Startup chicken & egg #843 – the Partner/Investor one.

We raised a seed round last year and built out the product, got early b2c revenues but with slower than expected consumer growth. We have a LOT of optimization to do to nail the b2c play and need a lot more funding and time to keep doing this. Would love to keep at this but reality is kicking in which leads me to…..

… we have been approached by a number or large partners interested in doing a deal which will help our customer acquisition and possibly bring in some revenue. It will also do wonders for validation and build our profile significantly.

To close the first partnership we need funding to get everything in place asap (read the sales spin is significantly ahead of tech reality) but the investors we’re talking to are sitting on the fence waiting for one of the deals to close….

This phase sucks. I’m considering scaling way back to conserve cash but in reality we should now be putting the foot down to ensure we can support the partnerships.

Any advice on getting thru this phase?

  • I would not let those potential partnership deals distract you. Seems to me like they’re taking away from your core business which is what you need to focus on. And, yes you should be conserving money because if you don’t get that next funding round soon and you blow through your cash too quickly, you’ll be one of those failures that people read about. There’s usually more than one way to solve a problem.

    • Absolutely! In a previous Startup I was employee #2 we made the mistake of betting hard on a partnership to have our b2c business grow, and when it blew up it was too late to give a step back. The money was gone, and time for real experimentation with acquisition ran out.

  • I cant help but agree with both the points here. One you do close a couple of deals, more than bargaining chips, you will gain the confidence and sight to see further. This does have the potential to change the game for you.

  • Thanks guys.
    I agree with you all and hence the chicken and egg conundrum.

    If I’ve learnt anything so far, it’s that pre-revenue startups are a lot about turning doubters into believers. You have a vision. A sweet spot cohort who really love your product and are paying for what you do. But you’re struggling to find enough of them to keep you going and you have a ton of optimizations to make in order to prove a sustainable b2c funnel and your short on cash and resources etc etc.
    The second thing I have learnt is that this is very much about staying alive for as long as possible to figure out what moves the needle.

    Hence the lure of the deals as they will instill belief and change perceptions which is important in terms of fundraising, PR but will also bring some traction and revenue.
    The risk is that they will distract us from our core product.

    I want to build a business here. This is about smth I believe in and can see users embracing. It’s about making a difference but also paying several mortgages.

    So – in summary I’m torn between letting people go to keep this alive (well aware of the signal that sends likely investors) or keeping the foot on the gas to have all the components in place to close that elusive deal…

    There’s no silver bullet here. Just curious to see how others have approached it before and what the outcomes were.

    Thanks for your replies so far!

  • Ignore the potential partners unless you can figure out a way to structure a deal that guarantees your startup a minimum of X revenue and Y partner actions to boost your company profile (eg on launch, BigCo agrees to feature us for at least 6mths/3X in their magazine/website/conference).

    Good luck and keep a list of the on-the-fence investors. When things go well and they come a-knocking, remember to say no or at least allow them in only at higher pricing. Also remember to reward your first believers when you find them.

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