Just like famously long-lasting power couples -- Michelle and Barack Obama, Beyonce and Jay Z -- startups and big corporations often benefit by teaming up. However, these partnerships aren’t without their pitfalls. Letting each party maintain its own identity and independent priorities is tough, and keeping two very different -- and demanding -- partners happy in a long-term union takes relationship savvy. Having overseen several such partnerships, I’ve learned a lot. Turns out, much of what we know about healthy romantic relationships can be adapted to apply to these sorts of business partnerships, too. Here are five pieces of advice for startups looking for a corporate mate:
1. Don’t settle right away.
When looking for a corporate partner, don’t be afraid to be picky. According to KPMG, an average of 9.4 months elapses between the time a corporation and startup meet and the time they formally establish a collaboration. Most of that time will be spent on the corporation’s end, performing due diligence as well as getting buy-in from the rest of the organization -- but that doesn’t mean startups can’t do due diligence of their own, too.
Unfortunately, there’s no site with millions of detailed profiles and sophisticated match algorithms to help you find your perfect corporate partner, but you can still narrow things down by establishing some criteria for the type of partner you’re looking for. For instance, most startups want a corporate partner that’s relatively nimble and doesn’t mire them in complex processes and time-consuming bureaucracy.
Once you’ve identified a number of promising matches, you’ll need to go on some “dates” -- that is, some face-to-face meetings to find answers to key questions. For instance: How will your product or service be integrated into their company? What blank spot do you fill? How will you need to adapt your own processes to integrate with theirs?
2. Mind the age gap.
Just like the cliché of an older person dating a much, much younger one, partnering with an organization in a different phase of its life can create difficulties. If you’re a very young seed-stage startup, you may be able to help corporates explore nascent industries and technologies, but organizationally you may not be mature enough to make a real business impact for your partner.
If you’re at series A or later, however, you can provide more than mere inspiration. A corporate partner can take your cutting-edge product and market it through their trusted brand and experienced sales team, leading to lucrative value-chain synergy. If your CEO has some relationship experience already under his belt, even better; everyone appreciates a romantic partner who (refreshingly!) knows what he wants. Youth may be dazzling, but as a mid-stage startup, you might actually be more attractive to corporates.
3. Don’t be afraid to ask for commitment.
In every relationship, there comes a point where you have to commit. In romance, that means meeting the parents and signing a lease. In the world of startup-corporate partnerships, it means signing a formal agreement that includes a substantial financial commitment from the corporate partner.
That last part is important. Startups shouldn’t settle for flowery words or romantic gestures at this stage -- it’s time to put a ring on it, as it were. Offering $5,000-$10,000 for a proof of concept is not a real commitment; the investment (not necessarily financial, but rather priorities and resources) from the corporate business side has to be significant. If such a proposal is not forthcoming, but you’re ready to commit, it’s time to sit down with your partner and have a frank discussion about the future. Yes, being alone is scary, but it’s better than being strung along.
4. Communication is everything.
You don’t negotiate with your better half the same way you would with a used car salesman (not if you want to stay together, anyway), and you shouldn’t expect your corporate partner to negotiate with you the same way it negotiates with a vendor, either. It should want you, its partner, to grow and be financially stable, so cost-cutting is far from the only goal they should have with you.
Startups can urge corporates to keep things “operationally friendly” by keeping payment cycles short, contracts straightforward and policies realistic. Startups and corporations should also decide together which partner “owns” which customer. (Never attempt to “share” customers -- trust me, it saves you a lot of pain in the case of a divorce.) I’d also add, though it might be controversial, that I believe startups should keep full ownership of their own intellectual property, and not share it with the corporate partner.
But, while excessive bureaucracy can be an issue, lack of accountability can squash partnerships, too. At some point, startups should insist that someone in the larger organization with P&L responsibility oversees the relationship. The success of the partnership should be integrated into this “owner’s” KPIs as soon as possible in order to ensure they’ll devote serious resources to the project. Having one point of contact on each side of the partnership also simplifies communication, so you can avoid stressful spats on the level of importance of whose turn it is to take out the laundry. There need to be clearly defined and agreed upon “quantifiable” KPIs so that success can be measured and celebrated.
5. Breaking up is hard to do.
How many relationships coast along for years on nothing but inertia, conflict avoidance and fear of lawyers’ bills? Sometimes it is time to cut your losses and end a partnership.
To minimize the damage, don’t let things get to the point where untangling your operations becomes unbearably painful. Constantly monitor the health of the relationship from the very beginning, looking out for friction points and deciding on dealbreakers in advance. During the honeymoon stage when everything feels right and easy, draw up some worst case scenario paperwork to prevent logistical and operational knots that would be extremely hard to unsnarl in the case of a divorce. A carefully written partnership agreement can help avoid arguments over who owns IP and other snafus.What does this all add up to? A healthy partnership, as those who have experienced it will tell you, is hard work, but it can also be hugely rewarding. The same is true for startup-corporate pairings. Put in the effort to find the right partner and maintain communication and commitment through the inevitable ups and downs, and you will find yourself toasting many happy (and lucrative) years together.