4 Tips for Startups Looking to Partner

July 8th, 2014 / Comments Off on 4 Tips for Startups Looking to Partner

There’s more in all of us and there’s more in all of us together. When we combine wisdom and efforts—and the right intentions—amazing things happen.

We see this proven time and again in the technology industry. This is what the open-source movement is all about. And, we see online communities achieve incredible things. At eBay, I witnessed how the community made the marketplace stronger.

That was an idea I borrowed to build WIN, my investment network. Our portfolio companies are made stronger by the community of experienced affiliates who not only provide funding, but who also provide coveted advice. Recently we launched a new platform, FounderExchange, where entrepreneurs can easily access affiliates and can collaborate. One of the biggest pieces of this is that the information exchanged is not just shared with one entrepreneur, but with all the portfolio entrepreneurs—providing ease and scale.

Of course I am far from the only investor who uses this model. In general, we are seeing a trend where angels and super angels collaborate in order to help their entrepreneurs to be more successful. While competition for deal flow is still intense, we see lots of collaboration between investors on making companies stronger and better.

Look at their track record. Are they known for lots of sharp elbows or for collaborative and strong relationships. Reference how they treat other people. Is there trust, or not?What do you do to make the most out of pivotal partnerships? Here are a few things to keep in mind to select partners wisely:

Craft agreements carefully. Detail what both parties are trying to achieve. Clarify how much protection you have and how confidential everything is.

Make sure the purpose is clear; then put together frameworks and rewards that are aligned and consistent throughout:

Align everyone. In the early days at eBay we struggled with system issues and we needed to work on these with one of our suppliers, Sun Microsystems. CEO Scott McNealy was a tremendous partner and was willing to demonstrate his commitment by aligning Sun’s executive compensation to our success.  Sun agreed to carry our system availability goal as a key component of their bonus plan. We had metrics that reflected how available our site was to our consumers. One hundred percent uptime,  a measure of computer operating system reliability means always available, 99.999% gives you five minutes and 35 seconds of downtime a year. If one of us won, we all won.

Incent everyone. Another time, during a big software implementation, we made our systems integrator, Accenture do the project on a fixed price basis, but we offered a bonus if it was completed earlier and if the quality bar was higher. Accenture had a very happy client and received a several hundred-thousand dollar bonus as a thank you.  The project was so well received it was a Smithsonian award nominee for IT projects.

I learned the incentive practice the hard way. If someone is going to make a significant amount more by taking longer, their interests may not be aligned with yours. In the case referenced, every change made cost us more in time and money.  It was win/lose. In another example, the vendor was paid by time and material, so when we screwed up, they made more money—and it took us six months longer to have the project finished.

Remember a lot of folks are very good and smart at optimizing for their own companies, but optimizing for everyone is what collaboration is all about. Great collaborations always have a magic formula where 1+1 = 3.

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