Profits and Perils of Partnerships for Start-ups

I recently gave a presentation to a group of entrepreneurs, students and faculty at Texas State University called “Profits and Perils of Partnerships for Start-ups“.

I was lucky enough to faciliate a couple of members of the Healthlaunchpad Connect community, on this topic. In a recent collaboration session, Brant Roth and Chris Bell gave an excellent talk on the topic. I expanded on their insights about partnerships and structuring agreements.

You can watch the full presentation from Texas State in the following video.

Summary

Partnerships can be one of the most effective strategies to accelerate growth and profits but they are hard to do well.

I covered:

1. The benefits of partnerships
2. Types of partnerships to consider
3. Challenges in making them successful
4. How to approach partnerships

Benefits of Partnering

• Staying focused
• Reaching inaccessible customers
• Scaling revenues
• Cost reduction
• Scaling supply chain
• Competitive advantage
• Improved or new customer experiences
• Risk mitigation
• Cost reduction
• Innovation

Categories

Business Agreements

Help you and your partner grow your revenues or lower your costs. Examples include:

• Hubspots’s agency, sales and integration partnership program
• The sales and marketing agreement between Abbot India and Zydus Cadalia
• The agreements between Toyota and Aston Martin and Toyota and Lotus
• The way Texas Instrument supports hundreds of technology firms
• How Bank of Ireland has oursourced elearning to Accenture

Technology Agreements

Help you and your partner improve your product offering or close a technology gap. For example:

• Coca Cola and Heinz’s partnership to create more sustainable bottles
• The agreement between Kaiser Permanente, greatcall and Best Buy to create the lively product for serniors
• Cerner and Induction Health’s deal to create a better patient engagement solution in UK
• Uber and Spotify’s integration of music and ride sharing experiences
• Apple and Nike’s strategic partnership to create Nike+

Strategic Agreements

Long-term, broad reaching partnership, including a new corporate structure.

How to Structure Agreements

Typical Challenges

• Lack of alignment
• Loss of control
• Lack of executive support
• Commercial or financial quarrels
• Interpersonal issues
• Customer ownership
• IP issues
• Exclusivity

Success Factors

1. Crawl Walk Run
2. Start with referrals
3. Have Mutual Value Proposition – “What’s in it for them?” goes first
4. Get clarity and definition on:
   • Value proposition
   • Deal structure
   • Process (e.g. lead registration)
   • Roles and Responsibilities
   • Escalation
5. Get executive buy-in
6. Have reviews
7. Develop a process, strategy, evaluation criteria

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