This post is #6 in the series, Starting in Partnering: What most Tech CEOs get wrong. Click here to read #5 “Poorly Pondered Partner Proposition – Starting in Partnering: What most Tech CEOs get wrong”
Tech leaders’ attitude to agreements are often extreme opposites, from light one-pagers with minimal commitment on one side to asking partners to sign up to excessive controlling terms on the other extreme.
For many Tech CEOs, the first enquiry for advice when starting in partnering is on particular terms within the Partner Agreement; exclusivity, intellectual property protection, pricing controls, commissions/ margins, incentives and targets.
The more experienced the Tech CEO is, the less complicated the process, as time has taught them that the balance toward expedience, rather that delaying the process arguing over so many unknowns.
The following areas are regular mistakes to be aware of to ease partner agreement discussions:
• Going into the process with the principle; ‘You get what you negotiate’.
• Overcomplicating details of commissions/margins, revenue targets and incentives thinking that these will drive everything.
• Focusing only on what the partner should do, rather than the joint plan.
• Thinking Exclusivity is a bad thing. Exclusivity is just too often used badly. It’s good when a partner asks for Exclusivity. There are many forms of Exclusivity and can be very effective in a plan with partners.
• Over negotiating a partner agreement based on some future pot of gold, damaging the relationship and slowing down market engagement. Companies first time partnering are the greatest culprit to this failing. For less experienced tech leaders, the partner agreement is a crunch point where they don’t know what they may lose or risk, and thus question every detail. It’s good to work with experienced people, as they focus on the important stuff and get on with it.
• Sharing cold legal documents that don’t represent the partnership relationship in the making. I’ve had more than a few run-ins with legal teams over the years on this one.
• Allowing legal people to drive the partner agreement discussions, regularly treating partners like service providers with stringent controls and obligations, not understanding partnerships.
• Overburdened legal partner agreements when a Heads-of-Terms, Letter of Intent or Investigative Agreement may be more appropriate for preliminary relationships.
Partner Agreements are primarily a definition of the working relationship and not a stick to beat the partner with.
The best teams seek to capture in the Partner Agreement, the purpose of the relationship, joint and individual responsibilities and the joint objectives of the partnership, along with clear commercial terms, targets and the necessary legal protections.
It’s a good thing, when a partner asks for exclusivity, as they want to protect their investment in creating a market for the vendors product. Exclusivity is a great tool, when coupled with trackable conditions that the partner is actually executing on creating a market for the product.