As always, a nice article and good thought.

As I have seen an experienced that startups tend to spend a lot of cycles “partnering” expecting that the business will grow through that route. Your framework gives some practical guidelines on how startups should be evaluating partnering.

I thought I will add a few points, that may appear trivial or commonsense. But, it may be useful considering some of the confusion that one observes with startup companies who have several partners listed.

In essence, there is a distinction between being a partner, customer or supplier. These are sometimes mixed up. A startup is a Customer when it buys from an external company and is a supplier when it gets paid directly for the services. Whereas in partnership, there has to be interest and stake from both parties, to realize revenue from a third party together. The essential aspect of the partnership has to yield higher revenue for all partnering entities, that could not have happened without the partnering in place. Startups should therefore have a very candid evaluation criteria before they spend time (which is the most expensive resource they have), money and effort in developing partnerships. Partnership has to be thought at the business model development level, and RoIs worked carefully in terms of time and cost.

I liked the article and agree with the hypothesis. In addition I need some clarification to better understand some nuances.

One could categorize new consumption along many dimensions – a new class of product, a new channel, a new business model, or something else? For e.g. Amazon.com is old product delivered via a different channel hence a new consumption category. Similarly salesforce.com is both a new channel and a new biz model – same functionality. Intuit starting quickbooks for SMEs where they were already selling tax prep software is a new product same channel and biz model. Google starting to sell payment services to its SME customers is likely none of the above as the product already existed.

So new consumption could be either of three – is that fair?

If so, the partnership model distinction is more pronounced when the channel is what defines new consumption. If new consumption is new product, that can be pushed thru existing channel, then partnership ahead of customer traction may be a reasonable strategy - if one can find a willing channel partner. This is being demonstrated by the likes of TCS who are offering their channel to startups with no proven customer traction. Or Junglee where we realized that our product is best pushed thru existing channels (strategic investments frequently are made for this reason). Often, the channel partner may want to see customer traction in which case we are indeed compliant with the distinction you make.

So net net, the only nuance that seems worth considering separately is if the channel for product is well established then the startup should consider partnering ahead of customer traction.

Thoughts?