Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

Three Things to Consider When Developing a Successful Strategic Partnership for Your Start-up Company

Strategic partnerships can be extremely beneficial and profitable for both large and small companies.  In addition, for start-up companies, a well conceived and executed strategic partnership can be the difference between ultimate success and probable failure in the market place.  Accordingly, strategic partnerships are invaluable to start-up companies as most if not all of these same companies are resource limited.  This can affect many of the necessary requirements for success in the market, including their product offering, go to market strategy, availability of development resources, as well as their ability to establish a market presence and create market traction.  As such, a well conceived and executed strategic partnership can create significant value for your start-up company. It can also provide high levels of value for your strategic partner, large or small.  To develop a successful strategic partnership, as a start-up company you need to consider three things, including:

  • Does your strategic partnership help to complete your product offering?
  • Does your strategic partnership enhance the value proposition to your customers?
  • Is your strategic partnership a “win-win” for both parties?

If you answered “yes” to these three questions, you are well on your way to a valuable and successful strategic partnership.  On the other hand, if you answered “no” to any of the above questions, you should reconsider entering into this strategic relationship, as it most likely will not ultimately provide your start-up company with the necessary success you desire in the market.

Does your Strategic Partnership Help to Complete Your Product Offering?

As a start-up company, more often than not you do not have all of the necessary resources to develop the complete product offering you desire to bring to the market.  Accordingly, you will need to look for potential strategic partners to help complete your product offering.  A simple example of this would be a strategic partner that offers “protocol stack” software to complete your start-up company’s “chipset” hardware product offering.  More often than not, the cost of developing a protocol stack can be significant to a chipset hardware vendor. On the other hand, in order to have a “complete” product offering in the market, your start-up company requires a proven, bug-free protocol stack that will allow your customers to drop the chipset in to the end product application design.  The value of providing a complete “protocol stack/chipset” offering to your end customers can differentiate your product offering in the market and at the same time accelerate your end customers development time and allow them to get their end-product(s) to market much faster.  Therefore, as exemplified here, looking to identify a strategic partner to help “complete” your product offering can provide your start-up company a significant competitive advantage in the market.  It also significantly reduces your time to market and overall development costs.  So, as a start-up company looking to identify potential strategic partners that can help “complete” your product offering can provide you with s significant short- and long-term advantage in the market place.

Does Your Strategic Partnership Enhance Your Value Proposition?

One item to step back and consider before you enter into a strategic partnership, with any company, large or small, is the ability for the strategic partnership to enhance your start-up company’s value proposition to your customers and the end market.  Often, when considering your start-up company’s value proposition, it is best to be honest with yourself and put yourself in your customers’ shoes to better understand the reason(s) they would consider buying your technology product or service offering.  If your “value position” is not significant enough, potential customers will pass on your product offing, leaving your start-up company with the inability to secure traction in the market.  On the other hand, if you can identify a strategic partnership that can not only change your start-up company’s value proposition, but also enhances it to increase its overall attractiveness to your customer base, you have increased the value to your end customers and at the same time enhanced your ability to secure market traction.  So, when considering a strategic partnership only consider those strategic partners that can enhance your start-up company’s value proposition. This will provide significant value to your start-up company and to your target customer base and at the same time also ensure higher levels of success in the market place.

Is Your Strategic Partnership a Win-Win for Both Partners?

Finally, a strategic partnership needs to be a “win-win” for both parties.  If not, one party will feel slighted; that is they are bringing more value to the relationship than they are receiving in return for their contribution to the strategic partnership.  As an entrepreneur of a start-up company you need to go into any potential strategic partnership with your eyes wide open.  As such, you need to work to construct a strategic partnership that provides “significant” and “fair” value to both parties according to their contribution to the end product being offered to the market.  If you do not do this, your strategic partner will not see the relationship as fair and ultimately not provide their full effort to make it a successful partnership.  This type of strategic relationship is “doomed” from the beginning, and will ultimately cost you more in time and energy to manage the strategic relationship than you will actually get out of it.  Therefore, it is very important that you initially construct a strategic partnership that is fair upfront to both parties and creates a win-win atmosphere in both perception and reality.  This will provide you with short- and long-term success in the market.

Successful strategic partnerships can be the life-blood for start-up companies.  With limited resources, these same start-ups often need to look outside of their companies to create and bring a successful technology, product or service offerings in the market.  To create a valuable strategic partnership start-up companies must identify a potential strategic partner that can help to complete their product offering, enhance their value proposition to their customer base, and creates a win-win for both partners.  If you are successful in accomplishing this, your start-up company will substantially enhance their potential for success in the market both in the short- and long-term.

This information was taken from Robert’s new book: “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies”.  Available at www.amazon.com.  For more information on the book go to www.carlsbadpublishing.com.

Advertisements

May 17, 2010 - Posted by | Venture Capital | , , , ,

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: