1. How Not to Let
BD Tank Your
Startup
Charles Hudson
Venture Partner, SoftTech VC
CEO and Co-Founder, Bionic
Panda Games
2. Biz Dev is Really Simple
Business Development is a very specific function
with (only) two core activities:
License someone else’s technology or content for
use in your product or service
Distribute your product or service through someone
else’s network
Difference between business development,
Chief Revenue Officer, VP Sales, and “business
guy / gal” roles is key to understand
3. Before We Move On…
Stop! Does your startup even need BD?
What are you trying to license or distribute?
Startups that benefitted from BD
Mint (deal with Yodlee)
Google (distribution deal with Yahoo)
AdMob (global BD relationships with top carriers)
You might need a “business hire” who is not a BD
person
Build and maintain relationships with key partners
Collect valuable info about your market / space
Position your company for acquisition / exit
4. BD is a Costly Function to Staff
It can easily cost the company $200K+ for a
Director-level BD person:
Salary and benefits = $120K-$140K / year
Conferences and travel = $15K / year
Networking and client entertainment = $5K / year
Legal fees for deals = $25K+ / year
Fully-loaded BD people can easily cost you more
than a talented engineer or designer
5. BD Deals Mean Real Work for
Engineering and Product
If you’re not willing to put engineering and
product cycles against BD, then don’t send your
BD people out there
It’s embarrassing to sign or negotiate a deal that
the company will not support with real resources
Supporting BD deals often means internal projects
will get deferred
It’s very rare that a BD deal can make / save
your startup – stick to your strategy
Evaluating deals consumes a lot of management
cycles
6. Healthy Relationships Between
BD and Product
Trust
Engineering cannot give overly padded estimates of
delivery timelines
BD cannot give overly inflated likelihood of closing for
key deals
Respect
BD people cannot treat pre-deal engineering cycles
as “free”
Spec work and mockups have a cost
Having your VPE or CTO in meetings is very expensive
Engineering cannot treat BD people like
knuckleheads
7. Hire the Appropriate Person
The big key deal person
Licensing or distribution deal(s) with a few major
partners
The deal template person
Figure out the mechanics of a deal that can be
deployed to a select number of partners with a
similar structure
The volume deal person
The deal is in place, go get partners
8. Evaluating Candidates
Rolodex / network of relevant contacts
Ask around – it’s a small pool of people
Experience doing the kinds of deals you need
done
Licensing and distribution are not the same
Appropriate level of seniority / past experience
Revenue vs non-revenue deals
Small company vs big company experience
Style match for your corporate culture
9. Distribution Deals
Why is the other company interested in or willing
to distribute your product?
Under what circumstances would they cut you
out, do it themselves, or bring in a competitor?
How critical is what you’re doing to their overall
objectives?
Are you making them money, saving them
money, or costing them money?
10. Licensing Deals
Can you afford to pay the minimum
guarantees?
Do you have the terms locked in long enough to
make the economics work?
Music licensing deals for streaming
Video licensing for companies like Netflix
Do you need to be the exclusive licensee of the
content?
11. Where Many Startup BD
Deals Break Down
Economic Terms
Revenue splits, minimums, guarantees
When an 80 / 20 rev split isn’t really 80 / 20…
Term and termination
Convenience vs Cause
Notification period
Duty to perform
Exclusivity and other restrictions
Geographic domains
Products
Indemnification and Limitation of Liability
Who’s financially on the hook for how much when things
go wrong?
12. BD Deals and Corporate Politics
Are you dealing with the right person?
Generally speaking, manager / director level
people at big companies can only say no
To whom does my deal matter and why?
Am I displacing or threatening an internal project?
What product / corporate objective is fulfilled by
my deal and is it meaningful?
Does my partner ultimately want to put me out
of business?
13. More Tips for Startups
Get performance commitments in writing
People and priorities can change
If they won’t put it in, there’s usually a reason
Get performance comps from past deals
Make sure you have rational performance
expectations from any BD deal you do
Doing BD deals with other startups is risky
Understand who your champions and enemies are
within the organization
You probably can’t afford legal action – try to avoid it
