For Young Startups, Channel Partners Are a False Promise

Building a strong sales apparatus is often challenging for young startups, who can only afford a small sales team and a modest marketing budget. Furthermore, and this is especially true in Israel, many entrepreneurs come from an engineering or product development background, and the process of marketing and selling their products at scale is often outside their comfort zone.

 It’s therefore not surprising that many startups make the mistake of focusing on product development while relying on the large sales team of a channel partner for sales and marketing. This approach, however, fails time and time again, and here’s why:

1. Convincing a customer to pay for your product is not easy, especially as a young startup with a new product and a small customer base. The best salespeople are the founders themselves, who can sell their vision and not just the existing product, or early employees. When you delegate your sales to a partner, no matter how experienced their sales team, they’ll never have the same drive and knowledge-base as your own internal team. Passion and in-depth product knowledge are crucial for a successful pitch to early customers.

2. While in theory, a channel partner can direct a large and qualified sales team to your product, reality is often different. When you sign a partnership agreement, you’ll often work with a senior executive who will act as your ‘champion’ inside the channel. Even though this person may love your product and promise you the world, the local sales reps are your actual boots on the ground. They’re the ones meeting potential customers and trying to convince them to buy your product, and most often the sales reps will sell whatever is easiest to sell in order to hit their quota; i.e., the products and services they are already familiar with and not your new product.

3. When you sell direct and not through a channel you are in charge of your future and not someone else. This is crucial for a startup that has to act fast. When working through channels there’s typically a long lag between the time you sign an agreement and the actual start of the sales. With channels, you might open the next round of funding while still waiting on your channel partner to succeed in selling your product.

4. As an early stage startup, you don’t want anyone coming between you and your customers. Selling direct is the only way to stay close to your customers, to get invaluable customer feedback, and to understand through their eyes what and how your competitors are doing. While you’ll receive this information from your channel partner, it will be delayed and second-hand. This lag can result in delayed product iteration and have a devastating effect on your product roadmap.

This doesn’t mean you have to abandon channels completely. Channels can be a strong, efficient way to scale up once you optimize your internal sales process. But selling through channels necessitates a lot of time, attention and resources. This is why channel partners are typically better suited for later stage startups — when your company is better established, your product more mature, and you have enough time and resources to make the most of them.

This article was originally published on Medium.

 

Amit Karp is a partner at the Israeli office of venture capital firm Bessemer Venture Partners, headquartered at Menlo-Park, California.