Ep. #880 - How Startups Can Partner With Major Companies

00:00.00

Matt Watson

And we’re back for another episode of the Startup Hustle. This is your host today, Matt Watson. And I’m excited to be joined today by Bob Rosin, who is a partner at Defy Venture Capital firm. We’re mostly talking about his journey and how startups can partner with other companies. And the pros, cons, advantages, things to watch out for; all those kinds of things with partnerships for early-stage startups.

Today’s episode of Startup Hustle is sponsored by fullscale.io, helping you hire software developers quickly and affordably. Full Scale can help you build a team to do whatever you want to do. If you want to build software, we can help you.

So Bob, Mr. Rosin, how are you doing today?

00:42.50

Bob Rosin

I’m doing great Matt. Thank you so much for having me on the podcast today.

01:32.82

Matt Watson

Absolutely. You know I always get a little nervous when I’m talking to somebody from a venture capital firm. Honestly, I haven’t had a lot of good experiences with them and they always tell me no, I always get rejected. It’s kind of like dating like I just.

02:09.66

Matt Watson

Everybody says no like it’s just not good. Maybe it’s me. I don’t know.

01:28.78

Bob Rosin

I’ve been on the other side with the table before. I’d been a founder at then 3 startups. And I definitely formed strong opinions about what I liked about certain VCs, who I met with, and what I wanted in an investor. And so I always thought someday, hopefully, I’ll have the opportunity to be on the other side. So it’s a privilege now to be in this role.

03:21.80

Matt Watson

Well as a founder, I just want you to give me as much money as I want. And you don’t worry about losing it right? I mean is that the service you provide?

02:49.18

Bob Rosin

Exactly. But I’d say capital is an important part of the equation. It’s not everything but you know one of the funny things people talk about in this business. We end up.

03:55.32

Matt Watson

Well well.

03:28.30

Bob Rosin

You know we only invest in a small fraction. You know, less than 1% of the companies we talk with we meet with and so your reputation is really defined by the companies that you don’t invest in in a lot of ways and so how do you? How do you interact with people? I remember when I was a founder. There were some investors who.

04:30.54

Matt Watson

Yeah, yeah.

04:05.48

Bob Rosin

They passed on my company. They didn’t want to invest in my company but I still remember the conversations because I learned a lot and they were you know I had a really good interaction with. So I think it’s a big part of it.

05:09.30

Matt Watson

1% man that’s like my probably my win-loss ratio on dating too. But so tell us a little bit about um your background and how you went from founder to the other side of the table to Vc I love to hear more about that.

04:35.92

Bob Rosin

I.

05:00.28

Bob Rosin

And yeah, sure I um I ended up doing 3 startups. The first of which I started myself when I was in school and then two which I was not the initial founder of but I joined the early team and i. My first one. So what? what? I would say is in all three cases we had the right idea and so having the right kind of technology vision and the right idea of how to market would play out certainly helped us raise a lot of capital raised over none from lots of VCs. Great folks like to quiet. Mark Andrews and others. But ultimately the first None companies both failed and the second when we actually got 25 to 25000000 a year in revenue and we still failed so it’s not enough just to have the right idea right.

07:22.52

Matt Watson

Naing None in revenue and still failed.

06:47.52

Bob Rosin

And still failed So it’s um, you know obviously getting to that point we feel like we accomplished a lot but there’s a lot of things you need to get right in order to have a successful company in the end. So I learned a ton through those experiences and…

07:57.26

Matt Watson

How so unless you’re a startup that is doing 25000000 in revenue. But you’re actually losing like another 50000000 how do you? How do you fail at None in revenue like just the operational costs were more than that like losing too much money like.

07:50.82

Bob Rosin

It. So ah, a lot of times what helps companies grow very fast is because there’s an underlying market trend, and these market Trends If it’s a wave that you can ride the wave. It can really pull you but then these do these markets do transition very quickly in the case of the second company.

08:36.53

Matt Watson

Um, curious.

08:28.98

Bob Rosin

We had a crazy idea. It was actually a hardware company. We had the idea that people this is in 2002 we had the idea that people would want to have a computer that they could put in their pocket. So imagine a device that you could put in your back pocket with a five-inch touchscreen wireless internet connection.

09:45.90

Matt Watson

Hold on I got one I got one here you can no nobody can see it on our podcast but I’m holding it up for you to see it. It’s a phone when I got one of those.

09:04.82

Bob Rosin

You could run all of your apps, you got the internet. You got none, right? but you see the idea was correct and so we like we understood I think before a lot of folks that that was something that people would want to have. And the technologies were just kind of becoming available to make that kind of product possible but we made um a certain set of bets. We. We made a bet on a certain architecture the pc architecture x none becoming kind of ah better at ah. Using power so lower power consumption and the alternative was a different processing architecture called arm at the time semiconductor ships running an arm were not powerful enough really to run full apps but they were just getting there and you know. The bet that Apple made ah was to bet on arm and bet that you could convince app developers to rewrite applications from scratch and that over time as the processors became more powerful. You could do more and more. But if you started with just the right minimal set of apps.

12:17.26

Matt Watson

Um, yeah, and Moore’s law kicked in.

11:36.64

Bob Rosin

Then you could win them and obviously Apple played that correctly and so Moore’s law worked really well in that in that case and so um, we um, you know we were on the wrong side of it. So.

12:40.50

Matt Watson

Well and this is a good example. You say oh 25000000 how do you fail from there. Well, market conditions change right? like I mean you could have also been like a market leader and then all of a sudden Apple comes by and like takes over the market and you’re just screwed, right? You just never know.

12:11.86

Bob Rosin

And.

12:30.94

Bob Rosin

I yeah but I wouldn’t say it was because it was Apple necessarily I think it was that they actually made the right product decisions, right? They made the right that they had the right vision.

13:36.20

Matt Watson

So so tell us more. How did you go from founder? And sounds like you’ve done a lot of cool stuff in your background to the VC side of this.

13:12.56

Bob Rosin

So the third startup that I was involved in was a company called quick and we were again we had a technology thesis which was that mobile networks. You know cell phone networks would as they became. more and more capable it would be possible to do video on phones and that was not really obvious to everyone at the time. But if you looked at the technology trends. It was pretty obvious technically that you could do video so we built what was the none live streaming app on phones and we had to actually hack the ah. Camera API and iPhone because Apple didn’t support it at the time and we got in some trouble for that. But we ended up building the none live streaming app. It became a social experience and we got quite a lot of buzz as a way to do live streaming from phones. Um, what we found was that. Um, people would love the idea they would use it once and they would never come back and then we and we pivoted into a video calling experience. So if you take None live streams and put them together bidirectionally, you have a video call, and so we became really the none successful video calling app on phones.

15:43.18

Matt Watson

Yeah, it was novel.

15:35.00

Bob Rosin

And I remember we launched with sprint on a Friday and then the following Monday Apple again comes up Apple launched the iPhone 4 and Facetime was the kind of showcase feature and we were off to the races because we had ah the alternative to Facetime. And so if you were anyone in the mobile ecosystem. Besides Apple if you were you know an OEM like a Samsung or anyone else or if you were a carrier in us and you were not at and t iPhone was still exclusive on at and t so everyone else needed to have.

17:24.40

Matt Watson

And.

16:50.28

Bob Rosin

Video calling and we were in the right place at that point, and so we did partnerships with essentially everybody in the mobile ecosystem and then we were always worried about kind of the £800 gorilla which was Skype Skype was the leader in video calling by far on the desktop. And everybody used at the time Skype and for video calls and we were always worried what they would do in mobile but they didn’t really have the right architecture for mobile and in the end, they acquired us and we became the mobile team at Skype I got asked. Yeah, and then I asked to stay on to lead partnerships because ah.

18:30.70

Matt Watson

Oh wow.

18:03.50

Bob Rosin

And they were like your partnerships are better than our partnerships and you guys are like a tiny little company. So maybe you should run that team here so that was my transition from being kind of you know founder kind of business overall business leader at startups to kind of larger the world of larger companies.

19:13.40

Matt Watson

So so when you when they got acquired was that acquired by Skype or acquired afterward when it became Microsoft it was l skype. Okay.

18:38.62

Bob Rosin

When you.

18:46.68

Bob Rosin

It was Skype at the time. It was posted on eBay pre-mics. So this is during the Silver Lake period if you will.

19:47.38

Matt Watson

Okay, very cool. Cool story man. Love it. So you talked about you know you know how you’re you’re doing partnerships for Skype. So then how did that lead you to the VC side of this?

19:34.16

Bob Rosin

And well, there are a few steps in between so from Skype, I mean Skype was a really exciting experience. We ended up getting acquired by Microsoft as you mentioned and then um I established at Microsoft for you know, None ars in a day and then i. I left and I I had a friend who was at Linkedin and I loved using Linkedin because I felt I loved looking and being able to research people if I was going to you know have a meeting I’d always be looking people up and so I got invited to take a similar role at Linkedin where I would lead partnerships. Business development for the company and site I couldn’t refuse that offer so I joined Linkedin and I ended up staying there for about none years and I really loved it. There. It was a great, just a great set of people very mission-oriented company, and just a wonderful. Learning experience really for me and then Linkedin ended up getting acquired by Microsoft in the end as well and again I had kind of been at Microsoft as it turns out. It was a very different Microsoft than the none time and Linkedin has really done very well under Microsoft.

22:17.30

Matt Watson

Um, yeah.

22:06.84

Bob Rosin

Really has retained its autonomy but I you know I say for a year and then ah and I decide to leave and I felt at that point about wanting to do venture I got involved in advising startups often on partnership Strategy. Ah, but in general advising and then I was doing some angel investing which is really enjoying and one of my. Classmates from business school actually had started this firm Defy and it invited me to to join them on that journey and at the time I had an offer to to join another company which was stripe the payments company and I had been following them closely and was just fascinated by um. You know their go-to-market model, particularly around how they were able to kind of platforms as partners to acquire small businesses but also just everything about Stripe was fascinating and so I um want to learn more about payments and fintech as well. So I ended up joining Stripe as head of partnerships there and. And then after I end up leaving stripe and joining my my friends here at Defy shortly after.

24:51.12

Matt Watson

Okay, awesome man. Well, that’s great. So I’d love to talk more about the partnership side sounds like you have a lot of experience and partnerships and business development. So I think as an early stage startup. We all you know, have these big dreams of a partnership and. My very first company that I had at the time at called Venn solutions at the time it was actually called thenn stickers in the early days we ah we created a software to print ah the stickers you see at use cars. So if you go look shoppy use cars or like stickers on the windows and say like your make model and all the equipment the price and all that you know you.

25:13.68

Bob Rosin

Sure I.

26:07.44

Matt Watson

Run around the lot and you you know they all have these like basically price tags on them right? Anyways, we partnered with a company. Um, that was the largest company and in our motive that sold the paper that that those were needed to print on and every dealership had their own designs and whatever. And we got this partnership with them and they were gonna resell our product and we thought we were gonna be billionaires like we thought this was like a home Runn Grand Slam like you know our Go-to-market Strategy is done. Let’s pop champagne like you know we we we’re going to the Moon. Maybe.

26:15.62

Bob Rosin

And.

27:19.26

Matt Watson

And you know like a year later not a damn thing happened and that was a huge waste of time and um, you know that forever jaded my opinion on partnerships and love to hear your feedback around partnerships and you know your experience with them and how to how to be successful with them.

26:45.98

Bob Rosin

Yeah.

26:57.48

Bob Rosin

I yeah.

27:13.38

Bob Rosin

You? Yeah well I think your example is the perfect example of what happens most often with with when people often. They’re a startup, and they think they’re going to get this big deal with a big company that’s going to resell their product and nothing ever happens. So um.

27:58.76

Matt Watson

Because I obviously didn’t get it figured out.

27:53.12

Bob Rosin

I think it’s a good good segue I mean I can um, ah ah so I guess None off just thinking about maybe stepping back from partnerships like and given an analogy.

28:37.82

Matt Watson

At the end of the day we just spent a lot of money on Champagne and that was it.

28:24.38

Bob Rosin

I guess it’s a metaphor in nature. You have this notion of symbiosis right? where you have like organisms that um you know work together in certain ways right? and you can think of that like partnerships similarly and in nature you have parasites where it’s one company. 1 not 1 company but it’s None organism. That’s really, um, you know, maybe latching onto another one and kind of sucking in the life out of it. You know trying to get benefit just in one direction then you have it. There’s 3 types just parasitic. There’s commensal which is the example here is like a. Ah, Ramora that tracks a shark where you know the shark swimming around the shark eats a dinner and there’s little you know particles of food that float away and the ramorras are able to eat that stuff and they get kind of a free lunch.

30:38.52

Matt Watson

E.

30:12.80

Bob Rosin

Um, but it doesn’t really hurt the shark doesn’t lose much for it and maybe they’re a little bit helpful on the side, and then you have mutual symbiosis and this is where the None organisms kind of work together and help each other and so it’s pretty obvious how this applies to. Business partnerships you know if if you think about a partnership where it’s really about you and the benefit you’re going to get from this other company. It’s probably not going to take you very far and ultimately what you want to achieve is something where the partner is getting feels like they’re getting the benefit.

32:05.30

Matt Watson

Right.

31:27.00

Bob Rosin

And you are an enabler to help them get the benefit that they’re seeking So that’s kind of an overarching framework to think about like okay who’s getting the value here because ultimately it’s not. It’s not really, it can’t just be about you it. It has to be about.

32:26.10

Matt Watson

Yeah, yeah.

31:59.32

Bob Rosin

Understanding the strategy of that company. What matters most to them and then how do you help them to achieve what that goal is so.

32:53.54

Matt Watson

Yeah, and in in my example, you know the benefit to them as they were gonna sell more paper-like they wanted to sell the paper. Um, but inevitably those salespeople could not sell a technology product and it just didn’t work out like it made sense at you know at None idea, but. The execution of it was just too complicated.

32:50.72

Bob Rosin

I yeah well maybe I can give a um, an example based on we were talking just a moment ago about um about this video calling app that we had right quick and what we wanted it quick was to. We wanted to grow so we were looking for distribution. So how do we figure out how to get our app everywhere and so kind of the obvious thing and if you had a mobile app like how do we get preloaded on phones you know can can they ship every phone with us but the the approach that we took. You know, the great example was Samsung and Samsung. You know all that mattered to Samsung was Apple and Apple launched Facetime and so what do you think was happening inside Samsung inside Samsung the number one priority with the Ceo was thinking about Samsung was how do we compete with Facetime. Okay, because every billboard every back in every magazine cover was Apple talking about Facetime and so our approach was let’s go to Samsung and and show them how we can help them beat Apple and so the most important priority at Samsung at the time in their mobile division was.

35:40.40

Matt Watson

Yep.

35:24.72

Bob Rosin

How do we have the best video calling experience. We walked in and said we have the best video calling app. It’s proven that we can scale. It has higher resolution and better frame rate than facetime does we will give you a story that’s stronger than what Apple has and and that was the way to get a partnership done right? Because. It wasn’t it was never about us. It wasn’t us saying hey can you offer us distribution. It was going to Samsung and saying we can help you beat Apple and in fact, you should pay us for it and so instead of not only do we win the deal but typically the way it worked in.

37:01.60

Matt Watson

Um, yes, and so did you guys win that deal.

36:43.50

Bob Rosin

Mobile was that if you had an app you wanted to distribute you. You would pay to get preloaded if you could you’d pay an operator instead. We had the all the operators and OEMs we partnered with were actually paying us to preload our app because we were doing customizations for them to make it work. Well.

37:30.90

Matt Watson

Right.

37:18.84

Bob Rosin

And they needed That’s more than we needed them and.

38:03.16

Matt Watson

So did they end up white labeling it so it was called you know, Samsung video calling or something or was it still under your guys’ name.

37:36.28

Bob Rosin

It no, it was a quick app and in fact, we required that they have our logo on the box and you know all the users were our users. Um, but so we had a lot of leverage that negotiation because we knew that. We were going to be very important for their strategy. So. It’s really understanding what their strategy was they needed video calling and by partnering with with us we would help there. We would help them be successful that gave us a leverage to ask for our own branding to not white-label to keep. Um, yeah to get paid for it. And then we also you know I think we did some some smart things about knowing what the leverage points are in negotiation to where we developed advocates internally we had very good kind of back channels. So we knew what? but some of like what was happening and how to address some of the questions that were being debated internally. And I think we also do good job selling high and having very senior folks get involved because some of these deals you have to be selling talking to Svp or the Ceo and.

40:31.74

Matt Watson

Yeah, absolutely and that is such a great story and that’s such a huge win for you guys and it was a huge win for Samsung right? So they could be competitive.

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I can give another great example of this from my VinSolutions days. You know we got to a point where we were you know a market leader you know and we were doing. $30000000 a year in revenue and whatever and people come came to us all the time they want us to resell their stuff and my thought was always like why would I pay my salespeople to sell your shit when they could sell more of my shit like why would I do that. Why would I sell your stuff when I can sell my stuff right.

41:20.30

Bob Rosin

Yep, yeah.

41:30.86

Bob Rosin

Yeah, yeah, why.

42:28.90

Matt Watson

Unless there’s a win-win for it, and so a good example of this at Evan Solutions is you know it was automotive related and so we had integrations with things like Kelly Blue book most people have heard of Kelly Blue book so that made sense. It’s like well we need Kelly Blue book we need integrated in our products. So then it makes sense for us to resell Kelly Blue book because.

42:03.30

Bob Rosin

No.

42:17.72

Bob Rosin

Start.

43:04.86

Matt Watson

It was a win-win to your examples earlier like it helped us sell our thing versus just randomly selling some other random widget like why would I have my salespeople call up companies like I have this like a cleaning service I can clean your dealership like why would I do that.

42:50.36

Bob Rosin

Yeah.

43:36.52

Matt Watson

When I can tell my software that I make eighty ninety percent margin on that has a very high you know customer long-term you know, ah longterm value and people stick around and they pay for it forever. We make lots of money like why? That’s what we want to sell why would we sell your crap but people don’t think about it that way.

43:21.58

Bob Rosin

Sure I.

44:15.20

Matt Watson

And a lot of times those partnerships just don’t work. But your example with Samsung was a perfect example of where you could be super high value.

43:52.14

Bob Rosin

Yeah I mean I think the basic framing is. It’s not about you trying to get them to sell your stuff. It’s about understanding that company’s strategy what is critical for them and how do you help them be successful in their mission right? and so you know. It’s the same thing, and in the case of Samsung, we understood what their strategy was the mission. We. We tried to help them do that I give another example would be you know at at at stripe we were very successful in having platforms onboard small businesses to stripe in a way that stripe never could have done on its own but stripe. Stripe took the strategy of how we help these platforms build their business and how we help the platforms monetize. What are the tools that we can offer these platforms to help them be successful in building their core business that just pulled stripe along right? So we weren’t trying to say hey can you sell stripe. It was.

46:21.36

Matt Watson

Um, so.

45:49.60

Bob Rosin

We are going to provide you with the tools that you need to be successful in your core business. So.

46:36.68

Matt Watson

So let’s talk about that some more for a minute you mentioned earlier like that was one of the unique things about stripe that made them really successful and as a software developer processing credit cards and stuff is always a pain and it sounds like that was one of the big things that Stripe made easier for developers to do right? but.

46:28.96

Bob Rosin

And.

47:16.18

Matt Watson

Go-to-Market strategy as you described had to do more with these partnerships and stuff so explain to us in more detail like how that was a big differentiator for stripe like in the business model.

46:54.20

Bob Rosin

Sure? Well, um, you know the team at Stripe Patrick and John and the rest of the team they were always very interested in How do we work with. Founders of companies know very like a couple of engineers in the room that are building a new company and getting off the ground and how do we help them at that stage when they’re just building the business in the beginning and there were a few kind of points of thesis that drove this one is that. Kind of a view that technology is going to essentially take over the world right? So you want to work with technology companies and secondly that the great technology companies would all start off as None guys in a garage or None women in the garage so it starts off. You know as a startup and so if we could. Be the partner for them when they’re getting off the ground when they’re none you know enabling payments for the none time on their website then as long as we keep listening to what they’re asking for and we never lose them then we will be powering payments for you know the like the bulk of the economy as the whole economy moves the internet and. That thesis played out really well and so a lot of the approach at stripe was how do we make it as easy as possible for developers and how do we provide great documentation for example to developers to make it really easy for them to implement stripe so they would stripe to be the None choice and how do you make it so that. Don’t have to pick up the phone and talk to anybody because nobody wants to do that when you’re getting started. You want to just like you know, add some code and get it to work.

50:43.36

Matt Watson

But those weren’t necessarily like partnerships though right? Those are just the customers just making it easy for their customers to use their platform.

50:16.50

Bob Rosin

Sure, But what was happening was that a lot of the technology businesses that were being started and still are really, um, you could think of them as platform businesses and so those platforms take different forms. It could be a marketplace business like Lyft people.

51:29.38

Matt Watson

Like Spotify or something like that, is that what you’re thinking of I’m sorry Shopify. What did I say I meant Shopify.

50:54.96

Bob Rosin

Yeah, sure or it could be a Saas platform. Yeah yeah, Shopify is a great example. It could be ah a saas platform where you’re building. You know, scheduling and ah. Kind of payments for ah you know fitness studios like mind but mind-body so it could be um, anything where you are onboarding businesses and getting those businesses then to have you know to sell their products or to like Shopify or helping those businesses to. Manage their customers and take payments so you have all these examples where whether it’s a Saas platform or a marketplace they would be trying to get lots of small businesses onto their platforms and so a lot of the strategy at stripe was. You know as all these small businesses come online. They will do it with partners. They’ll do it with these platforms. We were never going to build all the functionality that a fitness studio would need. You know they would want calendaring and scheduling, and they had very specific needs. Subscriptions. We weren’t going to build.

53:41.18

Matt Watson

Yep.

53:06.12

Bob Rosin

Everything that they Need. We would just build the primitives. We build the infrastructure to allow a platform like a mind-body or a Lyft or a Shopify to build their product and then they would do all this you know selling and onboarding of small businesses and so that model. Worked extremely well and enable stripe to have millions of small businesses with Stripe accounts but Stripe never had to sell them directly.

54:33.80

Matt Watson

Yeah, and so for them, it was ah somewhat of a similar sort of strategy as Square right? except Square was more for in-person transactions right? where Stripe was more online transactions right.

54:28.34

Bob Rosin

Well, I would think of Square as an example of a platform that could be built on Stripe and so um Square would actually directly try to sell to a coffee shop. Yeah.

55:11.70

Matt Watson

Would that be as a fair comparison.

55:23.28

Matt Watson

Got it? okay.

55:40.40

Matt Watson

Yeah.

55:03.10

Bob Rosin

Or a bakery and would directly self the small businesses to onboard them to use their app and Stripe would never do that stripe would work with a partner like ah like lightspeed for example to do that. So Stripe would not build the application.

56:08.18

Matt Watson

And.

55:38.40

Bob Rosin

And they would not try to onboard the merchant directly they would just allow some company to pop up to do that? Yeah, okay.

56:28.84

Matt Watson

Yeah, but they’re providing them the tools and infrastructure behind the scenes and everybody else can go build on top of it and I think probably the best example is something like Shopify where it’s like I decide this weekend I’m going to sell custom candles or whatever and I go set up my little website on Shopify but I need to take credit cards. And so they’ve got an integration with stripe and I can click a couple of buttons and Boom I’m taking credit Cards. So So what are you? Um, What do you?? What do you see startups being able to best use these kinds of Partnerships. So if I’m a startup and I’m like you know what.

56:31.94

Bob Rosin

So exactly you got it.

57:46.68

Matt Watson

Go to mark my go-to-market strategy. It’d be great if I could find some partnerships like we need tips for like where they should start or how they should think about that and I guess there’s two sides of a right? There’s like resellers versus like ah Stripe was more of like not reseller but almost like a platform play right. So how do you? What kind of suggestions would you give a startup that’s thinking about maybe you know should partnerships be part of my go-to-market strategy.

57:51.60

Bob Rosin

I sure would be very careful actually not to think of partnerships as a substitute for finding product Market fit. Partnerships can accelerate your business. But. If. If you don’t have a product that people want to use or want to buy then Partnerships aren’t going to help with that. So I think the number one task for early-stage companies is to make sure that you have a product that users want to engage with where they’re getting real value from it where they’ve demonstrated that this is something they’re willing to pay for. And that kind of takes priority. But with that aside, I would think of partnerships in maybe 3 ways. None is enabling partnerships and this is really partnerships that you like unless you have that partnership you can’t build the product that you want to Build. You can’t be in the business you want to be in unless you have a partnership with someone so those are often the scariest ones where unless you get a certain deal done. You can’t be in business and so that’s.

01:00:43.56

Matt Watson

It’s like I need a contract with the military to build this thing for the military without the contract I can’t build it right.

01:00:09.96

Bob Rosin

Yeah, or you know there are a lot of examples of it. So I gave an example before of this product. We wanted to build a mobile computer that had a wireless internet connection. Well, you can’t build that product unless you have a deal with a wireless carrier right.

01:01:20.76

Matt Watson

Um, yeah, yep.

01:00:44.40

Bob Rosin

And they don’t necessarily want to do a deal with a startup and so figuring out how to get those kind of critical deals. Done is really important. Another example would be a company in our portfolio called freight pay. They’re building a platform for payments in the international freight industry. And as it turns out, um, supporting um freight shipment payments is often restricted by payment providers. In fact, it was restricted by Stripe and so that required that team you know, convincing stripe and getting a special deal done that.

01:02:22.98

Matt Watson

Weird.

01:01:56.74

Bob Rosin

Allowed them to be in that business. They want to be in now that provides to an extent. You know some defensibility to that business as well because everyone doesn’t have that opportunity to be in that business, but they went through a lot of work to demonstrate that they’re capable of being in that business. So those enabling deals are quite challenging but they can also provide. Defensibility and barriers to entry right? We can talk more about some strategies there the second type of partnership. You could think about is I call the marketing deals. These are deals that help you to sell. But they don’t necessarily sell for you and  people are often dismissive of these kinds of deals because it’s like well they’re not going to that company that partnership’s not going to do anything for you sometimes actually can be quite valuable as long as you know, really what it is. It’s when you delude yourself to think that this partner is going to drive a lot of revenue for you and they don’t then you can be in trouble but you know again using the example of that mobile computer company we had we partnered with Microsoft and we were able to get bill gates to use us in his keynote at cs right? And. Didn’t have any illusions that Microsoft is going to like sell our product for us but having the endorsement of bill gates at the time was incredibly meaningful and it really transformed the company and so some of these kinds of marketing deals really can be helpful. But again you have to call it for what it is right.

01:05:10.20

Matt Watson

Um, yeah.

01:04:59.42

Bob Rosin

And then the None type of partnership would be these distribution deals around getting others to essentially sell for you where they’re going to embed you in their product. They’re going to bring you into their customers, and for those, I think a lot of the lessons I’ve talked about before applying. Where you really need to do your homework. Honestly, this applies to all of these partnerships you need to understand the strategy of that partner and what are they trying to accomplish and then and then figure out how do you solve their problem for them.

01:06:42.36

Matt Watson

Well, and I would say number 3 is a huge market that nobody thinks about, and it’s sort of more like they can be like system integrators or consultants or whatever, right? I mean even think about something as simple as Google AdWords most people aren’t an expert at Google Adwords right? So they hire some firm that is.

01:06:33.40

Bob Rosin

And.

01:07:20.80

Matt Watson

But that firm is essentially like reselling or partnering Google Adwords right? Google sells more Adwords because of this ah none party that is like the system integrator consultant. Whatever you want to call it and there’s a huge market for that. Where. You know you’re finding people that they make money by being experts at how to use this thing and the relationships they have and and helping deliver technology to those people.

01:07:19.76

Bob Rosin

Yeah, I think that just the the trap that you don’t want to fall into is to like number 1 you don’t want to assume that if you have a product that’s not successful on its own just because a partner is offering. It’s not going to make it successful. Yeah, you.

01:08:24.64

Matt Watson

Right? Yeah, you want them to be clamoring to have the ability to sell it right? because it’s such a great product like they they want to be clamoring to to to be part of it. You know.

01:08:05.80

Bob Rosin

You exactly I mean I can give you a couple of tips for if you have a product that you want to get a larger company to to sell for you. Um, some of the techniques I’ve seen work particularly in the Enterprise context. Um, you know, bring them a customer right.

01:09:17.77

Matt Watson

Right.

01:08:41.00

Bob Rosin

You know, don’t Expect. You’re going to go there and they’re magically going to bring you the first you know they’re going to bring it into all their customers. Usually, these relationships start by you finding a customer for them. So There’s a big customer and it could be an existing customer over theirs that you sold your product to and then you go back Together. With one of their big customers and say hey can you integrate us, you get the big customer. You get their big customer to tell them to integrate to partner with you that works way better than you trying to convince them that you know the ah that that their customers are clamoring for.. It’s better for you to show them. Get their customers to tell them to partner with you and related to that. It’s better to go after the sales team often than it is to go after the Partnerships team because the job of the Partnerships team typically is to partner with the big guys. It’s not to partner with you. And so the partnerships or the alliances organization typically is not going to be very helpful whereas if you can show the sales team that they’re going to win deals because of you then you’re going to be a partner.

01:11:29.88

Matt Watson

Well and you bring up a good point that these partnerships and the sales Team. You know, I think a lot of these deals are successful or fail based on those relationships right and commission and how people get paid and how you know how There’re affiliates and like. Lead generation all these different things right? like seems like a lot of these things succeed or fail in those tactics as well. When you say.

01:11:38.84

Bob Rosin

And absolutely and you know a lot of times people just want to get to the VP or the Ceo and they think that by getting up high in the org that’s going to solve all the problems but don’t ignore the junior salesperson or the junior person in the room. Because often it’s those relationships that really will make the partnership happen. Obviously, you need to build the senior relationships too. But if you can help the junior salesperson to win a deal that they’re trying to win because you help them with the customer, then you’re going to become a partner with this company. They’re going to bring you in.

01:13:31.22

Matt Watson

Yeah, yeah, you mentioned earlier like the marketplace kind of reseller thing. So my last company stackify we did application performance monitoring. So our customers were software developers and stuff and we actually were in Microsoft.

01:12:55.00

Bob Rosin

He’s going to tell everybody how great you are.

01:14:09.34

Matt Watson

Azure their cloud hosting in their marketplace. We did all the work to get in there and and so if you used Microsoft Azure you could use like your budget and payment methods and stuff to then basically buy our product through it. You know how much business we got out of that none huge waste of time. Huge waste of time.

01:13:47.50

Bob Rosin

So Nice. So. I think I.

01:14:48.66

Matt Watson

Now on the flip side, I think we had other competitors that were really successful with this in the Amazon Aws Marketplace Um, and so sometimes you just never know how these things are going to go man. It’s crazy that I have a losing record so far with partners.

01:14:19.40

Bob Rosin

And.

01:14:39.48

Bob Rosin

I don’t know it’s really hard to get them right and most of these end up failing ultimately um, but I think you know some of the basic ideas around. You know you need to prime the pump if you will. Like you need to find the None joint customers you need to get their sales team convinced and excited that if they bring you into this sales call of theirs that they are more likely to close their deal right.

01:16:15.52

Matt Watson

I think your example of Samsung is one of the best right? It was a huge win-win for everybody like they desperately need your help. It wasn’t just like. Ah oh, we sell phones and oh for an extra dollar. You can get this thing. Whatever like no big deal. Whatever if you get it. You don’t get it. We don’t really care. Right? Because then nobody nobody cares about that like Samsung doesn’t care about that either right? It needs to be like a big deal like it’s got to be a big win-win and that was a great example of one that was a huge deal to them because they need to be competitive to Apple.

01:16:34.12

Bob Rosin

Yeah, and you know, so often people think hey we’re we’re going to show them how much money they’re going to make by selling reselling our product. You know we’re going to give them this rev share or they’re going to make all this money. But these companies don’t necessarily care about that. That’s not going to move the needle for them. But they care about is their own core business and are they going to be selling more of their product or their platform and you know the fact that they’re going to make a couple bucks or whatever by selling your product isn’t going to be material.

01:18:12.16

Matt Watson

Absolutely now is my example from Vinn solutions earlier. It’s like we sell our product for $3000 a month like why would I spend time selling your little widget or whatever I’m gonna sell I’m selling more my stuff you know, but if you can help my customer. My.

01:17:47.98

Bob Rosin

I Exactly So yeah I.

01:18:43.54

Matt Watson

Ah, help me sell more of my stuff or be more sticky or whatever that makes sense. You know, well, do you need to hire Software Engineers testers, or leaders. Let full scale help. We have the people and the platform to help you build and manage a team of experts when you visit Fullscale Io All you need to do is answer a few questions and let our platform match you up to our.

01:18:08.82

Bob Rosin

Yep, still.

01:19:21.62

Matt Watson

Fully vetted, highly experienced team of software engineers, testers, and leaders at full scale. We specialize in building long-term teams that work only for you to learn more at fullscale io it’s crazy. We have 250 software developers out there working on all sorts of stuff pretty pretty cool stuff that they do. And a lot of our customers have ah you know Vc and angel investors like yourself and hopefully we can help help some of them ah reach out to you and hopefully some of our listeners today potentially could reach out to you so tell us a little more about Defy and. Do you know what is your target market who are you looking for? you know you write you know series a checks for million dollars or series c checks for $10000000000 like what? what is your guys’ market who are you looking for.

01:20:03.42

Bob Rosin

We sure so Defy and you can look us up online. We’re http://Defy.vc and we’re kind of a classic early-stage venture capital firm. You know we look for great founders going after big markets we can invest up to $10000000 in a check but often the sweet spots you know 3 to None but really, we’re focused on finding just great founders building. You know that are ambitious. Want to build large businesses and it could be from. You know, pre-seed through series a but typically kind of between c and a is where we play. So.

01:21:57.12

Matt Watson

So for those that are listening. They’re like man I would love to get that 3 to $ 5000000 what kind of traction and stuff are you looking for when those people reach out to you is it just at an idea or do you expect them to already have a product or already have a certain amount of revenue like. how how do how would you steer people that way.

01:21:51.52

Bob Rosin

It sure I mean there’s a wide range. Obviously, you know it it really is about the people at the end of the day and so um, you know we’re interested in people that um, that are driven that have shown a track record of you know, kind of defining convention right? and building things. So a lot of it’s about the individual and then showing that you have going after a large market opportunity and that there’s a strong willingness to buy right? so.

01:23:29.42

Matt Watson

So it’s about the team a certain amount of traction. The rest of the numbers. Don’t necessarily matter quite as much. It’s more about the team and the market The traction Product-Market fit.

01:23:06.58

Bob Rosin

So well everything matters. You know when it’s a very early stage company then you know the signals are different right? So ah for a very early stage company. That’s pre-revenue then you can look at okay well what’s the research you’ve done with customers to show that people will want this product or do you have. And beta customers today who are using it and what’s their kind of experience been so there’s different signals. You can look at depending on the stage. Obviously, once you have ah you know real metrics on usage of your product on revenue then it’s much easier to you know you can look at those numbers and get more information that way. So.

01:24:58.92

Matt Watson

I feel like as soon as you have any revenue I’m like oh we’re doing $10000 a year in revenue now it’s like hey you’re worth 7 times that number not your valuation like I feel like that’s how it worked like.

01:24:31.38

Bob Rosin

It. It’s funny. It’s ah it is the more data that you have, the more data people want to look at so.

01:25:34.16

Matt Watson

From my experience at Stackify, we were trying to raise money and this is no slight against you. I felt like the VCs I always talked to were plugging some numbers in a spreadsheet and at the end of the day, it said like yes or no and this would be the valuation. That’s how I always felt it was.

01:25:04.26

Bob Rosin

And.

01:25:24.76

Bob Rosin

You? Yeah yeah, and there’ um, you know people come to this business with a lot of different backgrounds, but you know obviously you need to be able to demonstrate that the business has defensibility and that you’re able to build a business with unit economics. They’re going to that are going to make sense over time right? And so I think a lot of what. You know people in the venture business are trying to do is to extrapolate forward. Okay, let’s assume this company is really successful, Then? what’s that company going to look like what’s the kind of what are the Economics. What’s your ah ROI or the economics going to look like as a scales and is that going to be an attractive business at that point in time. So.

01:27:00.34

Matt Watson

Bright And what’s your ah roi.

01:27:21.60

Matt Watson

That’s where I felt like there was a spreadsheet somewhere of like what the ROI was and I never I never made the list I never made the cut. It’s always tough. Yeah, it’s always tough Raising Capital is tough. So.

01:26:49.82

Bob Rosin

I don’t know and sometimes just need to find the right person you know.

01:27:48.90

Matt Watson

Well, thank you so much for being on the show today. And I think we covered some great things around partnerships. You have a great story. You’ve been around and done some really cool stuff and sounds like you’ve had your share of success and failure right.

01:27:27.80

Bob Rosin

I certainly have and thank you so much for having me on the show today. I really appreciate it. So.

01:28:20.16

Matt Watson

So again, this is Bob Rosin with Defy you go to http://defy.vc and learn more about them. I hear he’s got a huge checkbook and he’s looking to write some checks. So if you’ve got a great startup idea, he’s the guy. Thanks again for being on the show, Bob.

01:28:10.46

Bob Rosin

Thanks, Matt. Take care.