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. —————————————————————————————-
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.
The Gotham Gal and I went out with friends last night. As can happen, we got talking shop towards the end of the night. And specifically we were debating the significance of Snapchat. The debate was about whether the feature that makes Snapchat special (you know your photos won't end up on Facebook) is the basis for a standalone app and business. My view, having lived through this debate with Twitter and Foursquare, is that mobile apps are features in the mobile OS and that Snapchat can and likely will own this feature in the leading mobile operating systems even though institutionalized copycats (ie Facebook who copies everything) can and will copy it. The irony that Facebook has copied a feature that is specifically designed to avoid Facebook is precious in and of itself.
But I digress. The thing I want to talk about here is the emergence of privacy as the defining feature of the next breakaway app on the social internet. What does this mean for where we are and where we are going? Is open social out and closed private in?
At times like this, I like to talk to my kids and their friends. Here is a typical college aged woman I know. She uses Twitter, Instagram, Cinemagram, Foursquare, iMessage, and Snapchat. And Facebook too. She uses each of them for what they are good for. Each of them is on her home screen – one click and she is sharing something with someone. Each app offers a different graph – that she has curated specifically for that app – and each app offers a different type of engagement. If it is something silly that she wants to share with a friend but would be mortified if it ended up on Facebook, its Snapchat. If it is something she wants out there broadly, it is Twitter. If it is something she wants to share with a wide group of curated friends, it's Instagram. She has a private Instagram account so she controls who follows her there. She is a sophisticated user of social media. She was on Facebook in middle school and has grown up with this stuff. She knows how to use social media and she adopts whatever is useful to her. Snapchat is useful to her. Privacy is an important feature at times and she is happy to have an app with that as the central value proposition.
So that is my way of saying that I think privacy is an important feature and kudos to Snapchat for figuring that out. Further they invented a mode of engagement (the photos self destruct) that is new and novel. And the result is they are on the home screeen of millions of mobile phones and that number is growing by the day.
I expect we'll see a rash of copycats and other approaches to leveraging privacy as the central value proposition in the coming months. I am not sure that is the right thing to learn from this though. I think the right thing is to think about what other features are missing in the mobile OS and figure out the right mode of engagement to implement that feature. That is what Twitter did with status, Foursquare did with location, Instagram did with photo sharing, and Snapchat did with privacy. That got each of them on the home screen. Figure out what the next thing is.
I wrote the Mobile First Web Second blog post a few years ago. In that post, I talked about apps that were designed to be used on mobile primarily with the web as a companion.
There have been a number of startups that have taken that approach and done well with it. Most notably Instagram, and also our portfolio company Foursquare. It has become a bit of a orthodoxy among the consumer social startup crowd to do mobile first and web second.
All in all, mobile service apps turn out to be a horrible place to close viral loops and win at the retention game. Only a handful of apps have succeeded mobile-first: Instagram, Tango, Shazam, maybe 2 or 3 others.
You have an entirely different onboarding story on the web. You can test easily, cheaply, and fast enough to make a difference on the web. You can fix a critical bug that crashes your app on load 15 minutes after discovery (See Circa). You can show 10 different landing pages and decide in real-time which one is working the best for a particular user. You can also close a viral loop: A user can click an email and immediately be using your app with you. You can’t put parameters on a download link and people don’t download apps from their computer to their phone. Without the barrier of a download + opening the app to try your product, you can prove value to the user immediately upon their first impression, as is with Google. In addition, the experience of signing up for a service is superior in every way. Typing is easier. Sign-up with OAuth is faster. Tab to the next field. Provide marketing alongside sign-up as encouragement. Auto-fill information is a feature in every browser. The open eco-system of the web and 20 years of innovation has solved many of the most difficult parts of onboarding. With mobile, that kind of innovation is lagging significantly behind because we create apps at the leisure of two companies, neither of which have a great incentive to help free app makers succeed.
I use my phone more than anything else. I just don’t think that an entrepreneur who wants a real shot at success should start their business there. The Android and iOS platform set us up to fail by attracting us with the veneer of users, but in reality you are going to fight harder for them than is worthwhile to your business. You certainly need a mobile app to serve your customers and compete, but it should only be part of your strategy and not the whole thing.
Vibhu also takes a stance against the ad-supported, privacy challenged, free consumer app world. I respect that stance and every time I upgrade from a free ad supported app to a premium version (advertising free) via the in app upgrade on mobile, I express my solidarity with him on that one. But as a business person, I have and will continue to advocate for a free tier with a premium upgrade (or just entirely free) because as I have written many times on this blog, I think that is the value maximizing approach and it also allows the greatest number of users to access your product or service.
But I don't want to focus on business model in this post. We are at the start of what will be a long MBA Mondays series on business models and will be talking a lot about that.
distribution is much harder on mobile than web and we see a lot of mobile first startups getting stuck in the transition from successful product to large user base. strong product market fit is no longer enough to get to a large user base. you need to master the "download app, use app, keep using app, put it on your home screen" flow and that is a hard one to master
But just because something is hard doesn't mean you shouldn't try to do it. I am convinced the next set of large and valuable consumer facing services will be built with mobile as the primary user interface. You can see it in the success of Uber and Etsy this holiday season. That's where you users are most of the time. And if you don't design your products and services for what is rapidly becoming the dominant UI, you will not maximize the success of your business in the long run.
So do I disagree with Vibhu? Not at all. I think he makes some great points on why you might not want to go mobile only unless you are in the games business. But I differ in two important areas. First, I think you can't abandon mobile. It is the future like it or not. And second, I think it is critical to design for mobile first and then build a web companion. If you design for the web and then port to mobile, you will find that it is really hard to fit your UI onto the small screen. Better to design for mobile first and then build a web companion. Mobile first, web second. But as Vibhu points out, the web can't and should not be ignored. It is valuable in many many ways.
Saturday is always a tough day for me to blog. The weeks are long and I am often spent by friday afternoon. The weekend is a time for me to rejuvenate and restore. I often find the weekends bring out the best blog posts but saturday morning is always hard. In the past, I've punted by running a video on saturday morning. I think I am going to make that a more regular event. When I've got something to say, I will blog. When I don't, I'll run the most interesting video I've seen in the past week.
Today, I'm running a twenty minute conversation between two of my favorite people in Tech, @om and @dens. This talk is mostly about Foursquare, but they do touch on the future of maps, location services, UIs, and stuff like that. I enjoyed it and I hope you do too.
This is a Best Buy commercial. There is also a 30 second version. But I like this longer version for a bunch of reasons; it captures the big vision behind Foursquare, it showcases a father/son relationship, it includes a great piece of advice (avoid the haters), and Dennis is rocking a Galaxy S3 in the commercial.
My all-time favorite feature on Android is the way sharing works. I like this feature so much I am concerned that this might be a repeat of a prior Feature Friday post. But I searched on gawk.it and did not find any posts so maybe I haven't done a Feature Friday on this. Hard to believe.
When you are looking at content in Android, a web page, a blog post, a picture, a video, a venue in foursquare, a tweet, etc, etc, you simply hit the share button and all the apps that are installed on the phone that can take an object like that show up.
This is what the screen looks like on my phone when I share out an AVC post:
This is not the entire list of apps that are available to share the blog post with, this is just the first set of apps. You can scroll down to see more but I could not capture that with a screen shot.
This sharing feature is available to any app that is built for Android. Foursquare has implemented it for its venue pages with a "send to a friend" call to action. (this screen shot is from the USV venue page):
This ability to share data between apps is super useful. I would like to see Google and Android developers do even more with this. Think about the way bookmarklets work on the web. If web bookmarklet functionality (like the Tumblr share bookmarklet for example) could be replicated on mobile devices, that would be a huge step forward for mobile.
In any case, this is probably the number one reason I use an Android phone and if you haven't experienced the joy that this feature provides, I suggest you get your hands on an Android phone and check it out.
Last night the Gotham Gal and I went to one of our favorite local spots, sat at the bar, had a glass of wine and a nicely cooked mediterranean seabass. As we sat down, I checked in on foursquare and was alerted that there was a special. Spend $10 or more and get $5 off. So I clicked on the special, loaded it to my card with one click, and when we paid our bill, we got the $5 discount on our credit card bill.
It was simple.
Mobile commerce is simple. Because you have your payment credentials stored in the web service (in this case foursquare). But the same thing could have happened with a direct checkout in the Etsy mobile app. Or in the eBay mobile app.
According to this post on AllThingsD, both eBay and PayPal will transact over $10bn this year on mobile devices. That's a 100% increase over last year.
I've been talking a lot about mobile here at AVC lately. That's because I am seeing the same kinds of things in our portfolio companies that eBay is seeing. Mobile is exploding. And that doesn't just mean mobile browsing, mobile gaming, mobile social networking. It also means mobile commerce.
If you are a transaction driven company, a marketplace, a retailer, or some other transaction oriented business, you had better be investing big time in mobile. Because if you aren't, your competitors surely will be.
Mobile is a less reliable environment than the fixed web. Things don't always work exactly right. And so failing in a friendly way is really important. I particularly like the way Instagram handles this.
I went on a bike ride this morning out to Lazy Point. I saw a sign that I thought was great. I took a photo of it and shared it to Instagram and Foursquare.
Except, of course, there isn't good cell service out at Lazy Point. Which is a feature not a bug.
So after sharing the photo into Instagram, geolocating it on Foursquare, sharing it out, the upload failed. In many cases, all the work I had put into getting to that point would have been wasted. The app would have just said something like "upload failed" and I'd be back to the starting point.
But in Instagram, you get something that looks like this:
The first time I got this fail message on Instagram and saw that reload icon, I thought "brilliant." That is friendly failing right there.
So I finished my bike ride this morning and when I got home, I took a photo of my phone, then using my home wifi, hit the reload icon, and the photo got posted, shared, and all was good.
There's a lot to learn from the way Instagram handles this experience. They save the action you wanted to do in its entirety, and they keep the app in that state until you choose to try it again, or choose to exit out on your own. All mobile apps should work this way. Many don't.
I had an epiphany today. I was in Storm, a cool store in Copenhagen, and I checked into Foursquare. In the result screen of that checkin, I saw a tip that there was another design store right around the corner called Hay. And that my friend Naveen had recommended Hay on his Copenhagen list.
I immediately saved Naveen's list to my phone and then saved a few other Copenhagen lists that were recommended to me.
Now every time I checkin somewhere in Copenhagen, I get a tip for another place that is nearby on one of the lists that I saved. No more thinking about where to go next. Foursquare will tell me based on suggestions from my friends and the lists I've saved.
I've tried every kind of travel guide out there. Some are great, like the Luxe guides and the Wallpaper guides. But an interactive, real time, geolocated travel guide built by my friends and likeminded travelers is way better.
It's feature friday and today I want to talk about our portfolio company Foursquare, which put out a completely redone app this week on iOS and Android. Blackberry is coming shortly.
I've got a few simple frameworks for thinking about things. In social media, one of my main ones is the tenet that 1% of the users will create content, 10% will curate it, and the rest will consume it.
Foursquare has, for most of its life, focused on the 1% who want to checkin to places and share those chekins and related data like tips and to dos, with their friends. They have close to 10mm people who do that actively. That's a lot if you think about it in the context of the 1% rule.
About six months ago, Foursquare launched explore which was a consumption experience. Users who don't want to checkin can get value by exploring cities using the data created by the 1% who are checking in.
But what about the 10%? How do users curate Foursquare without checking in?
Enter the like button. It seems so trivial. It seems like every social app I use has a like button. But in the past 24 hours, I have gotten something like a dozen likes on the four or five checkins I have done since the new app launched. That's new meta data that is being created on my checkins by other people. It's a way for people who will use the app largely for consumption to create important data signals without having to checkin.
Sometimes it is the littlest things that are the biggest things. In the new Foursquare app, which is really really good, I think it is the like button that will be the biggest game changer.