This is the fourth post in a series focused on the topic of “Business Development”. In my first post – Introducing the Guide to Business Development and Partnerships – I provide a curated list of articles written by “experts” on the topic of Biz Dev. The first four sections of the guide are focused on the “What, Why, When and How” with regards to Biz Dev. In my second post, I examine the “What”. In my third post, I examine the “Why”. In this post, I tackle the “When”. (Note that while most of the ideas in this post are applicable to all companies regardless of industry, this post is geared primarily to B2B SaaS companies.)
As I have discussed previously, the term “Business Development” is neither well defined nor well understood. If you ask ten people to define “Biz Dev”, you are likely to get ten different responses, ranging in focus from sales and lead generation to M&A. Likewise, people have varying opinions as to when (if ever) a company should invest in Biz Dev. Here is a sample of opinions from some well-known VC’s:
- Paul Graham from Y Combinator argues that raw start-ups should never pursue partnerships; only when a company is “large” – defined as more than 150 employees – should they consider Biz Dev.
- Jason Lemkin from Storm Ventures believes that companies should invest in Biz Dev relatively early – meaning $2 million in revenue.
- David Cowan from Bessemer recommends that companies should hold off on Biz Dev until they hit $10+ million in revenue ($1 million in MRR).
- OpenView states that $20 million in revenue is the magic number.
- Neeraj Agrawal at Battery believes that $40 million in revenue is the right number.
And there are plenty of folks who believe that Biz Dev is largely a distraction, and that companies should avoid partnerships altogether.
I have two strong beliefs:
- Every company should invest in Biz Dev.
- The “right” time to invest in Biz Dev depends on several factors, including the specific Biz Dev model you are pursuing. But in general, once you have achieved some early “traction” – meaning your company has demonstrated that it can repeatedly build, market, sell, and renew your product on your own – you should consider investing in Biz Dev. (1)
(And yes – I am a big fan of Jason Lemkin and generally believe his word is the gospel, so it is no surprise that I basically agree with him.)
Let me dig into these two ideas further. Continue reading