Saturday, January 21, 2012

Six Tips to Sell Your Joint Venture Idea


*Also Checkout “How to Bake a Better B2B Partnership” on FounderUnder40.com

There are disadvantages to JVs too. Action-oriented entrepreneurs complain that it takes a long time to solicit corporations and negotiate the ownership and operating terms of a new business entity.

Here are my six best tips to help sell your JV proposal like a pro.

No. 1: Research target partners. JV proposals that are most likely to get serious consideration by corporations offer meaningful economic and strategic benefits to both parties. Think carefully about a list of partners that might benefit most from your technology or market idea. Also consider the size of the opportunity in relationship to the size of your potential corporate partner. Approaching a Fortune 500 company with an idea that may generate only $10 million in revenues won’t get any return phone calls.  

No. 2: Representation. It's not necessary for entrepreneurs to hire investment bankers to help solicit corporations and negotiate deal terms. The most useful ally will be a skilled corporate attorney who specializes in business contracts, securities law or licensing. Interview two or three candidates before making a selection. Well-respected attorneys from larger firms tend to stand up well to big corporation scrutiny.

No. 3: Penetrate the fortress. Solicit all potential corporate targets at the same time to save time. Target senior managers at the vice president level or higher in the corporate hierarchy. If you don't have specific contact names, seek out senior officers in "new business development" or "corporate strategic planning." If your idea’s primary value to a corporate investor is cost savings, identify the names of general managers and senior finance officers. Provided you are friendly, executive administrative assistants can help guide you through a corporate maze.

No. 4: Pick up the phone. From my investment banking days, the best corporate investments I ever structured started out as friendly, high level talks to identify areas of mutual interest. They were collaborations, not transactions. After initial interest is established, deliver a factual summary of the proposed opportunity, with emphasis on the size of the market, potential profitability and the strategic value of your company’s operating or technical capabilities.

Fight the inclination to talk about deal structure until the corporation is “sold” on the concept. Entrepreneurs always negotiate better deal terms when bigger corporate partners just “have to have it.”

No. 5: Protect intellectual property. Entrepreneurs should hold off disclosing details of important technologies to potential JV partner candidates until at least a provisional patent application has been filed at the U.S. Patent and Trademark office.

No. 6: Negotiate long-term success. Sometimes the percentage ownership in a JV company becomes less important to entrepreneurs than other deal terms. Pay close attention to the timing of funding contributions from larger corporate partners, the make up of the JV’s board of directors, and the decision making authority of operating management.

The best solicitation advice I can give to entrepreneurs is to present themselves as smart, honorable and effective managers. First impressions matter. Entrepreneurs who demonstrate they are serious do have a serious chance of tapping corporate resources for business growth.

*Originally published by Fox Business and written by Susan S
*For undo-ordinary marketing strategic needs, BJMannyst.com.  Also a Founders Under 40 Group partner.

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