As an early-stage SaaS company, do you sell your solutions into different segments or buyers? Then chances are you are tailoring your messaging, packaging, and pricing to those different audiences (if you don’t, you should!). A “one-size-fits-all” approach doesn’t work, does it?
Then why do I often see early-stage SaaS companies with “one-size-fits-all” partner programs? Go to any early-stage startup’s website and you will see a “Partners” page with a “Contact Us” form. No wonder I speak with CEOs and investors who are dissatisfied with their ability to attract partners and grow mutually profitable relationships. They wouldn’t market to different end-users audiences like that? So why do they completely fail when it comes to communicating how they partner with other companies?
It really comes down to two reasons. The first is that they don’t to understand the difference between the various types of companies that might want to partner with them. And the second is that they fail to communicate properly why those companies should partner with them.
As an early-stage company, there are many different reasons why you would partner with other companies. In my experience (aka lessons learned the hard way), the way to think about partnerships is the value that those partnerships bring to your customers. Here’s a quick model I’ve used in the past:
Are you looking for third parties to simply provide you with more awareness or leads? Then you may only need a referral partner program (not to be confused with affiliate or link-sharing programs). In a survey* of almost 100 Microsoft and Google G Suite ISVs, 49% of them have referral partner programs. This is a great first step for any SaaS company considering partnerships. Referral programs can help you reach more potential users and feed leads to your Sales team. And it can be a strong “farm team” as you identify partners who might move up into a more formal reseller program if you have one.
If referral programs are all about expanding your market awareness and reach, reseller programs are about closing more business (and lowering your CAC). You want to create partnerships with third parties who are familiar with and recommending solutions to your target buyers, to hopefully close more business faster. How your sales team is structured will impact how they work with partners and the role that they expect partners to play in the sales cycle. According to the same survey, only 36% of those ISVs surveyed expected channel partners to actually close business.
Your startup might be selling a SaaS solution that requires deployment services. This may be to configure the solution or to integrate it with the customer’s existing applications and data. If that is the case you have a choice of investing in a professional services team or partnering with third parties (systems integrators or implementation partners) who provide these services to their clients (your target market). 40% of the Microsoft ISVs surveyed said that they work with third-party systems integrators to deploy solutions at their customers’ sites.
There is another important category of partnerships that SaaS companies enter into, and that is technology partnerships. These are often partnerships that help create the “whole product” in the customer’s eyes (Geoffrey Moore introduced this concept way back when…). The whole product is "everything required to assure that the target customers can fulfill their compelling reason to buy," according to Moore. It should be noted that the early adopters of your SaaS solution (or technology visionaries) don’t care about the whole product. But you care, since you want to expand your potential target market to reach buyers (pragmatists) that are more risk-averse.
Technology partnerships can range from technologies that you integrate into your solution or use (“Powered by…”) to solutions that are integrated with your SaaS application. Many early-stage companies start with a handful of technology partnerships, but then evolve to create formal programs where partners list their add-on solutions and integrations in directories. These partnerships are valuable in that they increase the value of your solution to your customers, and increase “stickiness” (while reducing churn).
I’ve described these as different partner programs with discrete different members, but I have worked with clients that have partners who can be members of different partner programs, depending on their business model (resellers with deployment capabilities, integration partners who may also resell, etc.). This requires a certain amount of flexibility but can work well.
How have software partnerships changed? What’s changed is that acquiring and implementing SaaS solutions is different from when companies sourced and acquired traditional software applications. There was less information available to buyers for product comparisons, so they relied more on trusted third parties. Now we have the Internet and crowd-sourced reviews and comparison guides. And SaaS applications are designed to be easier to acquire, deploy and use. Gone are the days where you have to also buy and configure hardware, and invest in configuration services and training. (Check out my blog post on this evolution.)
Hopefully, you can now appreciate why the “one-size-fits-all” approach doesn’t work when it comes to partnering.
As for why third parties should partner with you, that’s a whole different topic….
* “Partnering in the Cloud”, which I co-authored with the Cloud Technology Alliance. Contact me if you want a copy.