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.

May 17, 2010 Posted by | Venture Capital | , , , , | Leave a comment

Entrepreneurs, What is Your Start-up Company’s “Value-Added” Proposition?

Simple questions from venture capitalists can be the most difficult to answer for entrepreneurs. Why, because they often require both a strategic vision and specific insights to the long-term nature of all aspects of the market, your competitors, and your customers.  This requirement often eludes entrepreneurs as more often than not they are tactically focused and do not really have a strategic vision for their start-up company and the long term business opportunity their investment represents to their customers and to these same investors.  Therefore, when asked “What is the value-added proposition of your start-up company?” they often stumble and in some instances cannot answer this most simple of probing questions.  Why, because they have not taken the time to really evaluate what they are trying to offer the market and their end customers. That is, “Why are customers going to buy your product?”  As an entrepreneur, there are four tenants that you need to address, which will provide you the necessary insight to address the issue of defining the “value-added” proposition for your start-up company.  This article addresses each of these tenants and their ultimate importance to the potential success of your start-up company’s product offering to the market and its end-customers.

What are the Strategic Opportunistic Needs of the Market?

When developing a product offering you need to start from the markets.  Specifically, you need to address the “strategic opportunistic needs” of the market.  That is, what is the “problem” or “need” you are solving.  If there is no “problem” or “need” to solve, then there is no particular reason for customers to buy your product.  Whether it is lower costs, lower power consumption, higher efficiencies, or better service, etc., there needs to be a strategic opportunistic customer need that you are addressing with your start-up company’s product offering. Therefore, to determine your value-added proposition to the market place and the end customer, you need to definitively identify and solve a market or customer need that is currently not being addressed in the market.  The basis of this strategic opportunistic requirement needs to be based on a real assessment of the customers and the market. Anything less, will not cut it, as customers are very discerning, and if they do not see a definitive need to buy your technology, product or service offer they won’t.  Therefore, take the time to define the needs of the market place. Write these needs down on paper, and verify them by talking to a number of potential customers. You will then be able to appropriately define the “strategic opportunistic needs” of the market and one important tenant of the value-added proposition of your product offering.

 Do You Have a Long-Term Competitive Advantage?

Investors need to know that as a start-up company that you have a long-term competitive advantage in the market. This is usually accomplished through the development and subsequent patenting of certain intellectual property as it relates to your start-up company’s technology, product or service offering. This intellectual property, as defined, needs to differentiate your start-up company’s product offering in the market, and at the same time provides significant value to the long-term competitiveness of your technology, product or service offering.  Remember, investors are looking to create long term value, so that they can ultimately cash-in by either selling your company to a third party or going public (not too often these days).  Therefore, you need to create and protect your value-added proposition with patented intellectual property.  Doing so, will provide your start-up company with a long-term sustainable competitive advantage and allow your investors to earn substantial returns on their investment.

What is the Competitive Positioning of Your Start-up Company?

Do you know the competitive position of your start-up company? More often than not, entrepreneurs do not really understand the value of creating a “unique” competitive position in the market.  By creating this competitive position in the market you are differentiating your start-up company in the market and at the same time creating a value-added proposition to your customer base.  Whether it is a lower cost solution, or a unique service offering, you need position your start-up company and its technology, product or service offering as differentiated from your competitors. Apple does this well with their entire line of product offerings.  By offering unique operating systems and value-added user interfaces, they provide a differentiated end-user experience.  Hence, Apple has developed a “value-added” and unique competitive position in the market.  As such, they are able to charge more for their products, as the customers believe that there is value in the Apple product offerings and the overall end-user experience. Therefore, as a start-up company you need to develop a unique position in the market, such that your customers believe there is significant and unique added value in your product offerings when compared to your competitors.

How Do You Define your Start-up Company’s Product Offering?

How you define your start-up company’s product offering can add significant value to your customers and their needs. As an example, many times there is significant value to your customer base in how you deliver your product to the market.  For example, take Netflix and the movie rental industry. By developing a new delivery channel for a “generic” product offering, the home movie rental market, they have been able to provide substantial “value” to their end-customers, and at the same time differentiate themselves in the market.  Therefore, take the time to properly define your start-up company’s product offering. Make sure you are doing this in the context of developing a differentiated product offering for your target customers and the market.  This will allow you to develop a product offering that is defined by market and the end customer needs.  Solving a customer’s problem by appropriately defining your product offering to the market can be a key to adding significant value to your end customer and at the same time differentiate your product offering in the market.

Creating a “value added” proposition for your target market and its customers requires vision and specific insight to the long-term nature of all aspects of the market, your competitors, and your customers. To do this, as an entrepreneur you need to address four tenants, including: identifying the strategic opportunistic needs of the market, determining your long-term competitive advantages, developing a defendable competitive position, and determining your unique product configuration.  These items together will allow you to develop a “value added” proposition to the markets you are addressing and your end customers.  This will also provide your potential investors with the necessary insight to develop a quick understanding of potential for success of your start-up company and its product offering in the market.

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.

October 12, 2009 Posted by | Business Planning, Venture Capital, venture finance, Venture Funding | , , , , , , | Leave a comment