When choosing an accelerator for your startup, one of the most important but least quantifiable aspects to judge it on is an ability to acquire partnerships to distribute your product to customers. Funding is great, learning to pitch is great, and participating in a demo day is great, but finding a distribution partnership through your accelerator’s network can be the difference between getting traction or getting deadpool’d.
Such partnerships generally revolve around a more established entity either using, reselling, or enhancing a startup’s product with their existing clients. Larger companies tend to have trouble innovating and startups can have exciting products they would like to put through their existing channels. Obviously, this makes a lot more sense in a business-to-business sense but it can also work in a consumer play under the right circumstances.
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Partnerships for distribution should revolve around a simple questions for startups: “Why do they need us?” In an ideal situation, your startup has something a larger entity needs and is not just a “nice to have.”
In this case, the partner is motivated to work with your startup and either put your product through their channels or collaborate with you on making a product work with theirs. If you’re a “nice to have,” you’ll find that your phone calls don’t get returned promptly as you’re at a lower priority to push through any bureaucracy.
A good accelerator program will figure out who your partners could be and in an ideal situation one of the mentors or partners could give you a warm introduction to help the process along. A referral from a partner or mentor in your accelerator really helps both parties involved. The larger entity can see the mentor vouching for you and the mentor can vouch for the partner.
This is actually more important than you think as a lot of companies out there love taking meetings with startups and will have them kick around of bunch of ideas without actually writing a cheque or taking them seriously. It’s like getting a creative think-tank for free.
We had a potential partner jerk us around continually saying we’d have a signed agreement “within 48 hours” before pulling the plug on a deal a couple months later after wasting a lot of our time. Larger companies have a lot more time than startups do and often they don’t really appreciate how much damage they can do by leading them on. In hindsight we should have asked for partnership references before getting too deep into talks with them but a better case would be if we were referred to a more startup-friendly firm by someone connected to our accelerator.
Resist the urge to partner with other startups for distribution. It’s tempting because you have easy access to each other and may even work in the same space but you probably aren’t getting ahead and given that both of you are in a high-risk position it becomes sort of like two drowning swimmers trying to survive off of each other.
While partnership are great way of getting distribution, they may not fit your product well especially in the consumer space. For consumer distributions there are 2 basic ways to acquire new users: existing users bringing new ones or paying for new users usually by advertising.
In the first case, it’s tempting to think that your product will be so good that word of mouth will carry, but word of mouth is slow and people only tell their friends for great products not merely good ones. Aside from things like that “Bang my Friends” app that people were talking about because they’re hilarious/outrageous/scandalous, people will only spread products when someone casually talks about a product need which isn’t that often.
However, a lot of products are inherently viral and designed for users to refer one another: Instagram was useful for posting simultaneously to Facebook and Twitter which is turn creates a viral loop. The earliest example of this was, of course, hotmail having “Want a free email account? Sign up for Hotmail today!” as the default footer on emails sent—it made every use of the product become an ad for it.
If you’re paying for new users you’ll need a way to monetize them otherwise you’ll burn too much cash too fast. In case you’re wondering why so many Facebook ads on mobile are for mobile game installs it’s because the cost of acquiring a user through paid ads is less than the expected lifetime value of a user buying whatever app you see an ad for. This method is the most straight forward but you have to watch those metrics like a hawk.
Another temptation is to think that you’ll get so much PR and media that you won’t need any other way of getting distribution. However, this is a lot harder than it sounds as media is inundated with founders begging for coverage and most of the time it only gets you a blip of traffic that quickly leaves. It’s not a sustainable plan to get distribution in the long run.
In the end, distribution all comes down to “How will customers find our product?” and it’s a tough one.
With all the startup activity there are a lot of companies trying to stand out from the crowd and you’ll need to show the market some hustle in order to get ahead of them.