Getting started with partnerships

Technology and professional services partnerships are crucial to the success of many B2B SaaS startups. But, many startup leaders don’t appreciate how valuable partnerships can be, and it isn’t easy to know where to start.

Let’s explore the different types of partnerships that B2B software startups are typically engaged in and how partnerships can help you grow your startup.

Professional services partnerships

If you’re selling software to a business, chances are someone is selling professional services to that business (e.g., accountants, web designers, marketing agencies, ERP consultants). If your product can help an agency to solve a problem for its clients, a partnership could be a mutually beneficial opportunity. Many successful B2B SaaS businesses have accelerated their growth and improved the customer experience for their products by partnering with professional services agencies within their ecosystem (e.g., ecommerce web design agencies recommend Shopify, which has helped to drive their growth).

The simplest form for these relationships is one where agencies refer prospects to you because they trust that you can solve a problem commonly experienced by their customers. For example, an accountant that focuses on businesses in the events industry might frequently recommend specific expense tracking software to their clients because they know this is a common challenge within their customer base. These types of partners are commonly called referral partners. Your relationship with them could be informal (i.e., if your product makes their lives so much easier that they don’t need any incentive to recommend it) or driven by incentives (e.g., one-time or ongoing commissions on revenue generated from successful referrals). Note that while not all referral programs target professional services agencies (e.g., they may target customers or other individuals/businesses), this seems to be the most fruitful model in B2B SaaS.

Many software products require some configuration for prospects to adopt and use, and this configuration is often completed via in-house onboarding/activation professional services. This need forms the basis for another type of agency partnership: one where the partner agency fulfils services related to your product for your customers. The relationship here is inverted because the agency solves a problem for you (i.e., onboarding). As many startups find product-market fit, they start to grow so quickly that they cannot scale their in-house onboarding and professional services teams quickly enough to keep up. This is where outsourcing this work to partner agencies can provide a more scalable model for onboarding services (assuming these services cannot be easily eliminated through product innovation). The benefit for partner agencies is that this work comes with meagre customer acquisition costs because instead of conducting their own sales and marketing to find new clients, they receive leads from you (leads that you’ve already spent money to acquire).

Lastly, many products that target large businesses will find they frequently come by prospects who want some very specific customisations or additional functionality. Sometimes, these requests are worth considering because they will benefit the broader customer base. Otherwise, they may be so precise that they are significant distractions from your core focus. By partnering with software development agencies (and having good APIs) you can make it possible for very large customers to solve their own problems with your product as a platform.

Technology/integration partnerships

Technology partnerships are partnerships centred around the integration of external products or systems. The beauty of these partnerships is that they allow you to remain focused on solving the problem at the core of your product mission. They do this by allowing your customers to gracefully overcome the current shortcomings of your products’ features by pairing your product with another. For example, as a digital advertising product, you may recognise that your customers want the ability to retarget their prospects via email. You could build this functionality directly or simply integrate with the major email marketing platforms already being used by your customers. By integrating and partnering, you can remain focused for longer, and reserve the right to expand the scope of your product in the future when it makes more sense. These integrations can also serve as a channel for new customer acquisition. Chances are if your partnership and integration with a third party solves a problem for your customers, it probably solves a problem for your partner’s customers. Your new partner might be willing to market your solution to their customers if you solve a big enough problem for them that the integration could help them to grow or retain customers.

The most common type of integration partnership is outbound integrations. These partners are businesses whose services you integrate with, so you build, own, and maintain the technology behind the integration. Typically, these integrations extend the capability of your product (e.g., as a payment processor, you may not want to build out your own tax engine, so you partner and integrate with a business and product that is focused on this), or better fit into your ecosystem (e.g., when building a company targeting ecommerce merchants, it may be required to integrate with the various accounting systems used by these merchants).

The other type of integration is an inbound integration. These partners are businesses whose services integrate with you. The big difference here is that the partner builds, owns, and maintains the technology behind the integration. Whoever has the least leverage in the relationship (i.e., usually but not always the smallest company) typically ends up having to build and own the integration, so in the early days of your startup, you’ll have very few inbound integrations. Over time, however, as you become more dominant in your market and occupy a more critical portion of the toolkit of your customers, you will find that other businesses are willing to integrate with you.

Inbound integrations are cheap — because the partner builds, owns, and maintains the technology behind the integration, you only need to build and maintain your APIs. This incredibly scalable model is how companies like Apple, Google, Shopify, and others have become platforms. Inbound is not always better, though. While you can only build so many outbound integrations (because they require much more development effort to build and maintain), this approach gives you much more control over the functionality and reliability of the integration. Many integrations are so crucial to your product and business model that they justify the in-house development and maintenance costs.