Guest Post: Startup Business Development 101

Holger Luedorf has been doing business development in the web/tech/mobile sectors for almost 15 years. He currently leads Business Development (BD) for our portfolio company foursquare. Holger has contributed a guest post with a bunch of great advice for startups that are just getting around to BD and what they should do and what they should not do. His views and opinions are his own and not those of foursquare.
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The Beginner’s Guide to Start-up BD: 15 Basic Rules

A lot of the rules below will seem like no-brainers to any seasoned business development manager, but I think it is worth putting them together in one list.  I hope that they will be useful for teams that are building up BD teams from scratch or to those start-ups without a dedicated BD team and in which for example the founders or others take on BD as an additional responsibility.  I don’t think this list is complete and I am planning to add additional rules over time.  If you have any direct feedback, please tweet me at @holger.

  • Create clear BD targets – This goes without saying, but it is worth repeating.  Without clear targets, a BD team will aimlessly chase deals and in the worst case have a distracting effect on the rest of the organization by creating deals that are not core to the company but take up valuable executive, product, and engineering resources.  Ideally, BD targets are a subset of the overall company goals (e.g. grow the user base, expand internationally, outsource a critical technology etc.) but they could also be outside the core company goals, like exploring alternative business opportunities, seeking M&A opportunities etc.
  • Structure your approach – Don’t just run off and randomly approach partners.  Once the goals are set, the first thing the BD team or person should do is set priorities in terms of who your ideal partners are.  This includes market sizing, market and competitive analysis, and a clear timeline.  If you are new to the industry you better start researching yesterday.  There is nothing worse than being pitched by someone who did not make the effort to understand your business and the challenges you are facing.  Secondly, you need to put a lot of work into figuring out how to approach these partners (more to that in point 3). Finally, you have to make sure you have all the necessary contacts to approach your target partners.  If not, work your network.  Cold calls are rarely effective.  Unless you come recommended by a trusted source, chances are very low that you will get someone’s attention.  Ideally, you have built up a ton of what I call “good karma” by helping out others friends in the industry in previous situation so that you can call in some favors and ask for introductions.
  • Solve problems, help partners reach their goals – This is one of the most critical business development tasks.  Partnerships never work when the benefits are one-sided.  In addition to helping you reach your own targets, you really have to figure out how your proposal helps the potential partner reach their goals.  Again, you would think this is a total no-brainer, but this does not seem to be the case judging by the large amounts of proposals that I get that are not really solving any of my company’s problems, or are so obviously mass-emails without any direct relation to myself or my organization.  I consider these proposals to be spam and will refuse even reading those emails once I realize what they are.
  • Be prepared, research the companies you want to partner with – In addition to a well thought out, mutually beneficial proposal, it is important to research your target partners.  To me this is like prepping for an interview.  Nothing worse than realizing that the person you are interviewing knows nothing about your company or the issues you are facing but at the same time tells you how “passionate” s/he is about your business.  Try to figure out what is top of mind for your potential partner. Is it facing a particular competitive thread, has it had a major product launch failure, has the team that you are speaking to experienced a recent change of executives etc. There are so many possible reasons that might make you want to tweak your approach, change your timing, etc.  It is always hard to know for sure what matters most, but I am a firm believer that solid preparation will help you produce better partnerships.  I am literally spending 15-20% of my work time researching the mobile, location, advertising space etc. to understand what our partners are most likely thinking of our product and our company.  This means scanning a lot of industry press and frequently meeting with peers to share information.
  • Understand the partner organization – This is related to the previous point, but focuses on a different aspect.  Especially when trying to partner with a large company, you want to make sure you have as complete of an understanding of the organizational structure as possible.   Who are the decision-makers, which teams or managers are heavily weighing in, who is responsible for the long-term execution of the partnership etc.  This organizational understanding will help you address the right people in the partner organization and help you identify additional contacts you might want to connect or back-channel with.
  • Build a hierarchy of touch points – Ideally, a start-up BD team does not act in a vacuum but is able to tap into various levels of its own managers and executives.  I am fortunate that our CEO and other execs realize the value we can drive via partnerships and that they support the BD efforts in building additional touch points between our company and that of certain partners.  For high-value partnerships, I always try to build a relationship on multiple levels, e.g. between the two day-to-day partnership managers, between the two VP-level managers responsible for those partnership, and ideally also between two or more C-level execs.  Having these multi-level relationships gives you more flexibility in dealing with your partners.  In certain scenarios bottoms-up approaches might work better and you want to convince the ground-level partner managers first but in other cases it might be better to pitch top-down knowing that an executive is passionate about certain topics and will strongly influence the decision making process of her organization.
  • Always be responsive – A pet peeve of mine.  I think it is disrespectful not to respond to companies or people reaching out for various reasons.  The only things I usually do not respond to are blatantly obvious sales pitches.  But if people are reaching out asking for jobs, with a partnership proposal, or some simple user feedback, I will always try to reply within 48 hours, sometimes much faster.  In many cases my answers are a short but polite “No”, but at least I acknowledge their message or request.  This is how I expect to be treated, and that is why I tend to spend a good amount of time responding to incoming email, twitter, and Linkedin messages, etc.  I am pretty sure that there are a lot of people who disagree with me on this, but that is my personal modus operandi, which I think this also creates “good karma”.  (side note: I do not connect with people on Linkedin unless I had at least a few minutes of personal interaction).
  • Don’t rush, don’t annoy – Always remember that you are working in a dynamic start-up while some of the bigger organizations you are trying to partner with have heaps of processes and check-points that decisions have to go through.  I remember from my time at two of those large organizations, in my case Deutsche Telekom and Yahoo!, that people in those organizations could get frustrated with impatient partners banging on their doors all the time.  My mantra: Pitch, have a solid follow-up providing additional data points or whatever else were the action points, but then let it sit for a period of time, before sending a reminder.  There might be legitimate deadlines that you want to be clear about but otherwise give your partners enough time to make their decision, at their own pace. Appearing over-eager never helps from my experience.
  • Can’t close? Regroup, analyze, and adapt if possible – Don’t beat a dead horse.  If a deal cannot get done, and there might be many good reasons, regroup and think why the partnership did not make sense for the potential partner.  Did you have the right partnership concept in the first place, were you talking to the right potential partners, did you talk to the right people in the organization, did the business model make sense for both parties etc.  There can be hundreds of reasons why a deal did not work out and it is important to really try to understand why and come up with an alternative approach.
  • Own your partners, not just deals – There is a fundamental difference between Business Development and Partner Management.  In many large organizations you have a dedicated BD team that flies in to negotiate and close a deal and then moves on to the next deal with another partner. On the other hand you have Partner/Account Management that identifies potential deals, brings in BD for potential negotiations, and then takes over full responsibility for the deal implementation and on-going partnership.   In a start-up with potentially no dedicated BD team or at best a very small one, you have to double-up and take responsibility for both the deal making and on-going partner management.  This can be tricky as in the BD negotiations you want to be able to get the best possible deal for your company and this can create friction with your partners, while as a partner manager you want to be as close to your partner as possible to understand what is going on and in order to smoothly execute the partnership. When BD is a separate function from Partner Management, it is easy to play good cop, bad cop.  The BD guys are the bad cops haggling over the best possible deal while the partner manger is the good cop back-channeling with the partner organization trying to create a positive, productive setting for the partnership.  In a start-up you really have to bridge those attitudes, which takes some experience.  In the end solid knowledge about the partner’s organization and goals will help you find that right balance.
  • Don’t over-commit, internally or externally – With many partnership opportunities, you only have a few potentially only one shot at getting it right, so it is critical that what you commit to towards the partner is actually something that your company can deliver.  This might be in the form of a product feature, launch timeline, support function etc.  Do not over commit as you run the risk of killing the short-term opportunity and long term relationship.  The same is true for internal commitment.  Make sure that deals are signed off by and have commitment from all internal parties involved. This includes the management team, which has to ensure that a deal is in line with the overall company objectives.
  • Build strong relationships with key partners over time – What goes around, comes around.  A strong working relationship with partners will help you build trust over time.  Don’t forget that industries tend to be very small so having a solid reputation for being a trustworthy, proactive interface and partner will help you when partners research you and your company.   Also keep in mind that many times, people will stay involved in a single industry over decades, so how good your relationship with someone 5 or 10 years ago was does matter in a new setting, maybe after that person joined a new company that is a potential partner of yours. Strong relationships with business partners will help getting deals done and in some cases can be the deciding factor that a decision-maker on the partner side chooses your company over another.  Following many of the points above is what creates such strong relationships.
  • Be present as a company – In some cases your start-up is doing so great that you are getting a ton of positive press and interest from companies who want to partner with you.  But these scenarios are rare and can change.  One factor that will support your BD efforts is that your company has a positive image in the market.  In addition to your start-up’s marketing & PR functions, BD can play an important role to represent the company to the outside world.  Participation in conferences or other speaking engagements, hosting university student visits, or providing quotes and insights to journalists are all things that can help your company and your efforts as a BD team.  Of course this should never become a time-suck for you and others on the BD team, but especially when it can be done mainly locally and without much travel involved, it can be a good way to make your company be “part of the conversation”, gain valuable market insights, and network with other people and companies in the industry.
  • Relay partner feedback back into your own organization – The BD team is usually one of the most outward facing teams in a start-up and as such you will be able to collect a ton of valuable feedback for company.  A lot of partner meetings generate a lot of information like product critique, observation of what the competition is doing, insights into what partners would like to see in terms of product innovation etc.  Make it a point to regularly pass this knowledge on to the respective teams in the organization as it will help educating the organization and making more informed decisions.
  • Make sure you have solid legal support – I have been fortunate to have had outstanding, dedicated lawyers to work with on deals in all of my past jobs and as well as in my current role at foursquare.  Having experienced legal support that really understands the big picture and has a good balance of risk-averseness and business acumen will help getting better deals done faster. Weak legal support can kill or create weak deals.