OT Hi John, Mary, GV and Thread,
Read only if you're interested in hearing more on our startup, and if you have time for a few (long) strategy questions.
But first the fun stuff. Yesterday, we did something really fun at work. One of fun things I love to do is to chat with inventors on their technology designs from a marketing perspective. On Tuesday, we were fortunate enough to be able to speak to an inventor of a rather significant, new Internet communication standard that is supported by various communication companies like Cisco, etc. During the call he explained the new standard to us and how to implement it in our product. (It is basically a disruptive technology to some legacy comm stuff that currently is dominate in the industry that's hitting a wall). He intends to put headcount on his effort too. His organization might turn out to be our first paying customer for our beta (I've positioned our product as 'beta' to the outside world.) With him, we now have a handful of the best Internet industry experts involved in some way with our company.
I think this could be big, provided we change our current strategic marketing focus, which has us currently focused on a tiny market and tiny application scenario. Though this is intentional, because we wanted to establish a beach-head into a market to at least generate revenue, get established before struggling to do anything bigger or branching out. So, currently, we're focused on tactical marketing, on a small, probably reliable, steady market.
But the industry problem we are solving could be applied to a very large market that is currently dominated by a large incumbent burdened by old legacy technology. But if we tackle this huge market, here's the battle ahead:
This competitor (a mid-size firm, no one you talk about) has impressed Wall Street with an excellent financial track record (65%+ growth). While we have the advantage of new technology, they have the advantage of an established sales channel. It would take us 3 years to build up an equivalent sales channel. It would take them probably 1.5 to 2.5 (say 2) years to build an equivalent product to ours.
So, 3 years from now, they could eventually have a 3-2 = 1 yr advantage over us unless we act now. So, I think we either need to provide our competitor with our new technology that they are missing and use their sales channel that we are missing, or we need to leap frog them with our technology and solve the sales channel issue by partnering with a couple of non-compete, large companies we know that already have an established sales channel.
The first option (partnering with our competitor) involves a risk of IP theft. I looked at their corporate record to check out their behavior, and they have one rather significant incident of IP theft that really bugs me (they had to settle & pay), but they have had about 3 other partners they acquired rather than risk being accused of stealing technology, so it appears they played fair on 3 out of 4 cases. The other option is to partner with several incredibly large foreign companies, one of which has asked us to install our product into their headquarters, though I hesitated for the same reasons and have put that lead on hold.
We have several advisors that have extensive OEM & MNA experience, that could provide advice, but what are your thoughts on partnering with what could turn out to be the dance with the devil in order to gain the sales channel? I think a 1-year lag on sales channel could be a big issue, certainly not now, but down the road.
Here's another twist to the story. Their core architects that built their products for this company would like to work with us. (This company has a highly visible MNA strategy that WS loves, but probably frustrates architects, because the company tends to buy solutions rather than build solutions). We need to make a decision on this too (whether to work with them.)
My hesitation on partnering with the company has been subconsciously driven by a desire to get things situated in the smaller market, establish a presence, get more secure and independent by generating revenue, test things out - see how well the product takes in the market, and then make a decision.
==> I can't help but wonder if we could build up a sales channel quicker, say in 2 years rather than 3 years, to net an equal head-to-head race. (?)
But our sales advisor (and I think possibly most of the BODs) think we should establish a partnership with the competitor for the sales channel. Assuming this is right, I don't see any purpose in delaying the decision, aside from the benefits that the further this economy continues the further our strength shines because our other competitors are falling by the wayside because they are burdened by the legacy technology products, which means our value goes up. Intuitively I sense that holding off on an approach could prove to be more valuable, provided our ducks are lined up for a partnership just when the market recovers, but no later than 6 months (because it could take them 2 years to build a similar product.) During the year, we can build up a sales channel using the VARs our competitor sells through. We met with one VAR and they indicated we're ahead product-wise, so we have time, though it is indeed a race.
One thing I should mention is, they have a well-known significant struggle trying to develop new technology (which is why they keep acquiring companies - they buy rather than build), so even though I've pegged them at catching up to us in 2 years and then surpassing us on the sales channel side, I strongly believe they would always lag on the product side (i.e. they may catch up, but then we'd come up with something new & better), since product development is our strength. But I tend to believe it's not the better product that makes a company succeed, it's the company with the better sales channel that makes the company grow. So, that's their trump card - their existing sales channel. Our trump card is our new product technology.
Any thoughts on your experience in Silicon Valley over the risk of IP theft on partnerships with a competitor?
Maybe we should just initiate a meeting, don't disclose anything significant, feel them out first.
Your thoughts on this, i.e. on whether we should approach them, and if so, your opinions on when to approach the competitor? I sense I may be missing some big picture understanding on timelines for approaching this competitor here. Maybe now is better than later, since the further along they get on their product, the less value we have to them. (Though as other companies with legacy technology fall by the wayside, our value goes up, so waiting can increase our positioning.)
After typing out my thoughts, I think the best thing we can do is to further strengthen our position by focusing on generating revenue through preliminary sales, and then immediately initiate a meeting no later than 2-3 months, so it's soon enough that the risk of them having something like our product is at its lowest point.
Thank you for any thoughts.
Regards,
Amy J |
