Aesop’s fable “The Lion and the Mouse” teaches us that little friends ultimately may prove to be great friends. In the fable, a lion captures and then releases a mouse on the rodent’s claim that someday he may return the favor. Later, the lion gets stuck in a hunter’s net—but he is saved when his friend the mouse chews through the rope.
In some ways, I see an analogy with large companies partnering with small technology start-ups: Small companies, though sometimes lacking in the types of processes and experience that mark large-company projects, can prove to be great friends by looking at big-company problems with new technology, innovative business models and a fresh perspective.
Across the Battery Ventures portfolio, it is common to see mega corporations reach business agreements with very small, seed-stage companies. In fact, most seed-stage companies approaching their next round of funding have several customers with big names. So what makes this type of lion/mouse relationship successful?
To answer that question, it is worth defining how these relationships often work. The most common type of tie-up is a customer/vendor relationship–with the small company selling to the big one. For an early- or seed-stage company, the sales engagement with a large company should entail more than just an exchange of money. It may also include input on early product definition, running a proof-of-concept at scale, and willingness to be a reference. A second type of relationship is based on selling together: A start-up benefits from the large company providing access to new customers. In the case of a seed-stage company, however, this is difficult to execute and more challenging to support the pre- and post-sales activity. For this reason, let’s assume the start-up is selling to the Fortune 500 Company.
Depending on whether you are the lion or the mouse, the next logical question is, what makes this type of relationship thrive? And what causes it to fail?
If you are the mouse (i.e. a start-up):
- Locality of decision making: When a seed-stage company is selling to an organization with tens of thousands of people, it is critical to work directly with a person possessing the authority to spend money, and who is close enough to the problem being solved to understand the benefit of moving early. If you don’t, these relationships often break down.
- Opportunity on a non-critical path: Large companies judge partnership opportunities by weighing risk vs. reward. For example, a shoe company may innovate on a smartphone app because the impact of the app having a bug has limited downside for the company; it may just not work when tracking an athlete’s morning jog. The same company will be more conservative about innovating around its global supply chain, where miscues cause severe financial impact.
If you are the lion (i.e. a Fortune 500 company), key factors determining success include:
- A product’s role in the greater ecosystem: The proposed solution likely will fit into a complex system and rarely is a simple, ‘push-button’ deployment. The company needs have a plan to finance the deployment and support. If not, it could fail.
- Being nimble: A start-up has a unique ability to quickly incorporate technical feedback and critical feature requirements into a product. The vendor should ask the right ‘why’ questions to prioritize critical vs. nice-to-have features across the early set of customers.
- Being committed: Being nimble does not mean a start-up should make massive changes to its business plan or product just because a mega-company partner makes the request. If a start-up acts this way, they likely will be distracted by the next customer to come along, too.
Finding the right partner, lion or mouse, with which to work is the foundation to a successful relationship. However, the secondary lesson from the fable is that sometimes it is better to let the mouse go away and come back to help in the future, when it is bigger, older and wiser.
This is the latest in a series of blog posts by Battery’s Vice President of Business Development Scott Goering, who focuses on connecting innovative technology companies with large, Fortune 500 tech buyers.