Startup Partnership Playbook. Why consider partnerships and things to optimize for.

Part 2 with Abhishek Lahoti, VP of Business Development, EMEA at Sapphire Ventures 🚀 we discussed why and when startups should consider #partnerships​.

Learn about typical mistakes and key thing to keep in mind while relying on other companies in scaling.

Before moving into VC, Abhishek led partnerships in Dropbox and product in Adobe.

Part 1 is here.

In Partner Insight we explain how and why tech companies collaborate more to better acquire and serve their customers across their journey. From your vantage point of overseeing the entire ecosystem, what are the trends do you see in this regard, or maybe these partnerships and collaborations are just PR?

Yeah, it does make for good PR, I'll say that. Anytime somebody partners, we're always like, “Ooh, that's a new shiny object”. And having done a partnerships role at Dropbox, it's oftentimes you think you release something absolutely astounding. And the uptake is the percentage of your users, and you're a bit shocked by that percentage. That being said, there's a really good concept to consider here. And that's what I would call the stickiness concept. So there's several studies that have proven this. But generally speaking,

people have more affinity to the products that they use if those products are interplays with other things. And that can be in an integration perspective, that can even just be in a deal perspective.

The good example that I use is that I'm a Revolut banking user, as part of my consumer banking. And Revolut’s deals that they offer, on the flip side had one time Uber Eats deals that I really liked. That was valuable enough for me to continue to want to use Revolut, because I thought there might be better deals coming through. And I could take advantage of those discounts and use them to my own benefit.

When you expand outside of the market of just simple banking, and you look into deep software engagements and partnerships, I think that that stickiness becomes even more important, because that's retention, that’s now a recurring revenue that you can rely on a bit more. And I know that the numbers that have come out, they're all very depending on the software, but generally speaking, retention is better when people get a chance to collaborate across different integrations. That's why you see a lot of people doing these integrations.

The idea is that if your users see value in tying their apps to another application, the stickiness of their application becomes much better, the retention becomes much better. It's various reasons, I think you're entrenching workflows, making it more complicated and therefore harder to pull out. You're showing value in speeding up tasks so that the, you know, screen switch that causes a bit of a break of focus is lessened. Generally, people find those integrations interesting and cool that they can tie one thing to another and it works all seamlessly, and it saves them that little bit of extra mind space and time.

But the really big credence to that is even simply we all are having iPhones or Android phones, but you don't just get away with one ecosystem anymore. You know, on a Google phone, even though they haven't Google music and so on, you still have Spotify, they've made it a point of making sure that their Google Home speaker works at Spotify and is partnered. Apple works really closely with Google for default search on Safari. They're all these partnerships because they want people to stay within their ecosystem. And sometimes to stay in the ecosystem. it does require you to play with other people in that sandbox.

Totally agree with you. Stickiness, i.e. retention is a very, very important point and becoming even more important right now. Partnerships are often essential for companies to scale, but they are very difficult to do right. From your experience in Dropbox and your experience right now, what do you see as typical mistakes that startups make in this partnership path?

I'm going to draw attention to a book that I read, actually recently, it's by Bernie Brenner, it's called The Sumo Advantage. In his book, he wrote based on the BD initiatives that he ran at TrueCar, which is a car buying service in the US. And the benefit of the idea here is that

a lot of the startups that I've seen do their best to partner as much as they can, and oftentimes look at longtail partnerships, and just try to make whatever relationships they can. But that the startup to start a partnership, the small to small, whilst has your flexibility that engineering really likes has a really close tie of two particular facets of business can show really, really great speed isn't necessarily going to be the most commercially successful.

You can put a lot of cycles into it, but ultimately, the TAM, of those two small companies working together is just not going to equate to one of the small companies working with a sumo, in my opinion, a much larger company. And that means that if partnerships are aiming to be successful, from a startup perspective, you really are searching, much like your sales team is searching for your enterprise sales, your business development team, which should be separate by the way, is also searching for their Sumo or their enterprise partnership. So you're trying to find someone who's really big in the marketing space, that Salesforce or that Adobe, or that HubSpot that you can work with that has that global spread for you, that helps you scale. Because you don't have the capital to really easily jump into a new market and to scale in that market, this person, this partner can help you provide that sort of spread.

The most classic model of that is the channel selling model. It's not as value oriented, it's much more on deployment orientation, and training other people to sell your product. In this argument, the one that I'm making, it's much more of an integration and a cohesive partnership. So there is a tie of products that is a little bit more specific. And one team is not just purely commission based. So it behooves the teams like a Google sales team to sell my product alongside their ad sale, because my product adds value to their ad sale, they still get to close their deal, but their customer feels like they've actually bought, you know, an actual CMS or item or something that they're going to use for that ad sale versus just impressions.

This is like a really interesting puzzle to solve. Because one of the arguments is that partnerships in themselves don't really move the needle for big companies, like Googles of the world. And therefore, it's very complex to persuade them to do that. So from your experience, how startups can leverage European and global partnerships to scale faster?

The idea of distribution is really important. I think the idea of expansion of your customer success, and your customer experience is also really important. And generally, as I just mentioned, partnering with that big company is important. So you're a startup, you're a small company, it's something you live and breathe. So

whilst a startup might spend 60-70 hours a week focused on their brand and their product, it's still an unknown entity to a lot of people. It's an unknown entity to a lot of executives, an unknown entity to a lot of CIOs and an unknown entity to the VCs, most of them. So partnerships are not going to solve that.

Just because you're based in the US and you partner with a big German telecom brand, doesn't mean that everybody's going to suddenly understand the brand that you have and what you're offering. It'll take a real proper partnership and expansion in markets that is going to help that, and that means that the value add is going to need to be really, really strong. The great example I like using from my Revolut experience before is just even like beer52. And them doing a really good job was trying to spread themselves globally, by distributing through these different partnerships. So suddenly, rather than just one mechanism, and me hearing about this, I'm hearing from three to four. The idea in general is

if you're going to partner to scale, know that your partnership has to be one that can help to amplify a lot of what you're doing. If you fall into an app store and you're just buried into the page, it's not going to help very much and you're going to put in a lot of cycles and value into something that might not turn.

But if you're doing a really, really in depth partnership, make sure there's things like revenue attribution that you're tying to it. There's spiffs, and there's commission, there's sometimes even quarter retirement, look at all these opportunities that make a monetary difference to the people who are gonna be looking at your partnership. So find that Google sales rep again, and I'm making an ad spend of 750,000 pounds on this particular big deal. And I know that your deal in addition to that is another 50,000 pounds. I know great, okay, that's 800K. But in general, it doesn't really matter too much to me. Now, if that 800K ends up being part of a quota retirement from my end, because I sold you and my own product as 50K less than my quota, suddenly that 50K matters way more than it did before.

I love your sumo example, the analogy that you used. I think it's exactly the type of relationship that partnership people pursue with bigger companies, trying to befriend a 800 pound gorilla, it’s something really interesting.

Cannot really omit asking you, because you used to work on the other side in partnerships, and now you're in a VC fund, doing business development as well. How transferable are the skills?

It's interesting. It's not a completely obvious thing at first. It took me a little bit of time to understand what facets of my role would be successful in the new role that I took. And a lot of what it is, is up-leveling the type of partnership that you're trying to do. I was a very tactical partnership manager, I was heading up all of the European focus of our distribution partnerships for a moment. And so I was getting a lot done, but I was being very tactical and getting individual things done.

Now in the role a lot of what I need to do is take that next level conversation, the one that maybe my VP would have been having with the counterpart at a company that I partnered with. To have a much more strategic conversation, what are the goals? What are the strategies that you need? How can I find you the right products and the right solutions that we know about in the market that can help you be successful? What are the things that are going to make this particular person more successful in their role so they can maintain their general success as the company goes? And also, what are the outlets, what are the opportunities for those people? So if we see somebody who's really, really powerful and really, really happy at a major food brand or something, how do we help them understand how they can get on the board of the various other technologies that they're interested in?

Because those are the things that once you're in that sort of C-level position, people really like to switch to. I mean, even looking at Amazon and Jeff Bezos jumping down and I think his name is Andy Jassy and he’s taking over for him. That is a person who was in that kind of role. So how do you use person who used to head up AWS now running on Amazon? How do you take that formula and put it into other places, and have my sort of role, allow them to show a bit more of bits of success? No one's gonna ever build the whole car for you, so I can't tell you that VC fund is going to help you get every single piece and function and all the interiors and exteriors done. But every little bit helps, and this is just a little bit of that.

Thank you so much, it has been a fantastic interview. If people want to connect with you, what would be the best way to do that?

LinkedIn is definitely the best way to hit me up. I'm happy to chat with anybody. And that is it responsive on it as I used to be unfortunately, because so much of a new job and taking over but that's probably the best way to say hello.

Part 1 is here.

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