When starting a startup, naturally there is a real threat that money will run out and together with it your company.
Founders will do literally anything before letting their company go dead-pool. They won’t sleep, eat, they won’t take salary, they’ll buy the team food from their own money, they’ll move back to their parents, they’ll fly anywhere a client may be, they’ll be convincing, personal, emotional, real.
Investors would expect founders to do at least that and work relatively insanely hard before calling them to tell them their money is out.
I had the pleasure of chatting with some founders I find awesome and I noticed that there is a topic that many think about so I thought I’ll blog about it.
Question: should early stage companies try to get demand for their product by partnering with bigger companies that already have existing footprint with their target cliental.
My 2 cents: I think it’s a mistake.
I think that the most important thing, operationally, beyond the team, when a company is founded is to seek product market fit as soon as you can, and not compromise. Realize that seeking product fit can happen in a month, a year, few years or never.
Let’s say I start a company that can project Ads into the sky, and use that untapped real estate to generate ad revenue. So as I’m eating a Salad at Tel-Aviv beach, I’ll see a projected image of Hilton hotels in case I want to consider that. Should I pitch Hilton myself or should I tag team with someone that has all the Hiltons of the world already signed up?
Option 1: Tag Team with someone to get you Hilton
This can really go in two ways. You may fail landing that partnership, you won’t learn a lot about your market as there may be politics that prevent that partnership from happening, and overtime you’ll risk drying your bank account. A different option is that you’ll actually succeed, they’ll give you a lot of business/ads to project into the sky, and you would then generate revenue. The challenge here is that you’ll never really know if Hilton is happy with your product, or masked from knowing they even run on your Sky-Ad-Network. If Hilton never cared to check out if the results are good, it could be that your product is good and all is well, even if one day Hilton would check the results.
However, what happens if after a year, two or three Hilton finds out that your supply (e.g. “the sky”) is not working for them and the partnership you’ve landed, getting you all the Hiltons ends. Big risk.
Option 2: Pitching Hilton
This can also go in two options, but in here, I think both are constructive to the main goal, which is seeking product market fit. One way this can go is that Hilton will never become a client and you’ll spend years pitching them. However this is actually great, because what’s better for a founder to know that a client is not interested, it’s an important feedback and good time to adjust the product. The other way is that Hilton is actually signing up after a year of pitching and then they’ll tell you loud and clear – we are happy or not, and that feedback is gold.
Overall, while I do think that demand-side partnerships can be exciting for matured companies that are already post their market fit phase, I think for early companies it is risky and should be avoided.
I’ll finish by saying that I think failing is really ok, and better fail as fast as you can and move on, adjust the product and go back fighting over shortcuts that may look lucrative today but can become risky over time.
Don’t let others know your own clients better than you do.