Many promising startups have blown up due to ill-advised business development deals that swelled teams in a bout of euphoria only to see them wither if interest and focus from their partner wanes. Ask yourself these questions before going whale hunting:
Once that money is spent, what will the ongoing revenue be? What is the opportunity cost of not supporting the current business plan?
If the project will allow the startup to speed up the development of a core technology that is generally applicable to other customers, it would seem far more worthy of consideration.
When considering a high-risk, high-reward partnership, founders need to spend time envisioning a gruesome demise.
Founders with little exposure to big companies are susceptible to misreading cues.
Startups often drown in the number of process leviathans required to make the smallest of improvements while this is not the case for big companies.
Promising projects can die on the vine because the internal champion gets reassigned or leaves the company. Successful partnerships will involve multiple high-level people from the larger organization.
Below the level of a VP or CXO-level executive, we’ve seen startups spend large sums and risk their future on what amounts to a proof of concept project for a mid-level director with no real juice.
Founders considering competing with another startup should give serious thought to skipping the process and building out a less concentrated revenue base with fewer impediments while your competitors fight to the death.