How to Build Business Partnerships that will Help Your ISV Startup Grow

OEMs, resellers, and investors can all give your business a boost — if your partnerships have a solid foundation.

business partnership

The goal of any startup ISV is to become the next industry forerunner. Unfortunately, not only will the majority not become leaders of the pack, but most will go out of business with the first five years of their creation. In order to stand out from the crowd and create a successful and sustainable business, software vendors need to establish relevant partnerships to ensure growth. But, while creating business partnerships sounds easy, it can be difficult to find the right match. In addition, startup ISVs aren’t always aware of the common pitfalls that can derail their efforts. Here are five tips to help you build the right business partnerships.

OEM Partnerships are Win-Win

ISV-OEM relationships can be a fast way to add new features to a software product that would otherwise take months to develop and test in-house. By embedding another solution into your own, you can access the best of breed without having to reinvent the wheel yourself. Not only will this allow you to target new customers, but it will also help ensure that your current ones stay satisfied.

Stagnant software solutions die. For a startup ISV it is very important to have a clear development roadmap; coming out with new features that are pertinent for the end-user need to be released at consistent intervals. Ensuring customer satisfaction is key for the startup ISV, and by taking advantage of the right OEM partnerships you can be sure to respond to your customer’s needs quickly and efficiently.

Recruit Reseller Partners

Creating a reseller program is another way for the startup ISV to grow. Value-added resellers, system integrators, distributors and installation partners can help the ISV cover new territory, reach new clients, and access additional services that they may have difficulty providing customers on their own.  Partnerships that add value to the ISV should be considered over “box-movers” who may not have a lot to gain by selling software licenses. But make no mistake — you need to entice these businesses to want to partner with you. It is common for an ISV to think that resellers will resell any product, but this is simply not true. Resellers need to be convinced that they will benefit from the relationship with the ISV and that they will get a significant ROI for their efforts to sell the product. Creating a program that highlights the benefits for the reseller (margin, access to marketing support, etc.) is an important first step.

Be Wary of the Giant Partnership

ISVs often jump on the first big business opportunity that comes along, which usually presents itself in the form of a partnership.  Often, it is the first enterprise client that is looking for the ISV to modify their product specifically for them, whether that be for their own internal use, or for an external facing project of some kind. The risk is that by focusing solely on the needs of one client, you neglect the importance of having many; it is essential to weigh the advantages versus the risks of entering into such a partnership — it may become a way for the partner company to white-label your solution which could end up killing it in the long run.

Create a Channel-specific Marketing Strategy

Building a channel takes time, preparation and research to understand the markets you should address, and you’ll need a specific channel marketing outreach strategy to proactively entice companies to want to partner with you. By tailoring your messaging directly to potential channel partners so they understand the benefits of a future collaboration, you will increase the likelihood of them choosing you over your competitors. Be aware that many potential partners will expect co-marketing initiatives as part of the package — they will want your help in order to sell your product to their network, so you may need to create specific marketing materials for them to use too.

Investors

Investors can be great partners to take an ISV to the next level, but there’s a lot to be said for bootstrapping. Before partnering with any investor, it’s important to understand how that relationship may change the way the ISV is run. Investors become owners in the business; having the right one can mean gaining access to a mentor while having the wrong one can mean losing control over strategic business decisions.

What’s important to keep in mind when looking for investors is that valuation is critical for both you and them. Determining what your ISV is worth will help set the stage for the type of negotiation that is possible; if you want to give only 10 percent of your company to an investor who pays $100,000, in essence, you are saying your company is worth a million. The math is the simple part — the negotiation, less so, especially if you don’t want to give up majority ownership of your business.

Final Thoughts

Partnerships are an important way to grow your ISV startup, but choosing the right partners is an essential part of the process.  It can mean the difference between creating a sustainable collaboration and knocking the wind out of your business.  Conducting a thorough audit of the market, the potential partner types you are looking to recruit and how to approach them should be carefully planned out and well-documented; meeting with each partner personally and getting to know their value-system will also help you determine if synergy can be created.  It’s better to spend a bit more time on this initial evaluation stage as this will help save time later once the partnership is established. 

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Liz Lemarchand
Liz Lemarchand is the Chief Operating Officer of MediaDev, a global IT marketing firm. She has 20 years of marketing experience and provides strategic counsel to software vendors both large and small.