The Importance of Business Development — Gil Smolinski

Business Development for Startups and Mature Companies

Business development is a title that is being used more and more in the business world, particularly with startups. However, the term business development is rather broad, and it can mean different things to different companies. The main goal of business development is to pursue strategic opportunities by cultivating partnerships with other relevant parties. The way each company goes about doing so is up to that specific company.

Why Do Startups Need Business Development?

Startups need business development more than established companies because they have two main things on which they need to focus: filtering and building. Filtering has to do with the initial partnership options offered to a startup. In general, startups could receive multiple partnerships opportunities at first, but it is the role of the business development specialist to discern which offers are beneficial and which are not. Building is the next step, and it involves identifying potential partners to have the company reach its goals (more on business goals in my next post). It is a more active process, while filtering is passive. And yet, both are necessary for a business that is just getting off the ground.

How Biz Dev Changes as a Company Grows

Just as the title of business development can mean vastly different things in different companies, it can also mean different things for the same company at different stages of its growth. The role of BD changes because strategic opportunities change at each stage. A company in the pre-seed stage will not need the same things as a company in the stage of Series B funding.

Here’s a general idea of how biz dev changes as a company grows:

Early-stage

At the very beginning, startups are challenged to find early adopters and regular users of their product/service, since the business cannot exist without this crucial component. Sales and product development often intersect at this point, with the company adjusting its product to meet the demand of customers. In many early-stage startups, BD is so important that it is a role taken on by the CEO or a member of the founding team themselves.

Growth-stage startups (Series B or later)

Once the company has a firm footing and a desirable product, BD can now focus on the best growth trajectory. This might include new products, expanded target markets, or different investors. It is crucial for BD to make decisions and follow through with these. Partnerships become a real opportunity at this point since the company already has a solid reputation or product to leverage.

Mature companies

Even well-established companies need to dedicate resources to BD lest they become complacent and lose out to competitors. BD for companies at the mature stage includes branching out to new products, new types of customer engagement, and new lines of business. The keyword, if you’ve noticed, is “new.”

There are three types of BD that mature companies can do: intrapreneurial, agent, and de facto.

Intrapreneurial BD teams explore unchartered territories. They look for new growth areas in which the company can invest. These teams act more independently from the rest of the company since they’re not busy with current success but with future success.

Agent BD teams are similar to intrapreneurial teams except that they operate as agents of a division of the company. The team’s responsibility is to scout for opportunities that will benefit other company teams, and it often considers the question of “build, buy, or partner” when it comes to new products, partnerships, and opportunities. Agent teams can do the actual sourcing and negotiating that will ultimately result in a partnership.

De facto BD operators are those who conduct BD but without the title. These can be social media specialists, directors of customer service, or pretty much anyone in the company whose job it is to look at the big picture and seek out growth opportunities.

The type of BD a company employs will depend on its resources and structure.

Starbucks and PepsiCo — Business Development At the Mature Stage

One famous example of a successful business development venture is the partnership between Starbucks and PepsiCo. In 1994, Starbucks partnered with PepsiCo (then Pepsi Cola) to make the latter the official distributor of the coffee company’s pre-packaged products. The deal was a win-win for both — Starbucks was able to place its products on supermarket shelves, and PepsiCo broke into the non-soda beverage market. While seeing Starbucks drinks on supermarket shelves is something we take for granted today, it is actually the result of brilliant BD move on the part of both companies.

How Can You Know What to Look for in a Business Developer?

It’s not every day that a Starbucks-Pepsi merger happens, but if you’re looking for someone to make a real difference in your startup, you have to hire right. In order to do that, you have to ask the right questions, which will enable you to see which candidates are qualified and which are not. Hiring the right business development team member can make the difference between a deal like the Starbucks-PepsiCo one and a deal that falls flat on its face. When interviewing someone for a business development position, here are three questions to help you choose the right person.

What business partnership deals have you made in the past?
Who is in your business network?
Can you tell me about a time you successfully implemented your business development strategy?

Angel investor, entrepreneur, professional diver and passionate cook. My Medium blog in Russian: https://medium.com/@gilsmolinski/