Tag Archives: technology companies

Understanding the mechanics of partnering with “big companies” with a large channel

As exciting as it sounds, when a business development or partner sales representative from a large company in your domain calls you, it tends to, in most cases, generate more work than get customers in the short term for a startup.

The first part of partnering with a large company is to understand when you are ready to “sell with” or “sell through” the larger company.

In theory, partnering sounds awesome. The large company has a huge installed based, they may not have a product competitive to the one you posses and your solution fills a gap they may have in their portfolio.

In practice the mechanics of the partnership, the logistics, elapsed time and commercial terms are the things that wear you down.

First realize that they are multiple “players” within the large company – if it is a large technology company, they are very much engineering driven – so the internal engineering teams have a preference to build not buy or partner. While the product management teams might have a more outside-in view, it is also likely they will prefer to build internally (“I dont think the product will take too long to build” OR “We can build what that startup built in 3 months with 3 resources”).

Then you have the marketing teams, which tend to be consumed (in larger companies) with the current quarter’s lead generation or to focus on helping their sales team’s quarterly goals. While they would like to partner, it is with the intent to have their message be more “cool”, “relevant” or “credible” with potential customers or analysts / press etc.

The sales teams would like to partner if it helps them get the deal done. If they do not get credit for the deal, (or quota relief), no amount of convincing will get them to partner with your startup.

I am going to skip over the other incidental teams such as Finance, Legal and Services team, since they tend to get involved in the back end of most partnership opportunities and rarely lead.

That leaves you with the Business Development team – who reached out to you in the first place. In most large technology companies, they are chartered with “inorganic” growth – or the ability to generate revenue either by having other companies sell their products or helping revenues grow by selling other products the company does not build itself.

In larger technology companies, most BD organizations report either to the Sales team or the Marketing team. In less than 10% of the companies they might report directly to the CEO (via the Corporate Development organization or Finance in even rarer cases).

Most business development professionals are well meaning, have an outside in market perspective and are keen to make deals happen, but, in most companies, they tend to execute deals and influence the strategy, not come up with it.

Meaning, they can make the deal happen if the product or sales teams desire, or they can say no to a deal, but they rarely initiate the deal. There are exceptions.

So, what should you do when a Business development person reaches out to you to partner?

First, ask them to help you understand the dynamics of their organization and their process.

Typically, they will have a 3 or 5 step process.

Startup Partnership Business Development Process
Startup Partnership Business Development Process

Step 1: Layout the market scenario, including product fit, competitive roadmap, etc. and get buy in from Engineering and the product teams. Obtain an executive champion

Step 2: Layout the Go to market plans, with help from the marketing and sales teams. Secure the executive champion for post integration.

Step 3: Detail the financial impact – the investment to be made, the potential revenue impact, the opportunity. Secure the budget needed for the various teams for the deal.

Step 4: Get buy-in to start negotiations with your startup. This includes discussion with their legal team on the framework of the agreement, discussions with your startup on the roles, responsibilities and work each team needs to do to be successful. This includes defining success with milestones at each stage.

Step 5: Final contract completion and roadmap for the partnership with the outline of the announcements, etc.

This entire 5 step process usually takes months if not 2 quarters on average.

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How much should you pay for an engineer / developer in #Bangalore? Winter 2013 edition

Many entrepreneurs from outside Bangalore and larger company VP’s of Engineering from the US, who wish to relocate often ask me this question – How much should I pay developers / engineers in Bangalore?

That is a very tough question to answer overall, but I have noticed some patterns based on working with many startups here and also have the information on the salary bands for several large technology companies here in Bangalore.

The best way to think about how much to pay is by giving salary bands and considering the parameters.

There are 3 primary parameters I have seen used when people hire folks to determine their salary.

1. Experience – usually measured in # of years working on relevant and related technologies. A rule of thumb I have seen is 1.2 to 1.5 times the number of years of experience + starting salary of a fresh graduate at 2L ($3K) per year to 6L ($10K) per year. For example, if you are looking to hire a developer with 5 years of experience, then you will pay 5 years times 1.2 plus 2L per year if you are a startup that’s not funded.

2. Type of technology – The more arcane the technology the more you can expect to pay for it. For example, you can expect to pay much less for a person who knows PHP and more for someone who knows Android app dev or Ruby on Rails. Some common technologies and your base times multiple is below. I am assuming php developer is the base at Rs. 1. All others are multiple of what you’d pay the php developer. I dont mean this to think of php developers as bottom of the pool, but that’s the most prevalent skill, so the supply of engineers is more than the demand, making it a skill that’s easiest to hire and least expensive as well.

a) php developer = 1

b) Javascript + HTML (front end) = 0.9 – 1.2

c) Ruby = 1.2 – 1.5

d) Python = 1.4 – 1.7

e) Android = 1.3 – 1.8

f) iOS = 1.4 – 1.9

3. Stage of company. Generally a company, which is bootstrapped pays less and one that is funded pays more. Larger the company, the more you are likely to pay, If the unfunded company pays INR 1, then I have seen number of upto 2.3 times that being paid by larger technology companies.

So, if you are looking to hire a developer or a team, how do you decide how much to pay?

Step 1: Start with fresh graduates at 2L ($3K) per year if you are a new startup and go up to INR 6L ($10K) if you are a larger established company in the US for the same fresh graduate.

Step 2: For people with experience, expect to pay 1.2 times their # of years of experience added to their salary. So someone with 2 years experience would get 2.4 (1.2 times 2) + 2L to 10K depending on your company size.

Step 3: Finally depending on your technology stack add the multiplier above. So if you are looking to hire a Ruby on Rails developer with 2 years experience for a startup, then:

(2L (fresh grad at an unfunded startup) + 2.4L (for 2 years experience) ) * 1.2 (for Ruby) = ~5 to 6L per year or about $9K to $10K.

Two other points, that are VERY important.

1. To determine if the person is *good* I’d recommend you get them on board for a week to a month before you hire. Don’t use this formula blindly and pay a person who is not good a boatload of money to get disappointed.

2. Most people use salary at the previous job plus a 20-50% uplift (or raise). I think that works for most, but if you have a superstar candidate I’d go back to this formula.

P.S. There’s no good way to determine a good candidate except working with them. I dont take reference checks in India seriously – more on that for another post. I prefer recommended candidates from people I know very well.