The Basics Of Partnerships In Startups 

Virtually all significant endeavors are products of collaboration. With a few exceptions, many of today’s big-time companies started out with several people sharing similar goals and then deciding to work together to achieve the same vision. Work is indeed easier when you don’t have to do everything alone. Indeed, collaborative thinking abounds in the world of business, as evidenced by the frequent mergers and partnerships we hear in media. 

 

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The same logic holds for startups, and arguably they stand to gain even more from partnerships than more established firms. By definition, startups are rapidly growing entities navigating new niche markets, which entail higher risk exposure and stiffer competition.  

 

While not required, forming partnerships can be a way to sustain this rapid growth, enabling startups to expand their operations and to reach out to more potential customers. This article discusses the benefits of partnerships; the common partners sought out by startups and some pieces of advice for those interested in creating more partnerships. 

 

Why Partner? 

The advantages that a firm gets from partnerships are dependent on the nature of the partner. However, these benefits usually are of two types: money and experience. While all partnerships affect the bottom line, some provide direct financial benefits for the startup while others work indirectly by providing knowledge or guidance. 

 

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Depending on the terms of the partnership, some partners can provide additional seed money, which can be used to cover part of the expenses of running the startup. As startups usually do not achieve positive cash flow within the first few years of operation, this seed money can be useful in maintaining rapid growth and protecting the firm from any financial shocks. Aside from finances, partners can also provide less direct support, such as the use of their services or equipment at free or reduced prices.  

 

Even if partners cannot provide money or goods, they can still be useful by providing insight and knowledge. This case applies to partners that are already established within related industries or experts that specialize in a particular aspect of the business.  

 

By using their experience, these partners can provide crucial information on useful shortcuts, industry secrets, and business methods that work. In this way, it reduces the amount of trial and error that the startup needs to do, ultimately resulting in less wasted time and resources. 

 

Common Partnerships 

A popular type of partnership involves one or more corporations. Being more mature, corporations are valuable sources of useful knowledge, which they draw from their many years of experience. They also tend to have higher amounts of capital, as well as considerable influence over their industry. Startups can hasten their growth by partnering up with corporations. 

 

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In addition, startups can also consider partnering up with firms that offer complementary goods or services. For example, a startup focusing on 3D printing can partner up with an art museum, or a renewable energy startup can partner with the local government of a smart city. By partnering with similar firms, a healthy give-and-take relationship naturally forms.  

 

Finally, startups can partner with suppliers and retailers. These firms can help bring your product closer to your intended market. As their business involves delivery of products from producers to consumers, these firms also have considerable expertise in supply chain operations. Outsourcing your distribution operations allows your startup to focus on your core business. 

 

Partnership Tips 

When attempting to get new partners, always take note that partnerships are two-way endeavors. Like all other relationships, partnerships, where one party contributes unequally, are bound to fail. Make sure to maximize reciprocation as much as possible to reap the full benefits of the partnership. 

 

 

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Despite this, make sure that any partnerships you enter are relevant for your business. Not all partnerships are useful, and sometimes they lose value as the startup matures. Be willing to end relationships that are no longer relevant, instead of letting them rot without closure. Follow these guidelines to optimize your partnerships and ensure win-win scenarios for all involved parties.