The false promise of channel partners for startups
By Amit Karp, a Partner at Bessemer Venture Partners.
Building a strong sales machine is often challenging for a startup. As a small company, you can only afford a small sales team and a modest marketing budget. Further, many entrepreneurs come from an engineering or product background (this is especially true in Israel) and therefore thrive in building incredible products and technologies that customers love. On the other hand, finding ways to get these products to the hands of customers at scale is often outside their comfort zone.
It’s therefore not surprising when startups make the common mistake of focusing mainly on product and R&D while counting on channel partners to sell it for them. It’s easy to be fooled into thinking that you should focus on building remarkable products, and leverage the large sales team of a channel partner to take over the market.
Unfortunately, in practice, we’ve seen this approach fail time and time again.
Convincing a customer to pay for your product is not easy, especially as a small startup with a new product and a small customer base. The best salespeople are the founders and early employees who can sell their vision and not just the existing product. When you delegate sales to a partner, chances are it will not succeed. This is because no matter how experienced the salesperson, they’ll never have the same drive and knowledge-base as your own internal team. Deep product understanding and passion are crucial for getting your early customers. Without this, the pitch will likely fall flat!
While in theory, a channel partner has lots of qualified salespeople who will sell your product, it rarely works this way. When you sign a partnership agreement, you’ll often work with a senior person who will act as your ‘champion’ inside the channel. Even though this person may love your product and promise you the world, at the end of the day, the local sales reps are your boots on the ground. They’re the ones meeting potential customers and trying to convince them to buy your product — not the channel partner executive. Most often the sales reps will sell whatever is easiest to sell in order to hit their quota which is likely the products and services they already know and have sold for quite some time and not your product.
When you sell direct and not through a channel you are in charge of your destiny and not someone else. This is crucial for a startup that has to move fast. When working through channels there’s typically a long lag from the time you sign an agreement until it really delivers sales. You probably don’t want to reach the next round of funding when you are still waiting on your channel partner to succeed in selling your product.
As an early stage startup, you don’t want anyone in between you and your customers. Selling direct is the only way to stay close to your customers, to get invaluable customer feedback, and understand through their eyes what your competition is doing. While you’ll get this information from your channel partner, it will be delayed and second-hand. This lag can result in delayed product iteration which can have a devastating effect on your product roadmap.
This doesn’t mean you have to completely abandon channels. Channels can be a strong, efficient way to scale once you optimize your internal sales process. But getting channels to work is difficult. It requires a lot of time, attention, and resources. This is why channel partners are typically better suited for later stage startups — when your company is more established, the product is more mature, and you have enough time and resources to dedicate to them.
Amit Karp is a Partner at Bessemer Venture Partners and a proud father of three girls. View all posts by Amit Karp