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Finding the right partner for the business strategy you want to execute can be challenging at the best of times. When that partner is a startup, the challenges can seem even greater — but that doesn’t need to be the case.
Navigating a successful partnership is all about setting clear expectations, defining what success looks like up front (both short and longer term) and getting all parties aligned around those metrics. At Portag3 Ventures, we specialize in brokering partnerships between our investors and our portfolio companies, and we know the ins and outs of the partnership process and the challenges and opportunities it presents. So, how should corporates and fintechs navigate this journey to achieve, at best, a new commercial agreement, and, at worst, a potential future partner?
It was my pleasure to moderate a discussion on this topic with Nancy McCuaig, SVP, Chief Technology and Data Officer at IGM Financial, and Brad Joudrie, Chief Revenue Officer at Conquest Planning, Inc. As valued members of the Portag3 ecosystem, IGM’s subsidiary, IG Wealth Management and Conquest recently launched a new partnership to bring Conquest’s innovative financial planning software to IG Wealth’s financial consultant network and their clients across Canada. Together, we shared insights and best practices from current and past partnership experiences. Our key takeaways are summarized below.
Partnership Advice for Startups
On the startup side, finding companies to partner with starts with understanding your ideal customer profile (ICP). While this point may sound obvious, it cannot be overstated. Your ICP will define everything about your business, from how you build your product and what your go-to-market strategy looks like to who you hire and how you allocate resources within the company. You want to chase reality, not just opportunity — and that starts with understanding your ICP.
To define your ICP, siphon out data from past deals and pitches and find the patterns around what worked. Who is your typical client? What problems are they looking to solve? Figure out the types of organizations that want to incorporate your solution as part of their broader offering: these are the people you should approach.
When reaching out to a potential prospect, find your champion within the organization. Whether they’re in business, technology, or another part of the company, look for someone who can lead the charge, connect you to the right people, and help ensure your potential partnership is considered an organizational priority — which ultimately will determine the amount of resources and funding it receives (or doesn’t). The best strategy to find your champion is to leverage past relationships, but LinkedIn and trade publications are also good resources for networking. If you have trouble finding the right person, figure out who benefits most by implementing your product/service, and target them.
Though your champion will help you make inroads, more often than not they will not be the decision-maker. In any corporate buying decision, there are an average of five people involved, and there will always be a skeptic in the room. Don’t ignore the skeptic; communicate with them and understand their hesitancy. You need to bring them along for the ride, and while they might not end up being your biggest fan, life will be a lot easier if they are not actively trying to sabotage your deal.
Even with a champion on your side, closing a deal with a corporate partner will not happen overnight. That’s why it’s critical to understand their buying process, how long it generally takes to make a decision, and — assuming you get to a deal — how the partner thinks about the proof-of-concept (POC), pilot, and full launch stages. In order to align interests, it’s always advisable to timebox these stages, proactively determine success metrics that will move you from one stage to the next, and if possible charge something for your services in the pre-launch phases so everyone has skin in the game.
Though there’s no silver bullet for accelerating the corporate sales cycle, the better the fit between your solution and the corporate pain point and the greater the level of engagement and buy-in from senior business leaders, the quicker the process will move.
Partnership Advice for Corporates
Just like the startup needs to figure out their ICP to set up discussions for success, the corporate needs to answer a fundamentally similar question: to partner or not to partner. Before a corporate explores a partnership, make sure it makes more sense to partner for new services rather than buy or build them yourself. In the case of the Conquest partnership, IG Wealth decided to partner because they understood, at their core, they’re a financial advice company, not a software company. In this particular case, it was better to partner than to build in-house — but that won’t always be the right answer.
If you do decide to explore a partnership with a startup, set expectations openly so you don’t waste each other’s time. To the extent possible, communicate what the typical sales timeline is, whether it’s going to take six, nine, or twelve months to get to a decision. It’s critical that the startup has this information so that they allocate internal resources accordingly. For example, a six-month sales cycle may mean the startup has to focus on a small number of potential customers, but a twelve-month cycle means they can manage a few additional prospects.
If you’re interested in the offering but don’t see an immediate opportunity, or the partnership can’t make its way on to the organization’s priority list (see the comments re champion in the startup advice section), be clear about that. The worst thing you can do to a startup is waste their time, because that is the biggest asset they have. Direct and honest feedback is always better trying to sugarcoat reality.
As you move forward with a partnership, setting expectations internally is equally important. If you are one of the first customers for a startup, it’s inevitable that there will be bugs and necessary changes along the way. It’s called a ‘start up’ for a reason. You need to make clear to senior leadership that these issues will come up. This isn’t a reason not to work with a startup, as the benefits will outweigh any initial hiccups — but you should make sure that leadership won’t be surprised.
When it comes to risk management, know where you can and can’t compromise. Procurement and vendor selection processes have certainly evolved to accommodate earlier stage companies, and the days of requiring vendors to provide five years of financial records or $50M in E&O insurance are all but gone. That being said, if your RFP process could potentially kill a startup, then you probably shouldn’t be considering them in your process.
If you move forward with a contract, be sure to set clear expectations for implementation. There are things you cannot and should not flex on, like security or customer services. It’s critical to be extremely upfront about expectations, so that when rubber hits the road the fintech is prepared to respond to your concerns.
While corporates and startups work on different timescales, the basics of clear communication and expectation-setting are critical regardless of which side you’re on. No successful partnership will be created without these basic building blocks. By getting aligned from day one, you can successfully navigate the partnership process and build something even better than either party could on their own.