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Michael B. Fishbein

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How Startups and Large Companies Can Form Valuable Partnerships

Posted: 09/17/2013 9:31 pm

Below is a summary of an interview I did with Scott Pollack. Scott has over ten years of experience in business development in fortune 500 companies and startups. Currently he does digital partnerships and new product development at American Express. Scott also blogs, teaches, and will be publishing a book on business development. In the interview, Scott shared a lot of great advice relevant to both startups and large companies.

What reasons are there for a startup to partner with a large company?

Partnerships are just one potential avenue for a startup to achieve value. A startup could build a new product, market to new customers, buy google adwords, etc. to achieve value. The challenge of business development and partnerships is evaluating needs to prioritize based on strategic objectives.

If a startup lacks product development capability, partnerships can allow it to leverage someone else's assets. An early stage startup may lack customers, and could use partnerships to gain distribution. There are many ways for a startup to increase it's value, and there are many forms of value that can be gained through partnerships.

What can a startup do strategically to enhance their ability to form partnerships with large companies?

A startup must have some form of value to bring to a large company. The form of value will depend on the business and the stage of the company. For example, an early stage startup may not have many customers to offer to a large company, but they may of other forms of value such as an innovative technology that could help a large company with their product offering. The challenge is that both sides need to see value.

What can a startup do tactically to initiate and form partnerships with large companies?

A startup must appeal to a larger company on two levels. First, the organizational level. This means appealing to the company's current strategic objectives. The second is the Individual level. The startup must find someone within the larger company to establish a relationship with and make them a champion for the deal.

After determining which large companies have the assets that would help the startup achieve value, it must determine 1) what unique asset or value it has that will be sufficiently valuable to a large company and 2) who it is within a large company that will be personally motivated to do a partnership based on their role. Through researching press and networking with people that know the company, a startup can learn who they should reach out to or get introduced to at the individual level.

The opportunity should be presented not just by pitching, but by proposing collaboration. The startup must be extremely knowledgeable of what's of value to the potential partner and must present clearly and explicitly.

What reasons are there for a large company to work with a startup?

There are many reasons for a large company to form a partnership, and with a startup specifically. A startup may have a unique technology that's of value to the larger company. Startups can help a large company's brand by giving the large company the image of being innovative. Large companies often have certain cultures and processes that are necessary but can cause the large company to move slower than a startup. Therefore the speed at which a startup can operate can be of value to large companies.

The decision to and reasons for partnering with a startup depends on the company's strategic objectives. They're not always constrained by cheapest or fastest -- they may be more focused on owning a market for a long-term, in which case the larger company may decide to build the business internally so they can maintain control. Partnerships can also be the test a relationship that can lead to an acquisition.

What can a big company do to more effectively source partnership opportunities with startups?

Startups have tremendous value in terms of innovation, culture, brand, etc., however they are sometimes perceived by companies as being risky. Empowering employees at all levels to feel like they can take those risks is an important initiative. Working with startups should not be perceived as a risk or gamble by employees. Big companies can encourage people to be at events, sponsor events, etc. to engage with the startup community. Such an initiative must begin at the top.

 

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