Editor’s Note: This post was originally published on Seattle 2.0, and imported to GeekWire as part of our acquisition of Seattle 2.0 and its archival content. For more background, see this post.
By Nathan Parcells
Someone gave me this advice really early on. They said that when two startups try to co-market or integrate their services together that it usually fails. They said it’s like trying to put two similar people together in a relationship – it sounds good on paper, but you quickly find there is no balance and you end up with two great cooks, but no one to clean up.
I didn’t initially believe this. I felt that there are just too many innovative and useful ideas pouring out of the startup community not to find a few where we could engage and accelerate both our companies. Beyond this, I thought about all the incredibly positive elements of having a shared outlook when doing biz dev work with another startup – both sides are scrappy. Both sides want to move fast. Both sides will understand if the other is in Beta, etc.
While we have had a few moderate successes in making startup to startup deals, unfortunately the majority of the time things have fallen through.
Point in case:
Over the past few months we have spent a huge amount of time attempting to integrate services with another perfectly complimentary local startup. The problem is we are rarely on the same page. When we have time to dedicate a few hours to integration they are swamped building out some new feature or product. Or, when it seems like the pieces are getting close, a strategic change creates a rift in the integration strategy. Simply put both sides are too resource strapped and too agile to push the deal through to the finish line.
The same has been true when trying to do really basic startup to startup deals. Whether link sharing or trading blog posts, these deals do happen with other startups, but at a lower hit rate then when working with bigger companies whom it’s generally much easier to grab their whole attention and energy.
When does it work?
It makes sense to think about what each side can bring to the table. An early stage startup usually has an innovative product, a new technology, and a ton of excitement. A startup generally DOES NOT have time, excess capital, or a large established audience to market to.
With most deals (especially between two companies who have never worked together before) both sides are compelled to think about their ROI and to prove in relatively short order that they are getting their time and money’s worth in the partnership. With two startups combining forces what usually happens is you can integrate products and end up with a better technology but with no distribution, no money to market it, and few ways to get an immediate return on the investment of working together.
On the other hand, if you are able to put together a deal with Microsoft, it is likely that whatever department you are working with has 50k in loose change hanging around, which can be used to promote the partnership and new product and create a success. After getting acquainted with working together it is then easier to grow that partnership into bigger and better deals.
To end on a positive:
The idea that all startup to startup deals will fail is definitely not a hard and fast rule. One shining example has been our deal with 2.0 to integrate our internship board with the new Seattle2.0 job board. Marcelo and Jennifer were fantastic business partners to work with. From developing a well-designed integration to pushing out the new content and announcement, this deal moved forward quickly and smoothly and continues to pay dividends today.
