July 26, 2021 | By Jennifer Vancini.
As I shared in my previous post, ecosystems enable brands like Airbnb to dominate their markets. I also outlined the basic components of a company’s ecosystem. Now, let's explore specific purposes and goals of ecosystems and how you can drive ecosystem development.
Think early about ecosystem development.
In a nutshell, ecosystem development means pursuing strategic opportunities for your business or organization. This can be achieved by:
- Cultivating partnerships or other commercial relationships and/or
- Identifying and pursuing new markets for products or services to create long-term value.
At Mighty Capital, we provide exclusive access to >300k product managers and a playbook to turn them into customers. The more proactive portfolio companies come to us and say, “I want introductions to a, b, c, and d for these specific purposes.” They identify exactly who they want to meet and why, or they give us customer or partner profiles (security, sales, product management, etc.) that they want to engage with.
I’m thrilled when I see this kind of attitude as it’s a good marker for future success.
Map out your ecosystem to accelerate processes.
The goal of ecosystem development isn’t just to make connections. Instead, seek activity that directly benefits growth, gap closure, or competitive advantage.
While ecosystems change constantly at the organic micro level, macro level changes include adding new investors, customers, employees, offices, deals, partners, and technology. I recommend mapping these larger decisions to distinct areas of corporate strategy — and the tighter the association, the greater the potential benefit.
So ask yourself: what ecosystem changes do we need to make an impact? Consider things like revenue, costs, partnership models, employee elevation, and go-to-market (GTM) outcomes.
Before I get ahead of myself, let’s roll back and outline some key ecosystem mapping concepts.
Define your ecosystem purposes & goals.
Remember, for ecosystem development, the overarching goal is to create leverage to accelerate growth. Investors want to see the right trajectory that ends in a liquidity event for them. So what kinds of companies would you like to meet? Are you seeking sales acceleration? Marketing exposure? Partnering or buying (M&A) to open new opportunities? Consider your knowledge base too.
When mapping out ecosystem goals, I think in terms of two main buckets: Revenue & Positioning.
- Sales acceleration (consider every stage of the pipeline funnel)
- Market expansion
- Increase product value to the user/customer for higher ACV (annual contract value)
- Brand definition and projection
- Build a moat (lock everybody in)
- Acquire knowledge and capabilities
- Define a market; or better yet, a new category
- Build relationships with acquirers
There are a few caveats to consider here. For instance, who you partner with for product integrations can significantly boost your product portfolio. Also, a brand definition partner can add value and/or credibility. Meanwhile, acquiring knowledge may be key for advanced technology such as AI/ML, blockchain, and personalized medicine. Non-technical knowledge, such as industry specific insight or governance advice should be valued as well.
In a recent conversation with Sue Igoe, I loved her perspective. She’s a Mighty Capital LP and former Sr. BD Executive for Spotify (leading up to their successful IPO) and now runs BD for Nest at Google. Sue said, “Ecosystem partnerships - whether they are market, product, or deep-tech related - can significantly accelerate an organization’s growth and elevate its position. Successful partnerships need to be planned, well-understood, resourced, and constantly refreshed for positive impact. Doing so can really move the needle.”
You’ll want to resource intensive strategic decisions so carefully weigh your choices. For your tech or product roadmap, who do you want to integrate with and how strategic do you want the integration to be? Will it be cookie cutter or something more strategic? Who do you want to co-sell with? Who do you want for channels?
Bluedot.io, a Mighty Capital portfolio company, provides location technology for mobile apps to power high-value interactions between brands and their customers. Bluedot’s relationship with Mighty Capital (and our sister brand Products That Count) mapped to significant value add events, including:
- Reached target customers with a 3-part podcast series on building geofencing products
- VIP participation in executive events for networking
- Winner of Consumer Experience Innovation Award
- Sourced lead investor for Series B (Autotech Ventures)
- Sourced legal counsel
- Introduced to hiring candidates
- Intros to limited partners who have their own networks and relevant experience
Define what types of deals benefit you the most.
In addition to specific ecosystem purposes and goals, crossmatch this with the right type of deal. Here’s a list of deal types roughly in order of complexity from least to most:
- Cookie-cutter partner program (basic integrations or marketing alliance)
- Join a marketplace for distribution, amplification (eg/ Salesforce AppExchange, Slack App Directory, AWS Marketplace)
- Channels (referral, resell, OEM)
- Specific integrations (pairing hardware & software)
- Product or service bundling; large GTM project
- Joint POC for new technology or concept
- Joint IP/technology development
- Joint Venture / M&A
Smaller companies won’t be involved in the more complex deals, which may, for example, involve government-sponsored projects and a lot of lawyers. Early-stage startups will be more focused on MVP and initial customer traction, and early-growth stage companies will layer in bigger go-to-market strategies to drive the revenue trajectory.
One effective approach for startups is to focus on a handful of cookie-cutter programs with big players and 1-2 more complex strategic deals to support your GTM. This helps evaluate your value proposition, and it can make you look bigger in the market than you are.
Drive ecosystem strategy from the top.
CEOs and founders should avoid over-delegating their ecosystem efforts. Don’t hire large, expensive business development teams right off the bat. Instead, personally drive your ecosystem growth as these are among the most critical decisions your company makes over its lifetime. Then delegate deal execution specifics once the direction is in play.
Strive to gain a clear understanding about your ecosystem and learn to prioritize, weigh risks, and think two steps ahead. How will relationships play out down the road? For example, for project management, make sure resource intensive efforts are mapped and managed to be successful. I’ve seen too many deals signed and nothing happens since nobody did the marketing. It’s better to do one strategic partnership and give it the proper care and feeding than to sign a bunch of deals that fall flat.
Also, beware of shiny new toy syndrome, such as chasing AI, blockchain, and big data without a solid value injection plan. It’s always better to clearly define how choices will satisfy key goals and objectives. Treat partnership opportunities as the investment decisions that they are.
Learn from real world efforts & the benefits that follow.
A core characteristic of Mighty Capital is our diverse, deep value ecosystem. Amplitude, a Mighty Capital portfolio company, tapped into it and increased sales velocity by 29%. They sold $millions to Fortune 5000 product managers and the company reached a recent $4B valuation.
Case studies help us picture what’s possible. Here are three more Mighty Capital portfolio companies along with examples of their ecosystem growth moves:
Bit Discovery is an Attack Surface Management cybersecurity firm. They partnered with WhiteHat Security for product integration and as a channel partner. This is an example of integrating with a bigger brand to grow the sales pipeline and establish moat building and credibility.
Accern is a no-code AI platform for financial services and use cases for leveraging data for investment, risk, and other decisions. They proactively built their ecosystem by partnering with key tech, data, cloud, and consulting firms to accelerate their value prop. They’ve heavily leveraged the Mighty Capital ecosystem because product managers greatly influence their target customer inside the enterprise.
Skylar is a natural perfumes and scented products brand, founded by Cat Chen after her time with The Honest Company. They created a sales campaign for the 2020 holiday season, reaching out to our ecosystem for corporate and personal gifts. The campaign generated tens of thousands of dollars in revenue and new product awareness
Networks go stale. Ecosystems thrive.
Mighty Capital is unique because its network is always refreshed. The great newcomers grab our attention so we don’t depend on the same network connections every time. The community encourages and challenges us to continuously renovate and innovate.
Build it for success.
Leadership should make ecosystem development part of the company’s cultural norm. Strengthen awareness, determine your status quo, and then think creatively about what resources you need (or already have) to get intros to target customers, knowledge sources, and strategic GTM partners.
Don’t count on your ecosystem to develop 100% organically. Be strategic about it. Shape it. Whether your goal is to go public, have a successful M&A, or raise your next round, outcomes largely depend on the ecosystem you build. Good CEOs and leadership teams understand this.
Jennifer Vancini is a General Partner of Mighty Capital. She's been investing for 10 years, and prior to Mighty Capital built Pointgrey Partners, a family investment office where she achieved a 15x cash-on-cash return. Before becoming a full-time investor, she held executive roles in corporate and strategic business development, especially in the high-growth security and mobile sectors with companies such as Telefonica, Symbian/Nokia, and Certicom, which she helped take public in Canada. Jennifer serves on private and non-profit boards and is currently the Vice-Chair of a Dean’s Advisory Council at the University of British Columbia in Vancouver, where she completed her MBA.
Jennifer has drafted, negotiated and executed 100+ deals spanning the spectrum from partner programs, to distribution, to M&A, and joint development. Such experiences have been invaluable to her as an investor and supporter of entrepreneurs.