Business development for startups 2013

Biz Dev for StartupsAn exercise in partnership model definiFon,

planning and execuFon

• Prep work assignment (done, hopefully)

• Part 1: Defining the Biz Dev model -‐ 30’

• Part 2: InteracFve session -‐ n*20’

• Part 3: Planning for Biz Dev -‐ 45’

What to expect

Part 1Defining the Business (Development) Model(s)

• Business plan is a story

• How the business will evolve in the future i.e. science ficFon

• Business model is a snapshot

• A diagram of the business engine i.e. inputs, outputs and components

• It is not just “how you make money”...

Biz Plan ≠ Biz Model

• Is repeatable

• Shows HOW business results are achieved

• Shows WHY company needs money

• Shows WHERE to put it to work

• Shows WHO to partner with...

Viable model...

Biz Model ⇒ Biz Dev

Cost Structure

Ac7vi7es Value Proposi7on

Adapted from the Business Model Canvas by Alex Osterwalder et al., 2010

Partners Customer Segments

Revenue Streams

Resources

Customer Rela7ons

Channels

• Developed a very advanced web recommendaFons sobware

• Built to integrate with eCommerce sites

• Sells sobware licenses, SaaS subscripFons to large eCommerce sites

• Has 8 customers, sales of 550k/year

• Has two sales people

Example: Small Inc.

Cost Structure -‐ Customer AcquisiFon -‐ Sales Team -‐ ConsulFng and Customer Support

Ac7vi7es -‐ R&D -‐ Product Development -‐ Sales

Value Proposi7on -‐ Customers: Increase sales through recommendaFons -‐ Users: Easier to find what you want -‐ Partners: Add valuable feature to your offering overnight !

Partners -‐ eCommerce plajorm vendors

Customer Segments -‐ Medium Online Retailers -‐ App Stores/Digital Media -‐ Large MulFchannel retailers

Revenue Streams -‐ Licenses + Maintenance -‐ SaaS subscripFons -‐ Services

Resources -‐ Intellectual Property -‐ Dev Team

Customer Rela7ons -‐ Prof services -‐ Maintenance -‐ Training

Channels -‐ Direct sales -‐ SaaS -‐ Channel sales -‐ OEM

Example: Small Inc.

• Partner model impacts enFre model

• Small Inc. and Big Inc. must have “mirror” models

• Different partnership model = different tradeoffs

Example: Small Inc.

Part 2InteracFve Workshop: How are YOU going to partner?

What is your model?

Cost Structure

Activities Value Proposition

Customer Segments

Revenue Streams

Resources

Customer Relations

Channels

Partners

Housekeeping

• 10 minutes presentaFon

• 10 minutes Q&A

• Focus on one partner type/model

• Focus on (partner) value proposiFon

• Discuss among peers (It is not a pitch!)

Part 3Planning for Business Development

ExecuFon Steps

1. Clarify partner value prop

2. Select target partners

3. Execute on the deal pipeline

1. Which value prop?

Cost Structure

Revenue Streams

Resources

Customer Relations

Channels

• Value Chain analysis

• Where are you capturing/creaFng value?

• How much value?

• Which porFon of the value can be shared with partners?

Adapted from Simply Market Report, 2010

• Customer AcquisiFon Cost analysis

• How much does it cost to acquire a customer?

• Does the partnership increase or decrease it?

• What is the most effecFve channel?

• What volume so that it makes sense?

• Customer LifeFme Value analysis

• How much is each customer worth?

• What are the most a4racFve segments

• Does the partnership increase CLTV?

• Does the partnership “lock” customers in?

Adapted from Occam's Razor, 2010

Distributor Customer

Direct Customer

2. Which partners?

Cost Structure

Revenue Streams

Resources

Customer Relations

Channels

Models ⇒ Partners•Marketplace (commission) ⇒ Merchants

• AdverFsing (rev share) ⇒ Publishers

• Infomediary (subscripFon) ⇒ Data Vendors

• Franchising (fixed costs) ⇒ Manufacturers

• Manufacturing (sales) ⇒ Distributors

Models ⇒ Partners• Affiliate (commission) ⇒ Merchants

• Licensor (royalFes) ⇒ Manufacturers

• SubscripFon (fees) ⇒ Content creators

• UFlity (metering) ⇒ Integrators

• Community (donaFons) ⇒ Contributors

Be deliberate & focus

• List of top 25 target partners (as per model)

• Score them by criteria (1 to 5) 1. $ value of deal to them! (weight: 50%)

2. $ value of deal to you (30%)

3. Speed/ease to close (10%)

4. M&A opFon value (10%)

• Degree-‐of-‐separaFon is not a good criteria

• Do

• Enroll your board for intros to your list

• Go for #1 in your list first

• Find a champion in the organizaFon

• Don’t

• Chase brands for brands’ sake

• Work only with large companies

Do’s and Don’t’s

3. How to execute

Adapted from Real Pro Systems, 2010

The “Standard Deal”• Simple to design, understand and deploy

• One-‐page term sheet, simple excel sheet

• Working capital posiFve or neutral

• Do you need to finance your partners?

• ~0 custom development (90% built-‐in)

• Have you thought about product features?

• What about support?

The “Standard Deal”

• Everybody understands...

• Licensing agreement

• Reselling agreement

• Revenue Share agreement

• White label agreement

• DistribuFon agreement

• ...

• Developing markeFng content for biz dev

• Biz dev presentaFon (≠ investor presentaFon)

• Partner case study

• Partner financial model

• Technical training material

• Speaking/a4ending industry events

• Engaging industry analysts

Partner MarkeFng

• Create a lead generaFon program

• Partner-‐focused content > web leads

• Events > live leads

• Analysts > referral leads

• Put a $ value on each opportunity

• Treat partner prospects as sales prospects

• Convert & nurture opportuniFes

Build a pipeline

At the table...

• Ask 5 quesFons for every answer you give

• Both sides are buying and selling

• Focus on the partner pain points and value

•Write down next steps and be Fmely

• Leave lawyers and NDAs for last

Value Proposition

Do we have a deal?

Cost Structure

Activities

Revenue Streams

Resources

Customer Relations

Channels

Thank YouMa4eo Fabiano

mf@firema4er.com

BonusTop 10 mistakes

1. Having an unclear partnership model

2. Having an unclear partner value prop

3. Spray and Pray i.e. not being focused

4. Partner with other startups i.e. risk^2

5. Not having a formal “pipeline” process

6. Thinking biz dev is a part-‐Fme job

7. OveresFmate your board “contacts”

8. Ignoring working capital i.e. cash

9. Not being operaFonally deal-‐ready

10. ...Not following up!

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