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Oct. 29, 2004 – The challenges facing nanotechnology startups are vast and developing partnerships is one of the most critical efforts we face.
Why partner?
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Given the extensive time and skills necessary to move from concept to commercial product, it is unlikely that the necessary people and capital exist within one’s own company. Furthermore, the chemical and mechanical properties of nanoscale materials challenge even the most technically advanced company. As a result, the likely reality is that partnerships will be as important to your company’s future as its technology.
Choosing a partner
Partner selection should be based on your company’s long-term objectives, not just as a means to a financial end. Viewed as an extension of your company’s in-house capabilities, partnerships can extend product and marketing reach.
All of us have a position within a targeted partner’s value chain. For example, from our perspective as a particle supplier, the next logical move further into the value chain might be a surfactant or dispersion. It therefore matters whether a partner operates as a supplier to an end product distributor.
Obviously those partners that manage the entire development process from concept to end-product distribution will better control the time to market, as well as the full development cycle.
Selecting partners is not any more complex than identifying companies that best support your firm’s move to its logical next step. Each potential partner should bring a set of targeted customers that increase your probability of successfully meeting objectives and achieving financial self-sustenance.
On the other hand, without a detailed understanding of the partner’s value-chain and a shared vision of commercialization, expectations may become grossly misaligned.
Partnering vs. selling
Partnering and selling are not the same activities. The goal of partnering should be to identify strategic collaboration that will ensure a mutually beneficial outcome. Understand the desired outcome of your partner, and position your company’s capabilities accordingly.
The likely goal of the partner is a combination of improved market share and sustainable profitability. At the same time, quality partners should be concerned with the success of your company.
A partnership can sometimes require skill sets for executive collaboration that the startup firm lacks. It cannot be overstressed that working strictly within the technical organization of targeted companies most often will not lead to mutually advantageous and strategic partnerships.
Your technology may in fact be too disruptive and pose a threat to existing technical organizations and their associated products. Strategic vision at an executive level may be the only avenue for the introduction of new ideas. Therefore, executive level relationships are essential to collaboration, for without their sponsorship, the initiative may become another science experiment without a business purpose.
Managing expectations
All quality partnerships begin with an alignment of expectations. Initial expectations will vary greatly. Chances are that your initial goals will not be in alignment with your partner’s goals. For example, startup firms require revenue and cash, while corporate partners may seek long-term strategic advantage.
The single largest challenge in these partnerships is getting paid within the partner’s development process. The customer’s development process will likely require 18 to 24 months. Therefore, establish project milestones with the partner.
Pre-production revenue or some form of advance payment is not an unreasonable request. There are no winners should your unique technology become the asset sale of a failed business.
Protect intellectual property
Protecting your company’s assets while partnering remains a basic tenet of any long-term partnership. In all cases, intellectual property should be patented or reside within the formal process of patent filing.
Only share technology with partners when your company is ready and protected, and continue to ensure that the proper patent processes remain in place and represent standard company practice. Quality partners will insist on patent protection and value the processes that you have in place to assure ongoing advantage.
Market rights
Your unique and patented capabilities represent long-term value, but the challenge of short-term revenue looms large. Selling yourself short by agreeing to exclusive partnerships without commercial milestones is relatively easy and the willingness to be paid for early technology may motivate emotional entry into a partnership.
However, no partnership should be forged without clear and concise mutual expectations. “Exclusivity prior to feasibility” should be approached with caution, and the terms for “exclusivity in perpetuity” should be a function of measured product development success, not simply early payment.
Without an ongoing commitment to commercialize unique technology within target markets, granting exclusivity will lock you out of other potentially lucrative opportunities.
Surviving without partnerships is clearly a function of your company’s length of runway — most likely measured by cash. Many nano startups are experiencing measurable and growing interest from high quality companies that will form the basis for outstanding alliances.
Recognize the value that these companies will have on your future success. Also recognize that without the unique offering of many nano companies, those new products and new opportunities might not exist — even for the largest of your potential partners.