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NextGen Panel: VC-Backed IT Startups Must Overcome Hurdles With Building Partner Programs To Expand Sales Pipelines

Building out a channel is an important stage for venture-backed IT companies – but there are hurdles that both sides need to overcome in order to cultivate a successful relationship.

Building out a channel is an important stage for venture-backed companies in expanding their sales pipeline – but both IT startups and solution providers need to overcome hurdles to cultivate a successful relationship.

A panel of venture capitalists, speaking at The Channel Company's NextGen Cloud Conference and Expo on Tuesday, said channel programs are crucial to boosting the sales force for startups in their early stages of funding rounds – but many VC-backed companies aren't doing a good job of building out partner programs.

"Many entrepreneurs are in love with innovation, but don't know how to sell," said Cliff Boro, general partner with Entry Ventures Group. "Meanwhile, solution providers know how to sell and generate revenue. I think there's an enormous opportunity [for startups] to tap partnerships with solution providers, but it's hard to get a deal."

[Related: How One Channel Partner Built Out A Successful Practice To Monetize IoT]

Solution providers, for their part, are often wary of partnering with startups that are still in the early stages of funding – mainly because of the risk associated with devoting resources to young companies with uncertain futures.

"Channel partners don't want to do business too early in the game – they don't know enough about the value proposition or the buyer to join a partnership with a startup," Boro said.

Ben Black, managing director at Akkadian Ventures, agreed that solution providers need to be careful with partnering with certain venture-backed companies, particularly in the software space.

"Many software companies are running up against AWS, Google or [Microsoft] Azure," he said. "All of these [startup] companies look successful, but core trends are moving against them, and solution providers need to look ahead at the impact that Google or AWS is having on them."

While "a lot of Silicon Valley companies don't do a good job with the channel," some companies are making progress, said Alex Rosen, managing director at IDG Ventures. For instance, Tempered Networks, a Seattle-based IoT security company, launched a formal partner program a year ago with the goal of developing a channel in the U.S.

How can channel partners determine which startups to avoid? Black said a big indicator for solution providers is identifying the competitive edge that startups will have in the future over their competitors.

"It's hard because you don't know what someone else is working on in their garage," he said. "The one signal I look for is figuring out if a company has a sustainable competitive advantage over others over a long period of time."

To stay in the loop, solution providers should also keep an eye on the newest trends and technologies that venture capitalists are betting on – including IoT and data analytics.

Rosen's big bet is on companies pushing the democratization of data and analytics: "We're in an era where we have the tools that allow companies to access data and share that data with more than just the C-Suite," he said.

"There's a lot of talk in financing circles about artificial intelligence and what that means," he added. "We're seeing interfaces like Siri and Alexa, but think about the enterprise applications and machine learning capabilities we'll see in the future."

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