Are alliances part of growth hacking?

October 22, 2013

Most people familiar with early stage companies understand the concept of “growth hacking.” If you’re not, you can see one definition here but basically it refers to creative uses of product design and data to enable users to discover, use, and share new web sites, SaaS applications, or mobile apps.

So perhaps is a purist sense of definitions, alliances and partnerships are not part of growth hacking since they don’t tend to involve product modifications (other than into the partner’s site/product) or viral hooks.  Most of the best examples of growth hacks, like the example with Twitter onboarding where Twitter discovered that users were more likely to tweet and return if they followed five people, are product centric. BTW,  Twitter started making suggestions of who new users should follow.

But really, growth hacking is about getting new users with little to no marketing. So yes of course, alliances and business development is part of that, because alliances are about distribution. It’s a rather fine line between partnering with a company for distribution, and engineering it (like AirBnB did to enable its users to crosspost to Craigslist).

I think Brian Balfour captured a number of interesting examples of alliance hacks (like Match.com and Kayak) here:

http://brianbalfour.com/post/60293339476/complete-guide-growing-consumer-startup-partnerships

These examples are good ones, one generation removed from Monster partnering with AOL and MSN to power those companies’ Jobs portals.

In my view, startups absolutely should look at alliances to supplement their own organic growth tactics. But because of startups size and limited resources, they need to be even more thoughtful, strategic, and aggressive. I have a longer post on early stage Business Development, but here are a few tips:

  • You need to articulate why you matter to the big company. What’s in it for them?
  • You need to wait for the right time. Big companies don’t often create prove demand, they fulfill it. In other words, you need product market fit first before you go seeking partners.
  • You need to hold your partner’s hand. They are offering you access to their users. You need to be willing to do (almost) everything else. I agree with Balfour that you need an implementation team. For your partner, this is a product launch and you should treat it that way.
  • You should measure and modify your tactics quickly. Big companies lose interest if things aren’t working. They don’t have the same iterative approach that you will, and they don’t tend to tolerate “failure” as well.

There is also the important issue of who should take on alliances activity. Personally, I think it should either be the CEO or a dedicated business development person, preferably one who has been through a few battles and seen deals work and go south. I don’t think you want to risk your company’s reputation because your alliances person is learning on the job. Or worse, if you need to unwind the partnership, you don’t want to find out that your green biz dev person didn’t really understand the contract.

Lastly, if one or two alliances are moving the needle, I think it’s important to understand why. Do a periodic review, prioritize your efforts for current partners, and also for your future partnering activities.


Early Stage Business Development

October 19, 2012

Rob Go of Nextview Ventures had a blog piece about basic marketing for start-ups that I thought was pretty accurate and it prompted me to think about doing something similar for business development. http://robgo.org/2012/10/08/very-basic-startup-marketing/

So here goes, directed to startup founders and early stage CEOs.  What is business development for startups, really? You think you should be doing it but you’re not sure exactly what it is or means.

1. What are your objectives?

You are severely resource constrained, but partners and alliances can be a very powerful accelerator for your business. This is because you probably don’t have a huge sales team, and some potential partner already has the customers you want. By working together with them, you may be able to acquire those customers more quickly and without the need for a huge sales team.

  • Find channel partners to produce more revenue
  • Make your product more salable by integrating it with the other pieces customers will want
  • Find other products to sell along with yours (you control the customer)
  • Find an acquirer (usually starts with one of the above), also called “date to marry”

2. Who is your team? Do they have the skills? Do they have the time? How are they compensated? Many times, CEOs ask sales people to take on this task and there are a number of reasons why this can backfire. It can also work great if you carve off dedicated resources, give them a different time frame (business development deals take longer than other deals), and a different compensation plan.

3. Prioritize your possible partners

There are a ton a possible partners out there, and your board and advisors will be throwing more names at you (“You guys should partner with XYZ Corp.”) Be brutal in prioritizing based on the factors that mater most to you, either revenue impact, market share, brand name, etc.

4. Outreach- like a sales pitch

This IS sales, so prepare like it. Get a warm intro to the partner if you can. Know what your value-add is to the partner and what your company will do for them. Do your homework. Have a special pitch prepared that is different from your normal pitch.

5. Structure

Start with a basic term sheet, but be conscious that you may want to replicate this so be wary of highly beneficial terms like exclusivity, equity, market standoffs, “most favored nation,” and the division of effort between the two companies required to get the products to work together

6. Tools & Process

Know how you plan on tracking the leads that come in, either your system, their system, or both. You may need to change your CRM or other tools.

7. Revenue generation

You may be joint-selling, but most likely one company will be primarily responsible for turning leads into paying customers. Whichever that is will need marketing and sales support, product marketing, training, pricing, dispute resolution, etc. They will need a “go-to” person or people for all of these things. Typically this is a Relationship Manager. It may be the same person who closed the partnership, but it may not. This “down stream” activity is THE key difference between BD and sales and why great BD people can wear so many hats.

8. Assessment

How is the partnership doing in generating awareness, leads, and revenue? How much has each party invested? Has each party done what they said they would, when they said they would?

9. Rebalancing your efforts

Periodically, it makes sense to think through your biz dev strategy and look at all of your partners. Certain partners will be more important than others. Make sure you treat them that way and be prepared to terminate those that don’t perform, or at least to allocate fewer resources to them.

Done right, business development can be a huge accelerator to early stage companies and provide important leverage to your overworked team.