How Nordic IT Startups Get Big Fast
How do small companies get big? It’s a question that gets asked a lot. It’s also a hard one to answer. Great execution is always key, but if I were to share a growth hack to multiplying that execution it would be to figure out strategic partnerships with companies larger than your own. To borrow a phrase from Isaac Newton:
“If you can learn to stand on the shoulders of giants, you can get bigger, faster.”
As a small company, you often need to zero in on a narrow product (MVP) or just as importantly a matching target market so you can achieve good product-market fit and sell repeatably into a minimum viable segment.
As a result of this focus, your product or service may be quite valuable to customers but one thing you can’t often provide from the get go is a true end-to-end solution. If you sell a piece of software, for example, it’s unlikely you can also offer the hardware, implementation and services as well. You’re just not big enough yet to do it all.
By engaging a larger company in a “Whole Product Strategic Partnership,” however, where you complete a bigger company’s value chain by integrating your company’s offering into their solution, you can create a win-win scenario where you both go-to-market together.
Consider the example of Unidesk, a virtual desktop management provider based outside Boston. Unidesk has put its growth on the fast-track in part because of a partnership with Dell . But why would Dell, a very large company by any measure, team up with Unidesk, a rapidly growing startup? Because for every dollar in revenue Unidesk earns on a sale, Dell earns $10. That’s quite a multiple – and it hasn’t gone unnoticed. In fact, with that much to gain, Dell has begun to send referrals to Unidesk, one in three of which typically turn into customers for Unidesk.
As a result, Dell and its sales and marketing department play a role in essentially pre-screening sales leads for Unidesk, because they know that when Unidesk closes a deal, Dell is going to sell a lot of their product. That’s a great way to build a go-to-market partnership around a product integration.
And it’s precisely how small companies can get big, fast.
Below is a video from one of my Harvard Innovation Lab workshops on Game Changing Business Models where we discuss Strategic Partnerships.
For the complete Harvard i Lab workshop, see this link here.
The Benefits of Partnering
It might, at first, seem counterintuitive that innovative and disruptive small companies stand to benefit from partnering with larger but oftentimes slower moving firms. Aren’t they the kinds of competitors they’re trying to take down? While that can be true, small firms can also stand to gain through such partnerships for reasons that include:
Increased revenue as a result of being able to offer customers a fuller and more complete solution. Potentially one that incorporates best-of-breed elements as well.
Expanded reach and market share resulting from access to the larger company’s sales force and channels.
A boost in credibility. As a small company, it can often be difficult to stand out in a crowded market or to get your calls returned. If you’re working with a firm with an established brand, on the other hand, it tends to grease the wheels.
Faster time-to-market and reduced development costs. Imagine the amount of time and money a small firm would need to invest in order to develop an international whole product and sales campaign, for instance? It might take years. But your firm could be selling globally tomorrow via a single strategic partnership.
Assessing the Right Partner
Given what can be gained – how should smaller firms look to determine who the right kind of big company partner might be? They should begin by asking questions like:
What are the elements of the complete solution or “whole product” that involve other larger companies.
Which of these companies do they complement in such a way where they, like Unidesk and Dell, create mutually beneficial win win scenarios for each other?
Specifically which areas are complementary such as product, distribution, or market positioning that leads to a sum greater than its parts; i.e. where 1 + 1 = 3?
Which potential partner would help drive both increased market share while also helping knock mutual competitors out of the market simultaneously?
The devil is in the details of the deal, as you don’t want to build unnatural partnerships or dangerous dependencies. So here are a few examples of things to consider:
Will the partnership justify and tie the incentives of the larger company’s sales force to selling the smaller firm’s products/services.
Do you have upselling opportunities?
How can you ensure you get help with Support but don’t get isolated from your end customers?
How will you protect your brand while the larger partner provides the credibility to help you close deals?
What’s in it For Them?
One mistake small companies make when they get the chance to approach a larger company is that they make the conversation about them, the little guy. They begin by asking how the large company can help them sell their product or service when it should be the other way around. The best way to make a partnership pitch is by approaching a company and telling them what you’re going to do for them.
So flip all the points above and ask yourself how you’ll pitch to your potential partner to ensure this is a must-have partnership for them.
Usually, one of the key benefits a large company will want to realize is competitive advantage from faster time-to-market and more nimble development. Start there and figure out how you can build out things like opportunities to increase average revenue per user or ARPU for them. But be prepared to prove it and don’t rush it. Like any relationship it needs to be two way.
Partner for mutual success and you’ll be able to multiply your resources with a strategic partner’s involvement. Find a way to execute on it that is a self-reinforcing win-win and it will accelerate your growth. Happy partnering!