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How Not to Let BD Tank Your Startup
Charles Hudson Venture Partner, SoftTech VC CEO and Co-Founder, Bionic Panda Games
Biz Dev is Really Simple
Business Development is a very specific function with (only) two core activities: License someone else’s technology or content for
use in your product or service
Distribute your product or service through someone else’s network
Difference between business development, Chief Revenue Officer, VP Sales, and “business guy / gal” roles is key to understand
Before We Move On…
Stop! Does your startup even need BD? What are you trying to license or distribute?
Startups that benefitted from BD Mint (deal with Yodlee) Google (distribution deal with Yahoo) AdMob (global BD relationships with top carriers)
You might need a “business hire” who is not a BD person Build and maintain relationships with key partners Collect valuable info about your market / space Position your company for acquisition / exit
BD is a Costly Function to Staff
It can easily cost the company $200K+ for a Director-level BD person: Salary and benefits = $120K-$140K / year
Conferences and travel = $15K / year
Networking and client entertainment = $5K / year
Legal fees for deals = $25K+ / year
Fully-loaded BD people can easily cost you more than a talented engineer or designer
BD Deals Mean Real Work for Engineering and Product
If you’re not willing to put engineering and product cycles against BD, then don’t send your BD people out there It’s embarrassing to sign or negotiate a deal that
the company will not support with real resources Supporting BD deals often means internal projects
will get deferred
It’s very rare that a BD deal can make / save your startup – stick to your strategy Evaluating deals consumes a lot of management
cycles
Healthy Relationships Between BD and Product
Trust Engineering cannot give overly padded estimates of
delivery timelines BD cannot give overly inflated likelihood of closing for
key deals
Respect BD people cannot treat pre-deal engineering cycles
as “free” Spec work and mockups have a cost Having your VPE or CTO in meetings is very expensive
Engineering cannot treat BD people like knuckleheads
Hire the Appropriate Person
The big key deal person Licensing or distribution deal(s) with a few major
partners
The deal template person Figure out the mechanics of a deal that can be
deployed to a select number of partners with a similar structure
The volume deal person The deal is in place, go get partners
Evaluating Candidates
Rolodex / network of relevant contacts Ask around – it’s a small pool of people
Experience doing the kinds of deals you need done Licensing and distribution are not the same
Appropriate level of seniority / past experience
Revenue vs non-revenue deals
Small company vs big company experience
Style match for your corporate culture
Distribution Deals
Why is the other company interested in or willing to distribute your product?
Under what circumstances would they cut you out, do it themselves, or bring in a competitor?
How critical is what you’re doing to their overall objectives?
Are you making them money, saving them money, or costing them money?
Licensing Deals
Can you afford to pay the minimum guarantees?
Do you have the terms locked in long enough to make the economics work? Music licensing deals for streaming
Video licensing for companies like Netflix
Do you need to be the exclusive licensee of the content?
Where Many Startup BD Deals Break Down
Economic Terms Revenue splits, minimums, guarantees
When an 80 / 20 rev split isn’t really 80 / 20… Term and termination
Convenience vs Cause Notification period Duty to perform
Exclusivity and other restrictions Geographic domains Products
Indemnification and Limitation of Liability Who’s financially on the hook for how much when things
go wrong?
BD Deals and Corporate Politics
Are you dealing with the right person? Generally speaking, manager / director level
people at big companies can only say no
To whom does my deal matter and why?
Am I displacing or threatening an internal project?
What product / corporate objective is fulfilled by my deal and is it meaningful?
Does my partner ultimately want to put me out of business?
More Tips for Startups
Get performance commitments in writing People and priorities can change If they won’t put it in, there’s usually a reason
Get performance comps from past deals Make sure you have rational performance
expectations from any BD deal you do
Doing BD deals with other startups is risky
Understand who your champions and enemies are within the organization
You probably can’t afford legal action – try to avoid it