Finding the business development deal that is right for you
By Scott Britton
You hear the term "business development" thrown around a lot these days within the context of tech startups, but what does it actually mean? How can it help your startup?
Well, it varies from company to company, but fundamentally it can be defined as:
- Developing partnerships and relationships that enable your company to reach new customers and markets
- Creating relationships that enable you to provide additional value to customers, and in some cases extract additional value from existing customers or users
Within this overarching framework, you'll see three types of common business development deals:
Let's dive a little deeper into each of these.
Distribution deals disseminate your product or service allowing you to reach new customers/users. Great distribution deals occur when your product enhances another product's existing value proposition or experience.
An example of a distribution deal would be between Quora and the Huffington Post. The Huffington Post redistributes content from Quora while Quora gets exposure and potential users by gaining exposure to the Huffington Post's audience. The Huffington Post gets excellent content to drive engagement and page views from their readers with limited labor costs.
Product business development deals integrate two complementary products to provide additional value to each company’s existing customers/users and help attract new ones. These are often manifested in API relationships.
An example of a product deal is between Foursquare and OpenTable. This relationship allows Foursquare users to reserve a table from directly within the application using OpenTable. Foursquare wins because they can close the loop on the user experience while generating affiliate revenue. OpenTable generates revenue from the Foursquare user base while further establishing a footprint amongst a new audience.
If a company wants to receive exposure amongst a specific audience while positioning their brand in a certain way, then one way to accomplish this is through a brand enhancement business development deal.
An example of a brand deal was the Skillshare Schools initiative. Brands could establish "schools" where their employees could teach classes. For example, General Electric partnered with Skillshare to position itself as a thought leader amongst a young, hip and innovative demographic. Skillshare benefits from the brand equity of being associated with a well-established brand as well as the additional revenue from classes on the platform. There is also the potential upside of brands eventually paying for this placement.
One of the reasons there is so much ambiguity with the term "business development" is because of the variance as demonstrated above. There's no cut and dry definition and it ultimately depends on the strategic goals of your company.
Does business development make sense for your startup?
That depends on how achieving distribution, improving your product and enhancing your brand compares to other channels. Considering the resources at hand, if constructing relationships that accomplish these goals has a higher return on your time than other channels like paid marketing or expanded product development, business development might be worth pursuing.
The challenge is that there are no guarantees. One way to assess the return on business development efforts is to evaluate the outcomes of similar business development relationships. You can also talk to experienced business development professionals who spent time doing deals similar to the type of relationship you’re considering. They’ll have a read on whether or not spending time on pursuing certain types of relationships will move the needle for your company.
About Scott Britton
Scott lives in New York City and is a startup enthusiast and business development executive for SinglePlatform, which recently was acquired for $100 million by Constant Contact. He writes about business development, life hacks and personal development at Life-LongLearner.com.
Follow Scott @britton.