunting. They promise massive returns on little work and the thrill of the chase is fun too. But relying on closing a big partnership is like making a big kill – it may take years and years or may not come at all. Moreover, it’s hard to remember that the hunter or company you know who landed their prey was probably just lucky.

  • http://damonoldcorn.com/ Damon Oldcorn

    You have to know what you are dealing with. Following your theme, there is a certain naivety from start ups as to what they will face in partnering with global players. As I mentioned here recently http://damonoldcorn.com/2015/02/09/someone-left-the-cake-out-in-the-rain

  • http://www.theequitykicker.com brisbourne

    Exactly. Good post Damon.

  • Aziz Morsly

    I built a small framework to help decision making on strategic partnerships. It has proved to be very useful, but I’m sure it can be refined and improved with others’ experiences. Let me know what you think of it. http://slidesha.re/1EluazW

  • Steven Hess

    I love this post. Most of us are happy to engage in an open, collaborative discussion with intelligent, interesting people; who knows who you might meet or what you might learn? However, my sense is that the resource rich are usually more risk adverse (more to loose with change) and the resource poor, very much less so (more to gain with change), the asymmetry you mention is also true of an appetite for risk. In many ways engaging in partnership discussions where there is little to loose means in reality that there is also little to gain directly. The risk and rewards of any partnership really need to be aligned.

  • http://www.theequitykicker.com brisbourne

    Thanks Stephen

  • Marco Dominguez Bonini

    It is my job to connect startups to my company and I have to agree with your comments, in your experience, what would be the best way for a big company to engage with startups?

  • http://www.theequitykicker.com brisbourne

    Hi Marco,

    The best thing you can do is have a very clear idea of what you are trying to achieve and be up front about it.

  • Marco Dominguez Bonini

    Thanks Nic.

  • http://twitter.com/ramin Ramin

    Our experiences confirm what you say here. Still, a lot of founders seem worried to be missing out on a potentially life-changing opportunity when a partnership is offered. Here’s a simple way to keep the door for a potential partnership open, without investing time/resources into it before there isn’t some validation that the partner will actually do something that’ll benefit you: http://blog.close.io/partnership-hack

  • http://www.hubblehq.com/ Tushar Agarwal

    Nic, whilst I agree with what you say with regards to startups trying to partner with larger corporates (we’ve experienced this problem ourselves with some huge institutions), I don’t agree when it comes to partnering with smaller firms.

    As a B2B marketplace startup, we have the challenge of simultaneously marketing to the property world and the SME market.

    Our stance on marketing to SMEs has been to focus on one particular industry vertical at a time and build key partnerships with influencers / community organisations there. This has been hugely successful for us so far, as we benefit from referral traffic from their sites, aligning ourselves with an already established brand in that community and obtaining a really targeted method of distributing our content & product.

    Our stance on the property side has been to partner with property companies specialising in particular geographies that we are focused on and incentivising the partner (on a company, as well as individual level).

  • http://www.theequitykicker.com brisbourne

    That’s a great idea. Thanks Ramin.

  • Carlos Vera

    Dear Mr. Nic Brisbourne,

    The reason why I’m writing you this message is because I would like to have the opportunity to pitch you a revolutionary idea for a phone app and/or game that could potentially increase people’s awareness about your company all over the globe. So without further ado, here’s my idea:

    “By creating a voice recognition application with the characteristics of a 3D video game, we can help intellectual/adventurous users all over the world learn new languages. In this app, users would have to go through simulated real life experiences where they will need to complete specific tasks in order to fulfill the main character’s immediate intentions, goals, desires and/or needs. Users will be required to verbally interact with the game in order to complete the tasks. This way, they will be able to practice and/or make use of the language that they’re trying to learn in real time. It’s important to point out that this app/software is nothing like the Rosetta Stone Programs. For starters, users will be able to use this new app on any of their personal electronic devices. And once they access it, they’ll have the option to choose from a wide variety of languages, dialects and cultures right off the bat. For instance, if I’m an English language student using this app for the first time, I would be presented with the option to choose an avatar’s sex between female and male. Then I would have to choose the language I’m trying to learn (in this case, English would be the selected language). Then I would have to choose the dialect between American and British. Finally, I would have to select the level of English in which I would like to practice. As soon as these quick selections are made, the game will start by giving me instructions about my avatar’s tasks. The game would then take my avatar directly into an appropriate 3D country and/or environment, where I as the user, would be forced to use the English language in a perfectly simulated real life situation. An example of a real life situation could be a time at an airport where the avatar’s task would consist of talking to an airline’s representative in order to purchase a plane ticket to a particular destination. Another could be a time at a coffee shop and/or restaurant where the avatar’s task would consist of talking to a cashier and/or waiter in order purchase a particular type of coffee and/or item off a menu. The investment of emotional energy that will be required by users with every command, order, request and choice within the game would automatically help them make the appropriate language associations in their brains. This has been proven by many linguists over the years to be the most effective method/technique to the learning of new languages. This app will certainly allow users all over the globe to have access to a world class learning technique right at their fingertips. And most importantly, it would put any startup business’ franchise out on the map as one of the most innovative, most educative and most productive companies.”

    I also wanted to let you know how much it actually means to me to have the opportunity to help other people learn new languages. As a student of the English language myself, I understand the difficulties of learning a second language. On the other hand, I’m also very well aware of effective psychological and practical methods/techniques that can be used when studying new languages. For instance, I have learned through personal experience that in order to overcome speech insecurities, students need to realize that native speakers of any language don’t fully place their attention on the pronunciation of words. They rather place most of their focus on the viewpoints, mindsets, feelings, emotions, attitudes, intentions, intensity of tonality, logical associations and abstract symbols being transmitted/conveyed by the messengers. In addition to this, students need to understand that languages are made up of and influenced by culture. And if they paid close attention, they’d find that culture is directly influenced by environmental elements. Therefore, we can certainly make breakthroughs in the educational field by creating an app/game where users can experience firsthand what it’s like to live in an environment where a specific language is spoken. By giving users a more natural and realistic 3D experience, we’ll be hitting the right spot in their brains. And this is exactly how we can get our intellectual users to focus on areas that will ultimately help them understand and use their new language rather quickly. I’m one hundred percent confident that with your resources, business expertise and networking capabilities, this app/game can be brought to life in no time. Needless to say, I’m really hoping that you and your team of professionals can properly review my idea so that we can someday work together to materialize it into physical form 🙂

    I would like to make clear that my plan is to someday start a company called L.X. which stands for Learning Experience. I firmly believe that my project has the potential to be “HUGE” and to take the world by storm. I’m also thinking about manufacturing and launching several products using the same format, platform and/or software that I mentioned earlier. My idea for Product#1 is called L.L.X. which stands for Language Learning Experience. This is the phone app that I described above. Product#2 is called B.L.X. which stands for Business Learning Experience. This application as well as the rest of my products will follow the same pattern and/or learning style than the one used in L.L.X. The types of simulated real life experiences and content will clearly vary in each of the products. Depending on the subject that we’re tackling, we’ll create simulated situations in 3D where users can learn psychological techniques that will help them deal with the challenges that come with the territory in each context.

    The truth of the matter is that most successful businesses make their money off people’s insecurities and/or weaknesses. Therefore, by presenting solutions to the collective problems/frustrations that people face nowadays, we can definitely create a global empire. L.X.’s handful of products/phone applications will be used by anyone and everyone in the entire planet because they will be the exact solution to many of their personal issues. For instance, one of the apps I was thinking about is called S.L.X. which stands for Seduction Learning Experience. In this app, we can teach shy males and/or females how to interact with the opposite sex by presenting them with simulated real life situations in 3D where they’ll be forced to socialize. The bottom line here is that people learn things by doing them and taking action. This is exactly why shy individuals never learn to attract the opposite sex. They basically never attempt to learn how to socialize effectively because they’re petrified of rejection. So it goes without saying that my company will literally make the world a better place by providing people all over the globe with applications that they can use “anytime, anywhere” in order to improve any areas of their lives.

    Furthermore, I’ve also come up with additional excellent mobile app ideas. Hopefully you end up liking my ideas a lot to make you want to help me implement them and materialize them into physical form. As you can tell, I’m really looking forward to catching your interest on these projects.

    THESE ARE MY ADDITIONAL APP IDEAS:
    1) “An app that measures people’s energy levels as well as their health, mental, emotional, psychological and physical states.” I believe doctors can tell a whole lot about a person’s health conditions simply by measuring their heartbeats. Apple’s new watch comes with a technology that monitors people’s heartbeats 24/7. Therefore, I’m 100% sure that any software development team can use Apple’s new watch technology as a platform to create entirely new apps like this particular one. By combining two or more existent elements, we can create new ones. Therefore, all that needs to be done would be to find someone in the medical field that is able to provide a software development team with intelligence as to what type of health related information can be gained from monitoring people’s heartbeats.

    2) “An app that will help the average person to compose their own songs. The app will come with a wide variety of music tones, beats, melodies or tunes. And it will facilitate ideas in the song writing process by showing up already written templates as well as words that rhyme with whatever has been previously written by the user. This feature could certainly help start and/or finish a song whenever the user is struggling to come up with ideas. Users can use this app for professional purposes as well as for fun.”

    3) “An app that allows musicians all over the world to connect with one another. The app can be extremely useful for beginning musicians and/or talented individuals seeking support from more experienced ones. A space where people seeking involvement in the music industry can interact with others that are already involved in it. This type of service can make it extraordinarily easy for people to build new music bands as well as an amazing support system. Needless to say, the app will simply provide a networking platform for all kinds of musicians all over the world to exchange information. As a result of these interactions, limitless amounts of successful businesses can be created in the music industry.”

    4) “An app that facilitates the process of trading stocks in the global market. Business people would certainly benefit from having a phone app that makes it really easy for them to buy/sell stocks anytime, anywhere.”

    5) “An app that lets people know how drunk they are. The app can test people’s level of drunkenness by either asking them to fill out captcha messages or by demanding the completion of tasks on a simple virtual 3D game.”

    6) “An app called ‘Party Partner’ A social network where people of similar interests can connect and arrange meetings to go out and party.”

    7) “An app that offers users who are unsuccessful in the dating scene a space where they can interact with one another. The purpose of this app would be to help its users figure out techniques to improve their own dating game. The hope is that in talking about their past failures with other lonely/sexually frustrated users, they can start to become aware of solutions, feel encouraged to change their old habits and ultimately overcome their long lasting fears of rejection. This app could be customized for men as well as for women, meaning that the men’s section would be completely different than and unlinked to the women’s. As a result of this, the app could also offer a paid/upgraded feature where users from one section can interact with users of the opposite sex/section.“

    8) “Research should also be done on whether or not social network apps for recovering cancer patients, cancer patient survivors, recovering alcoholics, recovering drug addicts, wounded veterans, handicap people as well as older folks have already been created. There could definitely be a market for that. And we would be helping people along the way by creating these types of support system apps. The possibilities are endless!

    I’d like to conclude by stating the fact that at the moment I need capital as well as legal advice on how to establish/register a company in the U.S. and/or the U.K. I’d also appreciate your guidance on how to get all of my ideas patented because I’m really concerned about other people stealing my project and/or dream. So whatever resources you can actually provide me with, I will be forever grateful with you from the bottom of my heart. I really hope you have a fantastically productive week!!!

    Thank you very much for your time to read this.

    Sincerely,

    Carlos Vera
    Contact Info: [email protected] / charlescv999

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