Joint Ventures

Have you ever created a joint venture instead of building out the company yourself?

Jason Gorham Corporate Executive Recruiter at Aflac

June 7th, 2015

I was recently speaking to a advisor that said it maybe a good idea to take this idea to a partner and have them build it in-house as it compliments what their platform does.  It would be a Intrapreneurship where I'm working for the company with some equity to build out the idea.  Currently we don't have a cto or development team so it would allow us to take the product to market at lot faster and without as much risk.

I’m curious if anyone else have been down this path and can share some pro’s and cons?  One of my biggest concerns is that I can pitch the joint venture partner and they take the idea an execute it themselves. 

Michael Brill Technology startup exec focused on AI-driven products

June 7th, 2015

How is this a joint venture? A larger company may be interested in a JV if *you* have the execution capability that accelerates time to market and/or reduces risk for them. But, as I read it, you want them to hire you and then hire a team to implement your idea and the ultimately spin it off as a separate entity. Unless your idea is to harness dark energy or some sort of device that makes Putin want to knit tea cozies all day, it seems like a stretch.

Paul Travis Multifaceted Online Executor: Product Marketing to Program Mgmt. to Business Development

June 7th, 2015

I think that Jason is getting advice from someone who believes in the power of leveraging a bigger player in the market, who already has plenty ahead of them, and who might welcome an industrious "go-getter General Manager" to run the initiative (getting 70% of a new, natural market they haven't yet sought to own -- instead of it being "captured" by a competitor).

I think that Michael, astutely, knows how companies like Microsoft (and others, but I have more direct experience with MS) will suck in all your data about the market -- and then go do it themselves if it's big enough and is already on their strategic roadmap.

The thing I can say I did (and it's been a couple decades now) is bring a new retail foodservice concept to JV partners instead of starting the whole thing from scratch.  Both were manufacturers -- one local with refrigerated products, the other national with frozen products.  I never got to an equity conversation because both of them backed away for different reasons -- one had just gone public and his board wouldn't hear of any distractions, the other just candidly convinced me he didn't want to go national.

Anyway the last thing I'll offer is a suggestion: approach multiple competitors.  Don't wave in their face that you're talking to their competitors; they'll figure it out if they're smart and you can certainly drop a hint.  Don't give away so much that the one you don't choose has marching orders to roll out instant competition.  But it's probably not something they haven't thought about before either.

Good luck!

Karl Schulmeisters Founder ExStreamVR

June 8th, 2015

Well essentially this does not sound like a Joint Venture but rather an M&A for Talent. Not a bad idea, but what it does is two things:

  1. it reduces your risk and costs dramatically
  2. the price for that is reduced upside potential

Not necessarily a bad tradeoff but that is really what you are talking about here.  A true "Joint Venture" would be a case where you build out the MVP  and then go to the partner  and offer to do a joint deal.  Yes MSFT has a long long long track record of engaging with a "partner" in a market they want to get into for a fixed period of time, and then blowing that partner off. 

I've sat on both sides of that table with MSFT.   The most famous case of this was probably Media Player and Real Networks where the CEO Rob Glazer ended up even giving testimony to Congress.  The irony to me was that I had watched Rob do exactly this strategy to other partners when he was working for Microsoft - so when he opted for the JV with Microsoft, he full well knew what the MSFT strategy was going to be

but setting that aside.- what it sounds like is that your advisor doesn't believe you can execute an MVP given your current configuration and team.  That may or may not be accurate. 

Pitching an idea as a way of getting hired is a time honored technique and works pretty well.  But understand that this is what you are doing.  You are walking away from owning the startup

Paul Sheppard Founding Partner

June 8th, 2015

There is some mileage in this discussion.

Generic point, that Entrepreneurs have a tendency to want to do everything themselves and to build a stand alone company that supports their innovation covering across sales and marketing through operations and manufacturing etc.

It's worth standing back and ask if the Entrepreneur has the experience to develop these functions in a start up company, and to continue to develop these functions as the company moves through various initial growth stage.  Would it be better to create a JV from day one with a company already present with established channels to market in the target market?

This leads to an obvious question (frequently not positioned correctly) of considering that the Entrepreneur has the idea and innovation, and this is where their focus should be.  Developing a stand alone business to support the innovation can be a distraction, and perhaps the model can be developed more quickly and more efficiently through a process of partnering with complimentary businesses.

Quite a number of start up's end up evolving through a partnering process, and therefore worth asking the question at the start of the project.

Ken Hollowell Ken Hollowell President/CEO at Profran

June 8th, 2015

If you would like to phone me I'll be glad to discuss your concerns. Ken 407-363-3545

Eric Sullivan CEO at FoundationLab

June 8th, 2015

Well there are legal ways to protect yourself as you share the idea with them and so forth to gauge interest such as an NDA so I would start there and possibly consult your lawyer on other options that might add more protection.