C stands for Co-operative as in the co-operative game theory. Ideally this means striking a partnership with an existing business or software product firm. Your goal is to provide an add-on product offering for their product. The motivations of people are shown below:
You, the startup
- You have an existing market to target
- If your offering can be on THEIR site, you will get much higher sales at a lower cost
- Greatly reduced marketing cost
- Revenue sharing may be part of the agreement – view it as a “sales representative” commission.
- If you can get an exclusive agreement for 2+ years on your offering then you have that sweet spot called a protected market!
- Scope of project is usually reduced (you will be interacting, not building a complete system)
Them, the established business
- Allow richer offerings to customers without cash outlay or risk.
- Allow your core competency to stay focus (especially is a small development staff)
- Possible additional revenue with little if any risk
The startup negotiate with the established firm an exclusive agreement for them to produce and offer for sale a complementary product to the firm’s business. The firm gets a fee per unit sold. The firm provide some internal technical support (i.e. internal API access). The firm does not have to develop some new expertise (or find funding for it) but it’s competitive situation should be improved.
The firm may actually be willing to be an “Angel Investor” in the firm. For example, a startup that develops an android application in lieu of a Windows application may cost the firm $300K in weighted development costs. Investing $100K in a startup for 33% interest may be a better business investment – if it is successful, you save $200K and if the startup expands offerings, you may reap unexpected paybacks. If it is not, you lost is only $100K instead of $300K.
Given the exclusive agreement (“protected market”), finding additional angel investors will be much easier.
Some Local Examples
I will walk through some local Whatcom firms and describe some possible start-up opportunities (if you do them, remember my 1% equity in the startup for suggesting it! ;-) )
Logos Bible Software [Site]
Create Mobile Applications that provides the same (or subset) of features as on Windows/Mac products. The offerings would be:
- iProducts (iPhone, iPad etc)
- Linux also?
- Windows Phone 7
These could be standalone and/or web service based (i.e. data is cached off web site). Their advantage: more offerings without needing to find and hire developers.
Dealer Information Systems Corporation [Site] aka DIS
Very similar to the above, except you focus on the use of mobile devices for scanning bar code labels etc and integrating the data in real time with their management systems. Additional features are mini-applications on mobile devices, like inventory lookup, dynamic rerouting of flatbeds for picking up equipment, documenting “as delivered” and “as returned” state of rental equipment.
Checking their product offerings we see some mobile offerings. A startup could offer conversions or ports to Android and other platforms. Possible product offerings on other mobile platforms that does telematics. This is an interesting case because they do some mobile offering – but they do not appear to cover the spectrum. Are they willing to spend money getting the entire spectrum of mobile developers, or would they prefer to cooperate with someone in a win-win scenario.
They do not appear to have a mobile friendly site available ( no http://mobile.haggen.com/ or http://m.haggen.com/ ) which presents some opportunities. Having a mobile site that lists competitive pricing specials (possibly with mobile device only coupons!). It could start with something as simple as a subset of their current pricings (assuming the login required a Haggen’s card) so someone shopping at Freddies or Safeway can do price checks before buying there. The price check would hopefully cause them to include Haggen’s in their shopping. With mobile-web only coupons (keyed to their Haggen’s card number only), they can do mini-hyper-focus-marketing and you get a few cents per coupon redeemed.
If GPS location is captured by using a mobile application, then Haggen’s would know the store they are in when they hit the site and intentionally “loss leader” a few items on that specific Haggen’s card to get the customer into a Haggen’s store instead. For example, if it is Safeway, lookup Safeway’s specials from their fliers and cut the price by 1 cent further for this customer. At checkout, the card number would trigger the extra mobile discount. The discounts will be time limited (i.e. good for 4 hrs only).
Almost every existing firm have items that they could (and perhaps should) do, but with the lack of $$$, they will defer the doing. For a start-up this is an opportunity. The firm gives up something that they are unlikely to do for at least two years because of budgets (so nothing lost), and you have the opportunity to make it work NOW with the thing called a protected market – i.e. exclusivity. A win-win situation for everyone. It takes a bit of co-operation (and an absence (or at least forcible restraining) of control freaks) and trust. – but this is Whatcom county… buy local, create jobs locally, support local startups!