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How to find the perfect partner as a SaaS startup, part 1 of 3

This is my first in a three-part series to express my top nine questions used to evaluate the appropriate partnership that Agile Stacks looks to have with other cool companies and startups in infrastructure automation, machine learning, and/or DevOps. The ecosystem is growing so fast that there simply is not enough time nor bandwidth to consider every latest, well-funded software startup in our space. Let's be honest, we make some good choices and we make a few bad ones (hopefully, more good than bad). Using these questions get me through the tough topics that eventually I will need to answer anyway.

For young SaaS companies looking to develop a product and get it to the market as quickly as possible, without neglecting the need to build a sustainable business, finding the right technology partners is high-stakes. The process can seem overwhelming—a little like dating.

To help simplify the process, I use these initial three questions to evaluate potential technology partners as well as to clarify what's needed (and what you have to offer) from the relationship.

1.

Does this company have complementary technology?

 

If 1 + 1 = 3, it makes perfect business sense to do a partnership since the value created to customers exceeds what you could ever do on your own. However, you still need to evaluate the technical details and do the due diligence. In one particular instance, I was evaluating a global maker of enterprise-class load balancing software. The company’s market size was massive compared to ours. When I began the technical due diligence, a red flag arose when their product team said their software was not yet container friendly. And our Engineering team already writes everything for containers so the deal just couldn’t materialize. 

Your CTO should be involved at every step of evaluating a potential technology partner. One of the first questions to ask is how compatible your existing technology is with the partner’s technology. For example:

  • Is the core code written in a way that makes integration possible?
  • How much customization will the technology require to meet our customers needs?
  • Will working with this technology partner lead to technical debt in the future?

When working in a new technology such as containers and Kubernetes, there is a lot to consider technically such that infrastructure automation actually lives up to it's promise of executing the infrastructure-as-code efficiently. When there is a technology mismatch then that value disappears.

While you’re trying to move as fast as possible, building a sustainable business means keeping issues like potential technical debt in the conversation. You should also consider if using the partner technology creates potential lock-in problems in the future.

The key is to choose a technology partner that able to minimize your and your customer risk while still sticking with the business long-term and contributing to the overall success.

2.

Does the partner have relationships with your competitors?

 

There are pros and cons to partnering with companies who have relationships with your competitors. Be fair to yourself and list out these pros and cons so that you can see which side wins. 

The biggest advantage is that the partner knows your industry and has a proven ability to provide technical solutions tailored to your industry. This might give you the ability to get even in the industry. Sometimes, as taught in Solution Selling by Michael Bosworth, you must acknowledge that you have to first get even before you get ahead.

The downside is that this technology platform won’t provide you with any advantage over your competitors. In some cases, that’s ok—not every piece of your technology stack needs to generate a competitive advantage, and it’s normal for competing companies to use the same best-in-breed tools. We take note of this especially in the fast growing area of machine learning. With tools coming out so quick, there certainly are quick winners and faster losers. The winners tend to get all the attention which means a lot of companies want to partner with them. So sometimes, it is enough to be in the game and not have a unique advantage.

This is a decision that will have to be made case-by-case, but it’s important to consider as you evaluate options. At Agile Stacks, we spend a lot of time evaluating whole ecosystems of our partners before signing an alliance agreement.

3.

What is the partner’s billing structure?

 

This is especially crucial for companies who are setting up a resell or OEM agreement, but it’s something that all companies, and especially startups, should consider. Think about your own cash flow and revenue model—is it subscription based? Do you have monthly, quarterly or annual billing cycles? Is their license a perpetual license? This could create conflict in the eyes of a prospect. For example, by combining a perpetual license (which typically has a higher upfront investment with a recurring maintenance charge) with your subscription license you may have difficulty in appropriately defining the cost to your end customer if you are passing through the partner cost.

You need to avoid a situation where your own cash flow structure doesn’t mesh with your partner’s structure, which could lead to situations where you can’t pay your bills on time in spite of a growing, successful business.

 

Finding the right technical partner for your start-up shouldn’t be just about purchasing a solution. You need to think about how you can benefit from the relationship with this potential partner—and how the other company can benefit, as well. In an ideal scenario, each company gets something from the relationship that isn’t just financial.

As with any partnership, the best way to set the relationship up for success is not only to choose the right partner at the beginning, but also to clearly communicate expectations at the beginning and keep the communication clear throughout the relationship. Clear expectations and open communication give you the best chance at a long-term business relationship that allows you to achieve synergistic solutions to accelerate your own product's capability.

 

Check out the second set of questions coming out soon.

If you are in alliances or business development, I would enjoy reading any of your thinking as well. The more we share then the better we are all for it. Feel free to submit your comments below.

Topics: Partners, Infrastructure Automation, Business Development, Strategic Alliances

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