Getting Aligned with Strategic Partners

As a follow-up to last month's article concerning the funding of start-up ventures, it is important to remember the following point. When entrepreneurial companies solicit money from outside sources, they have to know that the money is going to come with strings attached. These strings will have a significant effect on the long-term direction of your company.

Angel financiers and early venture capitalists are more than simple sources of money; they are strategic partners. As strategic partners, they expect to influence the direction the company takes. Because these financiers are providing money at the riskiest time in the life of a company, the level of influence may appear to be out of proportion to the amount of money provided. In reality, it may be one of the keystones of your company's success.

Angels and venture capitalists are not all the same. When looking at the early financial partners, you and your company must decide: what additional skills and resources do you need to be successful; does the company need manufacturing expertise and/or capabilities; does it need marketing expertise; does it need distribution expertise?

Your company may need all these and, in some cases, more guidance.

Engineers have not typically been exposed to these considerations for getting products to the marketplace. Even when engineers understand the issues involved, we as a group are not usually comfortable addressing them. Even as a manufacturing engineer, I look to others to provide detailed skills and expertise to actually build the products I design for manufacture.

When I talk about marketing and distribution skills, expertise and resources in this context, I am really referring to those capabilities as they relate to the specific marketplace. Not all markets are the same.

Over the years, individual markets, such as medical devices, pharmaceuticals, consumer products and commercial products, have established their own specific methodologies for distribution.

"Who do you contact to make the first sales?" As a start-up company working toward making the first sales, you need to understand who the players are and how to approach them. Angels and venture capitalists can be very important in ensuring that your company gets to the correct individuals at the proper time in the product realization process. It can be just as fatal to expose potential customers to the product too early as it can be to introduce them to the product too late. Some of the players want to be part of the solution, while others simply want their needs met.

Getting the correct strategic partner on your side is very important to seeing that you are able to hit your marks when it comes to delivering a successful product.

— Niel Leon
Committee on Engineering
Entrepreneurship
leonn@asme.org

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