What are "red flags" that you are in a bad partnership with a larger company?

[xdamousex]

It's been nine months since I signed a partnership deal/revenue split with a larger company (tens of millions in annual revenue) wherein I would produce the product and they would handle marketing/branding/selling exclusively. It seems like a natural partnership because we are an obvious upsell to their current customers.

However, six months after official launch, we have only a couple sales. The main problem was that the "Champion" of this partnership on their end left shortly before launch (not on bad terms) and thus they had to scramble for a replacement hired a couple months after launch, and the chief salesperson left as well shortly after the publisher came on, meaning we've been twisting in the wind six months after launch. Some positive signs are there and we've had some sitdowns with potential clients, but no hard results yet, and they've been willing to send us a small advance on sales to hold us over for a few months, but I keep reading all these negative things about partnering with big companies.

What are some red flags that startups should look out for when partnering with big companies?

[Freelancier]

Did you get a "minimum number of orders per period" written into your contract? If not, now you know why you should have. If they don't have enough incentive to sell your product, then they won't. Perhaps you need to consider doing a training session with the new people to get them excited.

But that's not what you asked....

[xdamousex]

Is that common practice? When we ran this contract by our law firm, they said it was actually a pretty good deal for us.

Should they have internal benchmarks that I can press them to give me, and would saying they don't want to provide them be a sure sign that this deal is a lemon?

[Paul]

Deals with big companies can often be a bust. Your situation is not unique having your advocate leave the company. Their priorities are not yours. the new guy probably doesn't want any extra work, especially if it's not his "deal".

A main question is, does the agreement prohibit you from pursuing other deals or business?

Freelancier is right about getting proactive. Trying to twist them into some form of legal commitment is probably futile. If the original person is gone it can easily become a forgotten issue. Train them, teach them, propose marketing and sales strategies and even generate some sales yourself for them. Make them realize it’s a good profitable product for them.

[xdamousex]

I actually do proactively train and talk to them. I have a phone call with the replacement of my champion every week where he continues to reassure me it's a top priority and details the efforts he's making to close deals. He says I need to be patient as it's a high-dollar product and they have a very nuanced marketing campaign.

I offered to make some calls myself to some of their current customers to close some deals as their new salesperson gets acclimated, but I keep getting turned down. They just want me to focus on the product and they don't want to hand over their customer's names because they don't want "different voices" (i.e., mine and theirs) confusing their customers. They want to just do it on their own, which I'd be fine with if things were moving more quickly.

It's frustrating because they keep telling me that even the CEO considers this a high priority and mentions it at high-level meetings, and I wonder if I'm being impatient, but I do worry that it's getting swallowed up by all the other more well-established products now that the champion is gone. It's such a pure moneymaker though it seems crazy that they wouldn't want to push it. It's an easy sell to current customers, it's high-dollar, and almost pure profit. It seems like they'd have all the incentive in the world to market it.

[Paul]

Maybe you are impatient...big companies move sloooooooow, really slow. They plan in terms of years, not weeks or months. I know one company did a simiar deal and it was well over two years before the product started moving.

I assume they have an exclusive on the product?

[xdamousex]

Maybe you are impatient...big companies move sloooooooow, really slow. They plan in terms of years, not weeks or months. I know one company did a simiar deal and it was well over two years before the product started moving.

I assume they have an exclusive on the product?

Yes, it is an exclusive.

I'm hoping I'm just being impatient. That's why I wanted to ask red flags to spot so I can know whether it's just a case of a big company moving slow and I should stick it out or if it's a deal that's just going to drain me and my investors of money with no payback.

[Freelancier]

Yes, it is an exclusive.

Wait... you gave them an exclusive, but didn't include minimum per-year sales targets they had to hit??!?

What's their incentive to not develop their own while they have your offering tied up this way?

[Paul]

Yes, it is an exclusive.

I'm hoping I'm just being impatient. That's why I wanted to ask red flags to spot so I can know whether it's just a case of a big company moving slow and I should stick it out or if it's a deal that's just going to drain me and my investors of money with no payback.

What is draining you financially other than just waiting? Are you obligated to be doing something that costs you money? Be very very cautious if you are spending more money on development or inventory, or anything for that matter. Stop the bleeding. Stay just alive enough to ramp up to fulfill if they ever start selling your product. I don’t know who they are or how important the product is, but they may actually be waiting for you to go broke. Much depends on the actual contract.