Collaborating with a larger company can be a great way for startups to acquire new customers, further validate products or services and drive brand awareness.
But there is often one problem.
“The speed at which startups and huge corporations work are very different,” Employment Hero chief executive Ben Thompson tells StartupSmart.
“You just need to be patient and work through.”
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At the risk of disruption, many corporates are starting to understand the benefits that come from working with startups.
But securing a partnership deal takes time and founders may have to be patient. In Employment Hero’s case, that patience has paid off.
This month, the Sydney-based HR startup secured its largest partner yet after striking a deal with big four bank ANZ to reach its network of small business clients.
After raising more than $3 million in funding in mid-2016, the ANZ deal will bring Employment Hero closer to its goal of registering 10,000 businesses on the platform by 2020.
The business currently has more than 30,000 individual users, but each business that signs up brings with it multiple users.
“They approached us,” says Thompson.
“We had raised our Series A just prior to them reaching out to us so we had had some publicity and were also growing quickly.
Meanwhile, Drive Yello delivery startup Drive Yello locked in a partnership with food ordering platform Menulog in October 2016 and co-founder Steve Fanale says working with a larger business is all about “give and take”.
So what attracted ANZ to Employment Hero? What concerns do big companies have with startups? And what does your startup need to get a foot in the door of a larger player like Menulog?
Fanale and Thompson have a few answers.
Can you demonstrate your startup’s potential and value?
“The foot in the door came about through having some results before talking to them,” says Fanale, when discussing Drive Yello’s partnership with Menulog, which was acquired by UK platform Just Eat in 2015.
At that early stage, Fanale says it was really about proving potential and demonstrating the startup had a strong system and product in place.
“We’re achieving good things in the marketplace even though it’s not to the level of traction to meet initial demand, but at least we’re showing we’re growing effectively,” Fanale tells StartupSmart.
Giving Menulog confidence in the startup’s brand, team and experience, a vision and ability to scale with the platform was crucial, he says.
“At the end of the day they’ll make decisions on ensuring their brand is not tarnished,” he says.
“Give confidence around your overall offering.
“Even though we were young in its current form, there was plenty of experience to ensure they were in safe hands.
“Most importantly, we had a product that really met their needs.”
Are you ready to execute if offered a trial?
Before signing any partnership deal, most big companies will want to run a trial with your startup.
“Proving yourself in those trials is really important,” says Fanale.
Building a “good relationship” and being transparent about where you’re at and how you’re tracking is vital.
Fanale believes partnerships are “90% relationship and 10% execution to a degree”, because without a good relationship built on trust, they can crumble.
“If the relationship isn’t there, your chance of getting past first base is zero,” he says.
Is your technology secure enough?
Despite the strong alignment, Thompson says, a heavy amount of due diligence was carried out by ANZ to ensure Employment Hero’s technology is safe.
“One of Australia’s largest companies needs to be satisfied regarding the security of the product,” he says.
“A lot of time was spent on security testing and user experience [and] ensuring the product was stable and the right fit for their brand.”
Are you willing to compromise?
As in any partnership or collaboration between two separate companies, there will be times when interests clash, says Fanale.
“You have to give and take,” he says.
“Contract negotiations [are] always a bit challenging because they’ve got their interests they want to protect and you’ve got yours.
“If the individual relationships are good you tend to be able to work through those.”
What ANZ wanted to know
“[ANZ] wanted to know whether we were aligned with their vision and needs,” Thompson says.
“Our goal is to permanently improve the way employment is managed to make it easier and more rewarding.
“From conception, we’ve always wanted to get to 10,000 Australian businesses as quickly as we could. This aligned with them wanting to help their hundreds of thousands of SMEs as quickly as possible.
“We both had the same end goals.”
What Menulog wanted to know
Before Menulog partnered with Drive Yello, Fanale says his team was asked everything from how the startup had managed other commercial agreements, to its traction and growth numbers.
“They wanted to know our history both personally and from a business perspective,” he says.
“How many deliveries we were doing, what sort of investments we’ve had. They wanted to ensure we’re a stable company and we’re going to be around … good references were valuable to us.”
Start with the end in mind
“There’s a big difference in being a disruptor that actively seeks to disrupt the established players, versus one which goes out to be a partner with the big players,” says Thompson.
“Are you going to work against the big guys or go and partner with them? You need to know that.”