Last month i met the CEO of a 60 employees post round A startup. He asked for my view on when to hire their first business development person. I imagine many other startups are debating the same question so i thought i’d share my view here.
The answer to the question, in my view, depends on the nature of the company’s business and the type of business development opportunities the company is interested in pursuing.
For example if your target customers are Small/Medium Enterprises (SMEs) or your business model is freemium – You are targeting a big market and want to reduce your acquisition cost. Generally doing that through partners makes most sense. You should be looking for resellers and channel partners that extend your market reach to thousands of SMEs. You should consider a BD person at +100 customers. Up to that point you want to have direct access to customers to shape your sales pitch and value proposition and to have a direct feedback loop about your product. You’ll learn a lot about the way your product is used, the need it serves and the value you provide your customers when you work directly. Having said that at some point this doesn’t scale and in order to accelerate your growth and reduce your sales cost, you want to work through partners who already have established relationship and access to thousands of SMEs. If you do that, you should segment your partners as 80% of the business will come from 20% of your partners. You want to recognize and treat those partners differently. Cloudflare a CDN and security services to web and mobile sites, is a great example of a company that early on focused on channel partners. Maria Karaivanova, their Head of BD, joined when the company had 20 employees. Their go-to-market is highly dependent on thousands of channel partners
If you are targeting large enterprises – While you might still be looking for resellers, in many cases strategic alliances would be a higher priority. The key challenge in selling to large enterprises is the sales cycle and integration with a more established partner, maybe even embedding your technology into his platform makes it easier to penetrate. Many times such integration is key to acquiring customers and so you want someone to manage the communication channel with those partners. Early on you are likely to do the integration adhoc, independently of the partner but as you scale your business and as the cost of maintaining that integration grows, you want someone to manage those relationships.
If you are planning to recruit a significant number of resellers/channel partners you want to do that early in the company life cycle. You want to establish a culture that is receptive to working through partners. You’ll soon need a sizable team to manage your resellers so the person you are hiring needs to have the experience in establishing Partner Programs, segment the channel, recruiting a team etc.
If your focus on strategic partnerships and/or OEM deals, this will likely be a lower priority for the company and the company can push the decision to a later stage. Many times a company first focus on building a standalone brand before OEMing their product. The decision to hire a BD person depends on how key these partnerships are. That person needs to have experience nurturing partnerships, people skills and sometimes some product management experience.
Not not businesses are easily classified into the black and white buckets I described but hopefully this framework will help you think through the specifics of you business as you make a decision.