5 Types of Partnerships to Avoid as Startups

 In Blog
August 16, 2014 – By Sean O’ Sullivan
In “The Departed,” Alec Baldwin schools Matt Damon on the public signals that marriage creates: “A married guy seems more stable…” Young companies are often all-too hungry to hop to the altar with entrenched players. While these partnerships can represent access to customers, and signal validation for your product, market and business, founders who rush into such marriages take big risks.Everyone enters partnerships with great intentions. It isn’t said lightly that the road to hell is paved with good intentions. Thirty years of deal making has also taught me that most partnerships lead to nothing. So what do you need to watch out for to avoid these time wasters? Here are five types of partnerships that can land you in the doghouse:Money Talks. Partnerships without financial commitments are meaningless. Do you have a partnership that signals limitless opportunity? Take off your rose-colored glasses. Put some limits on it, and if/when the relationship doesn’t deliver on those limits, stop pouring resources into it. Think about six months in, what will be the revenue associated with this partnership? Will it be paid directly between the partners or harvested out of third parties? If the revenue isn’t there, and it’s not your fault, then it’s time to admit it’s not working and move on.See what other startup mentors have to say about partnerships.Neck in the Noose. Unless there are human beings whose reputation, job and compensation are at some level of risk in a partnership, you’ve effectively got little more than a cute press release. Each partnership you close should have one or more named individuals responsible for each party. Have an executive contact and a technical or operational contact.

Why Do This? Make sure that there are financial commitments between partners if you can, but money by itself doesn’t make the effort strategic. Is it really worth devoting your precious development resources to a new platform for short-term cash? Is it strategically obvious that supporting another mobile platform will work for you, the small app developer?

Tails I Win. Partnerships with all the risks on one side are abusive. Over-eager startups frequently trip over this en route to the altar. Large companies know they have the upper hand when dealing with startups, and it is in their best interest to get the best deal they can. So they’ll push, quite hard, oftentimes. Like any relationship, a partnership here must be mutually-beneficial. It needn’t be fair or reasonable per se, but it needs to clearly benefit both sides. A healthy partnership won’t put all the risks and/or costs onto the startup and won’t cede all the control and/or power to the larger partner.

Keep Your Enemies Closer. Partnerships with future enemies are surprisingly likely. Competitions ebb and flow, but it is surprisingly common to have highly productive partnerships with your frenemy. Yes, Microsoft did betray Apple when it came out with Windows; and Google betrayed Apple when it came out with Android; and Samsung betrayed Apple when it came out with the Samsung Galaxy. But despite all these enemy moves, Apple is still dependent on Microsoft for its MS Office for its Mac customers, uses Google searches, maps and routing on its laptops and mobile devices, and incorporates Samsung chips into every mobile device it ships.

Despite my dour cautions, do partner. Don’t give up on partnering just because of the potential downsides. Keep your partner engaged and responsive through a respectful and meaningful strategy.

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