If there's any secret sauce to #business development, this might be it 👇🏻
Learn how PayPal scaled with partnerships + actionable advice on how to accelerate #growth of your business with business development.
In this episode I'm delighted to have Roy Vella who’s built BD teams and developed significant strategic partnerships for channels to market in PayPal, Hive, RBS. Roy is now advising boards of many prominent tech startups and F500 companies.
Business development function and best practices are still not well understood and I’m excited to share Roy’s insights with you.
📍 In part 1:
2:00 – Business development as commercial problem-solving in the early days of the business
5:00 – Biz Dev case study from the early days of PayPal
10:30 – Aligning expectations and why you should avoid PR deals
13:00 – Best Practices: accelerating deals & contracts
15:00 – Why you should encourage front end activity to accelerate deals
17:10 – How trust commutes in #partnerships
Roy, delighted to have you on our show. Currently, you're advising a lot of great companies, startups and so on. I would love to dig deeper with you into what were the secrets of business development in PayPal? What did you learn there? And how you are translating this knowledge and experience to new companies. Let's go back to PayPal, tell us how you started business development in Paypal in the early days?
Well, I guess it might help just really quickly to distinguish between business development and sales. What is that distinction? In my worldview, business development is the creative problem solving and the commercial problem-solving in the early days of a business usually.
Business development is the creative problem solving and the commercial problem-solving in the early days of a business usually.
Not that you can't have it later on. But in business development, it's sometimes unclear who's paying who for what? What's the value exchange? You're going to do this, I'm going to do that. The relationship between the parties is much less articulated. And hence, there are a lot of unknowns. Whereas in sales, for me, you pretty much know, here's what we're selling, it's very well defined, there's not a lot of bespoke unique structures necessarily and you're out there driving the business.
Sometimes the metaphor I use is, sales is running on a highway and sometimes it's a one-lane highway, sometimes it's a multi-lane highway, sometimes you're turning a path into a highway. Business development is well, it's a jungle, and you're just figuring out where the path should go? What's the best way forward for both parties involved?
And when I joined PayPal, I joined a small team, there were three of us. When we started off, we were called off eBay group. Basically, everyone else at PayPal was doing payments on eBay. And our job, we were the “not us” team. Our job was to get PayPal to be accepted anywhere other than eBay. We quickly named ourselves “merchant services”, we're more merchant services - merchants who are not PayPal effectively. My remit then was to find people who are willing to accept Paypal and have us process payments for them. Over my time at PayPal, I ended up being merchant services writ large initially, then travel and then mobile, and they were all new verticals at the time. And part of it is that openness to creative problem solving, I would say in terms of business development.
Let me dig deeper into that. Business development versus sales is clear. How do you compare business development with partnerships then? Is it the same?
It's not that business development necessarily goes away, it's that you keep exploring new areas and new ways of working together. I can tell you about travel to begin with. The transition of myself from sort of merchant services broadly to travel as a vertical, I got obsessed when someone threw up a slide and it showed our percentage of volume. And it said, we do 10% of volume, and then it had a little asterisk at the top, and at the bottom it said ‘excluding travel’. I raised my hand and I’m like “travel is half of online volume” at the time, this is in 2003-2004. They are like ‘We can't really do travel. They're using OS/400 and COBOL, they are old school and we're using web services API's and we can't do it’. And I was like c'mon, there's got to be a way for us to do it’. I had just done a pretty massive deal on the traditional merchant services side and my boss was like ‘if you think you can figure it out, figure it out’. This is what I think is the secret sauce. If there's any secret sauce to business development, it's investigating the vertical or the area you're going into very deeply. We realized. I consider myself a commercial person, I took a product guy and an engineer and three of us went and dove into the travel space. We discovered that there was a company that literally every travel provider, airlines, trains, hotels, you name it, processes payments for.
If there's any secret sauce to business development, it's investigating the vertical or the area you're going into very deeply. We realized. I consider myself a commercial person, I took a product guy and an engineer and three of us went and dove into the travel space. We discovered that there was a company that literally every travel provider, airlines, trains, hotels, you name it, processes payments for.
In fact, it was the travel verticals payment type and it's very interesting. You know how Amex [credit cards] starts with 3, Visa is 4, Mastercard is 5, Discover 6? 1 and 2 are from this company. It's called UATP, it stands for Universal Air Travel Plan. They invented the 16 digit bin range that we all use on credit cards now. The reason Amex is 3 is that when Amex launched, they took the next number. The first numbers were owned by UATP. The reason you've never heard of them and no one ever has is that the model is slightly different. Visa and Mastercard’s model - the banks were members of Visa and MasterCard. They were issuers and acquirers. In UATP the airlines are issuers and acquirers. British Airways is an issuer or UATP card.
And they're not consumers, they're corporate. That phrase that everyone knows ‘put it on the company card’ comes from UATP. British Airways would issue your company one bin range for the company to process all of the corporate travel on. And I was like ‘Okay, this is interesting’. I discovered that UATP not only was unknown, but it was really small. There were 30 employees in Washington DC, they were run as an association, they were owned by their member airlines the same way Visa and MasterCard were nearly. I think this is where the business development creativity comes from. I knocked on their door and I said, “Hey, I want to give you access to consumer payments, and you're going to give me access to travel’. And initially, they were, “Nah, we don't need that, we're fine. Everything's fine’. I'm like, ‘no, no, consumer payments are huge. This would be good’. And without getting into the weeds, effectively what happened is PayPal became a ghost issuer of UATP. You'd go to the United Airlines site, and you'd say I want to pay with PayPal. And the first thing that happens is UATP issues a bin range to United. United, the first payments integration United did on the web was to UATP. That's their payment type. All of a sudden, we were open to all travel. I mean, you name it. And you could go to any airline and say, ‘Yeah, we're UATP partner, all you need to do is to send the call from the webpage to UATP and we issue a bin range and it's easy. Changed the whole game. It was like, ‘Oh, my gosh’.
It’s like a growth function before there growth functions.
Well, it was interesting because that deal changed UATP's business model. You go to UATP now on their website, they have a whole business, which is about alternative payment type access to travel. PayPal was the first one, but now they are just any type of payment that's not Visa or MasterCard. UATP offers an integration point into the travel networks, because of the deal we struck. And it was kind of stuff and the other thing I would say is PayPal was the wild west back then. Myself and my team, we were doing deals. I mean, I was junior enough that I wasn't signing the deal. I had a VP who would sign the deal. And I had more than one deal. The VP is going to tell me what this deal is about again? Okay. I then signed the contract. Freedom to explore I guess is my point.
Fascinating. PayPal pioneered a lot of things. Literally still one of the legends. Going back to deals or things that went well, you just mentioned one, maybe you'd mentioned another example. Or maybe you would mention an example, which you thought would be great, but it didn't go well. Because it's interesting to people who work in business development and partnerships to see both sides of the coin.
The deals that don't go well are where the expectations are misaligned. You want to be very, very clear. Who's bringing what? In UATP I was bringing consumers, they were bringing travel integration, if I had to sum it up. The deals that don't go well are where one party or the other just misunderstands what the value transaction is.
The deals that don't go well are where one party or the other just misunderstands what the value transaction is.
I got a roommate in Chicago when I was right out of undergrad, and he goes ‘you want to be clear who's doing who a favor?’ Who's doing what? And you also don't want to avoid deals that are PR deals. Without naming any names, I have seen in my experience where one party is doing the deal, effectively for the press release. It doesn't matter to them what happens after the press release goes out. You see a lot of that in the startup land. What's really happening is a brand transaction, where one party is looking at the other party to be able to say that they've done something in a vertical or space. Especially where there's hype, ‘Oh, we've done something in crypto, we've done something in artificial intelligence'. Sometimes you'll get a small company and a large company. And the small companies, “this is going to be great. look at all their volume, look at all the things we can do’. The large company was just doing it so they could say, ‘oh yeah, we're doing things in crypto, look at this deal we signed blah, blah, blah, really don't care so much about volume after the deal or transaction’s working. That happens a lot. A little guy in a hot space does a deal with a big guy that has brand value. You look at the deal a year later, nothing happened.
I agree. I see that a lot across the board as well. But how do you differentiate between PR and real deals? What's your advice on how to poke holes in this deal if you’re a small guy or a big guy?
Part of it is, don't make generic contracts, if it's important to you that a deal manifests, that payment volume, for instance, or any sort of transaction volume or sales or whatever it goes through, lay it out, put the milestones in the contract. You really don't want a contract that doesn't have material milestones in it. And also the other thing I would say is that it's important to put accelerators in it. What I mean by accelerators, you want to put terms in the contract that encourage front-end activity.
You really don't want a contract that doesn't have material milestones in it. And also the other thing I would say is that it's important to put accelerators in it. What I mean by accelerators, you want to put terms in the contract that encourage front-end activity.
For instance, you might do a deal with someone who you would never really give exclusivity to. Like ‘we can't do an exclusive deal with you. There are all these other players in the market we want to do a deal with. But I'll give you a six-month exclusivity or year. And in the first six months, you get 2X to return, and then it goes down to X after that. Maybe you're more generous in the beginning, or you're exclusive in the beginning, or you dedicate more resources, you want to do what you can in large bizdev deals to front end the experience. The only thing about it is, it'll continue. If a company opens the spigot and really starts engaging in the deal and doing what you want in the first year - that'll keep going. Even though the deal incentives have changed that year it'll keep momentum. The hardest thing to kill in any corporation is momentum in any activity.
I've seen examples with my own eyes. If it generates revenue and even if some people have mixed feelings about that, it still will keep going if it generates value.
What's the hardest thing to do? Change behavior. At the moment, the people at the company you're dealing with do something, they're busy. Now you got this new contract and you want to change everything, but you want them to focus time and effort on this new thing. That's a pain in the rear. I mean, they're very few people who want to change behavior. You need to make the contract such that the behavior change happens at signing. They feel the contract signing was like a stopwatch and the clock is ticking.
they're very few people who want to change behavior. You need to make the contract such that the behavior change happens at signing. They feel the contract signing was like a stopwatch and the clock is ticking. And they're gonna make tons more money now, so they have to accelerate all of their integration, you want the technical work done.
And they're gonna make tons more money now, so they have to accelerate all of their integration, you want the technical work done. There are so many contracts I see where there weren't key terms on technical integration. They gave exclusivity for a period of time, but the technical integration ate up all that time. It didn't start, that's the key thing. I look at bizdev a lot like behavioral sciences. Behavioral economics is - what are the incentives driving people and understanding what makes them look good. And you want to do everything you can to make your partner look good and to change behavior in the near term. The sooner you can change behavior at the company, the better.
Just trying not to defend, but question the concept of these PR deals. I guess, a lot of people in startups, and also big companies, consider PR as the first step of a soft launch. Do you recommend just forget about brand value, and just focus on hard commercial components?
Depends what you're in it for? You can't discount brand value. I mean, brands matter. The trust in real, trust commutes.
The trust in real, trust commutes.
What I mean by that is the essential challenge of all bizdev and sales is trust. Every salesperson on the planet wishes they had one more thing they could sell to an existing customer. Why? Because building the trust bridge to the customer was the hardest part. Now the bridge is built, they want to send as much over the bridges as they can. And why do people do the brand thing? Because trust commutes. Look at Amazon, you buy from people on Amazon, you don't even realize you're buying from because you trust Amazon. But you're actually not buying from Amazon, you're buying from a third party, who is using the commutable trust of Amazon. I trust Amazon, I trust Prime. If they're selling on Amazon, I trust that I'm going to be okay. I think that you can't diminish the brand value, but you also need to know what you're trying to get out of it. If a brand value is the vast majority of your value, then you don't care so much about…. That's the thing, you got to be clear, the partner and you both have to understand who's doing what for whom, who's paying who? You're giving me some brand value, I'm paying you for this, you're paying me for that, we are working together on the back end, blah, blah, blah.
And sometimes you stagger when things happen. One party will say ‘I want to sign the deal and do a press release immediately’. The other party says “No, no, no, press release doesn't go out until the integration is done. What does this mean? Why is that? Because the integration will get done because they really want the press release. You really get to pay attention to the dynamics.
Very insightful. And I really loved your point about scaling trust, as a mindset of approaching partnership and value. Essentially, as soon as you build a bridge you can put more freight into it.