Prioritizing Opportunities

At an early stage company there are many unknowns when it comes to deciding on doing business deals intended to drive adoption or revenue. Is the product ready for distribution? Will this deal live up to expectations? What if the partner does something that delays a launch? How much money should we charge? Should we charge? Is the right thing to do right now?

I have found over the years that “the deals you do not do are as important as the deals you do.” A bad deal can consume and distract important resources, waste valuable time, cost money and in some cases take a company completely off the rails.

This probably sounds obvious, the real question is how to best identify what deals to do and what deals to avoid? It is not easy, especially when smart, passionate people have very strong, often reasonably informed opinions. Complicating it even more, since it is a startup, there is no track record or data. So, you need to have a way to easily assess and rationally discuss opportunities and make decisions quickly.

This is a simple matrix I have used many times to plot opportunities and lead a discussion that produces clear next steps. Measuring growth is pretty straightforward: users, revenue, page views etc. Strategic can be a bit fuzzy but, in most cases teams can agree on the high level attributes: potential investor, establishing market credibility, first step in a bigger deal etc.

The important thing is to have a basic framework for focusing the limited resources and aligning your team.balance_graphic_2

One thing I have noticed is the quadrants are a guide, the exact position in the quadrant can become a rat hole and distract a group from the main objective of focusing time and resources. This is a way to help make conversations more focused and productive.

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3 Stages of Commercialization

I have been asked by many founders and CEOs “we need to hire a BD person, do you know anyone?”  Few roles have a more varied job description than business development. It’s no wonder why it is hard to figure out who to hire, what they should do and how to measure success.

Hiring the right person based on the stage of your company may be the single greatest factor in success (or failure) in driving your business.

A person with deep industry knowledge and strong network ready to “do deals” can turn into a disaster if it is too early in a company’s product life-cycle. A product and the team building it go through cycles to establish the product’s identity and a BD person that understands this can be invaluable in shaping an product’s value proposition.

I believe there are three stages in the commercialization process and not everyone is suited for each and every stage.

1) Scouting – the earliest stage of a company, at this point business development is about identifying various routes to market, points of leverage and providing the internal team early market feedback. The ability to work closely with product and engineering teams is key skill. The BD person will spend 60% or more of their time working internally with the team to understand the product, assess the market and begin formulating the first external pitch deck. Closing deals is not a priority, getting market feedback is the primary goal.

2) Testing – once a few paths to market have been identified, it is time to try closing a few deals to test assumptions and provide measurable input before you scale the business. Analytical skills to set up a framework for what to measure and examining the data will determine if and where to scale based on the company’s strengths and vision. Refer to my other post re a framework for assessing opportunities if you need some tips. The time spent internally decreases to 40% to 50% – the feedback loop to product and engineering is critical though so it needs to be a priority.

3) Scaling – after gathering data from early deals and validating a path to achieve your goals, BD is ready to start replicating deals and putting support structure in place.  At this point it may make sense to add to the team and finding people who can take a template and scale. The time spent internally has shifted from the Scouting stage and is primarily and now an external facing role. The time internally facing will drop to 20% – 30% and should remain a priority to communicate changes in the market and partner needs.

As a leader in an early stage company, hiring for the right stage is critical so ask questions during the interview process that relate to experience relevant to the stage of your product.

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Types of Business Development

Job titles can be misleading, a product management role at one company is “program management” at another and “product marketing” at yet another. Business development is no different and maybe more confusing. I believe there are three common types of business development and in an early stage company these roles typically are combined and larger companies will have roles that focus on one particular area.

Sales – for whatever reason, some people seem to feel better about themselves with the title “business development” instead of sales. This is ridiculous. Sales is one of the most crucial roles in any business and the profession is filled with incredibly dynamic, intelligent people that play a key role in shaping the success of a company. If you sell a product or a service and carry a quota and more than 50% of your income is based on commission and you are successful, you are able to do something that only a fraction of the working population can do well. It is sales and that is something to take pride in doing and doing well.

Commercial – focuses on a specific deal type like distribution that in turns creates leverage for a company. A classic example are the toolbar deals that Google and Yahoo did years ago (these have since become less common given market saturation) where the economics and deal terms can be complex and require protracted negotiation. Another example is Coinstar’s gift card partners that create an incentive for consumers to dump jars of coins into machines in exchange for a gift card with Amazon, AMC Theaters and Starbucks.  These deals help an organization scale product distribution, generate direct or indirect revenue, increase market penetration and other business drivers that do not come from a direct sales team. While not all deals are the same, they will have the same goals and success metrics.

Product – this can range from basic technology licensing to integration or joint development deals and require a solid grasp of the technology on both sides. The ability to work well with engineers and product teams is a must, to be successful one must possess the ability to translate technology into commercial language in an agreement and effectively manage cross functional issues (legal, engineering, marketing etc.). Definitely not a procurement role, this involves things that make the product work, reduce time to market and provide scale. Think of the integration Apple, Google and Samsung have with banks and payment platforms to enable consumers to use their mobile device to pay for things at the checkout. This is an incredibly complex deal to structure that involves engineering efforts, security, intellectual property, marketing and dozens of other factors that need to be carefully thought through and negotiated. I have often suggested to individuals seeking to learn more about BD to read through a few different API agreements from different companies to get an understanding of how to successful companies approach their developer/integration programs.

New /Strategic – this combines many skills and requires diverse experience to work closely with company leadership to assess the overall business and identify new areas of growth and/or ways to transform existing business. Executives, product and engineering teams often have to focus on meeting tight deadlines, customer expectations and struggle to get the necessary external market exposure and synthesize trends and data relevant to the future of the business. The ability to both identify and assess opportunity and help a company take action that leads to something meaningful is a rare, and incredibly valuable skill. I stress execution here too, without it, even brilliant ideas are worthless. As Thomas Edison was famous for saying, “vision without execution is hallucination” and telling people about brilliant ideas without a plan to help get there and a willingness to go above and beyond to help get there probably makes you an asshole.

Hopefully this helps clarify some of what various business development people do – or don’t do in some cases.

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