THE BLOG
12/13/2016 02:27 pm ET Updated Dec 14, 2017

The Strategic Partnership: The Alternative to Venture Capital

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The quintessential problem all startups have is how do potential users of what they do (whatever it is) find them on the internet?

"You have a basic marketing problem," was the matter-of-fact way it was explained to us at a meeting.

I looked at my co-founder and he looked at me... we almost started to laugh... exactly!

Now, there is no easy way for people to find out about you; to drive people to your site, it takes a ton of work.

For many startups, the road to El Dorado is the venture capitalist. While there are many, many types, the basic idea is these VCs will provide the capital a startup will need, not so much to cover overhead, but to blow it out to the marketplace, or, at the very least, to get you noticed. The problem is this is a slippery slope. You give the VC equity (a piece of your company) in exchange for some money. Maybe you have some taste of success, but there is always the need for more money, and more money means giving up more of your company to "blow it out."

While you would always want 10% of something rather than 100% of nothing, you can see how this could deplete your equity rather fast.

My partner and I met one such young man at a conference. He had a snarky personality when we described what we did. As we realized we were each in a different space, he loosened up. His exhausted demeanor bespoke what we were already feeling. He was beat down. He said, "Try to avoid the money if you can because eventually your company does not become the company you were envisioning when you had that great idea." It was a cautionary tale as foreboding as the Ides of March.

And that's why we believe, if you can find one, a strategic partnership may be the best avenue to pursue. Here's a real nice primer I read: 4 Tips to Go Further, Faster with Strategic Partnerships

In a perfect world, your strategic partner should bring expertise in a field that you do not currently have.

What are YOU getting?

By forming a strategic partnership with a larger brand than you, you obtain "street cred." The idea that a large company has vetted you and your system and they think it would be a worthwhile venture for them.

You also get their expertise. Presumably, they have been doing what they are doing for a long time, or at least longer than you have. They will also have much greater resources to do the expertise that you need, the economies of scale to do it more cheaply, and the purchasing power should you need to buy things, like ad space.

What do THEY get?

They get an investment. They have taken the time, done their market research, and see a reason to take a calculated risk on you. If you are successful, they profit from the investment made in you. If you are successful, they will also get you as an account (in whatever services they are providing) for the future. i.e. a continuous income stream through services rendered.

So, while all strategic partnerships are different, when structured properly, they are a win-win scenario for both companies involved.

This post originally appeared on The Whole Magilla and was written by Chris Meyer, co-founder of MagillaLoans.com.

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