6 Reasons Why MSPs Form Startup Partnerships

By Maddie Bacon

The MSP relationship with enterprise-size vendors is well-established; customers want the tools and services from the leading vendors in the industry. The MSP relationship with SMBs is not far behind. Sometimes the best products come from smaller (relative to enterprise) companies with less of a global reach. In fact, according to the U.S. Small Business Association, SMBs account for 5.7 million companies in the U.S. alone.

But what about startup partnerships? These companies are small, they’re new, and likely don’t have the reach or the budget of existing vendors in the space. So why would an MSP look for startup partnerships?

The benefits to the startup itself of working with an MSP are already well-documented. Startups that work with an MSP are likely to get access to clients and customers who would have otherwise been out of their reach. Startups can be understaffed and overwhelmed at the beginning, and an MSP can provide a sales and customer service team in one, lightening the load of the hustling startup.

But when you look at it from the perspective of the MSP, considering all the uncertainty with startups, are there any benefits to their business from working with startups?

As it turns out, there are several.

One reason is that MSPs that work with startups from the early days can prove themselves to be a valued adviser and partner as the company grows.

Aventis Systems’ Tiffany Bloomer

“MSPs can be a huge asset for startup organizations, but it can also work the other way around,” says Tiffany Bloomer, president of Aventis Systems, a provider of information technology hardware, software and services. “If an MSP is truly committed to building relationships and expanding their business, what better way than to start with a company from the beginning?”

Startups tend to be scrappy and creative, and they tend to know how to hustle. Culturally, established MSPs can learn a lot from startups, or perhaps just be reminded of what it’s like to grind for success and start building relationships with new clients.

“You’re typically working with a blank canvas when it comes to building the startup’s infrastructure and network,” adds Bloomer. “Rather than trying to fix what has been cobbled together by an organization over the years, you can start with a strategic plan that meets the startup’s technology objectives both in function and budget.”

Janet Schijns, CEO of JS Group and our 2019 Channel Influencer of the Year, has more even more reasons for MSPs to work with startups. First, working with startups can provide MSPs with additional revenue streams, and there’s nothing wrong with adding new revenue to your existing billing.

Schijns also noted that starting work with a startup gives MSPs another reason to see and service a client. The relationships MSPs have with their clients is critically important, and being able to offer them something new and innovative can be a great excuse to build on that relationship.

JS Group’s Janet Schijns

Another reason to work with startups, according to Schijns, is that “these startups will be tomorrow’s major providers.” The small, scrappy company you forge a partnership with now could become the next industry leader. It’s best to get in early when you’re more likely to get favorable terms in an agreement, compared to later when the terms may be less favorable.

Finally, Schijns says, customers rely on their MSP to be “up-to-date on the market, find them new solutions to improve their business and lower their costs.” Since startups are the latest and likely the most innovative and creative in the market, customers are going to want their tools and services for their business; plus, products and services from startups aren’t going to have the same-level price tag as the products and services from well-established, enterprise-size vendors.

“Let’s face it, customers are always focused on costs, and these new startups are often a great way to …

… lower a customer’s cost without it coming out of your budget, all while showing them the latest innovations,” Schijns said. “Save them some money on critical apps and you can keep your services billings intact.”

She also noted that the products and services offered by startups are “often miles better than what [the customer] has today — for a fraction of the cost.” MSPs can’t afford not to offer solutions from startups when their customers come to them for all their technology demands, but want them to be budget-friendly.

How to Work with Startups

One of the only reasons an MSP might not want to work with a startup, according to Bloomer, is if the MSP isn’t looking to be a true partner.

“Typically, a startup will require a little more hand-holding and, at least initially, a larger time commitment,” says Bloomer. But, “that’s also a wonderful opportunity to develop a relationship and partnership where the MSP can offer IT expertise, planning and input to create real value.”

So if an MSP has decided to begin a startup partnership and take advantage of all the benefits of doing so, it still needs to know how to form that working relationship.

“The earlier on that MSPs start working with the startups, the better for both organizations,” Bloomer says. “The MSP will future-proof infrastructure growth as new employees, locations and products/services are added throughout the startup’s lifespan.”

“It all starts with the commercial agreement,” said Schijns. “There are many ‘cool’ solutions out there in a number of areas of the industry … However, cool never paid anyone’s bills, so they have to be able to support a billing model that enables the partner to make money and retain some level of ownership of their customer.”

She suggests that MSPs look for agreements that benefit the channel in terms of compensation and customer retention. It’s also important to make sure the startup has a channel-partner strategy and program.

“Don’t take their startup status as an excuse not to have a channel program,” Schijns says.

These programs can be pulled together quickly, particularly with the help of a consultant who can set them up correctly. Bloomer had similar advice.

“The relationship should, of course, start with an IT strategy and plan,” she says. “Just as a company has a business plan, it also needs an IT strategy that aligns with that plan. An MSP can help the startup map out an IT growth path that makes the most sense for the size, scale and functionality of the organization.”

Bloomer also suggests that MSPs can help startups by making them aware of useful solutions they may not yet know about.

She also notes that “the most important aspect of maintaining the relationship is providing continued value and being a true partner.”

Finally, MSPs should be sure that the startup has defined its rules of channel engagement.

“If it is a free-for-all with their direct channel, it is best to skip the engagement,” Schijns says.

With a properly configured agreement in place, MSPs working with startups can be a mutually beneficial way to do business. Everyone, including the customers, will be better for it.