One Partnership Principle with Billy Robins

Apr 19, 2022

I started This for That to uncover and illuminate stories and lessons that readers can use to build better partnerships. That is why I’m excited to launch a new format today called “One Partnership Principle.” This segment will shine the spotlight on a partnership leader sharing a story about a principle they live by.

For this inaugural One Partnership Principle, I am thrilled to feature Billy Robins. Billy’s career spans enterprise SaaS and fintech at both big companies and startups, where he has worked in Product and Business Development. Today, Billy leads partnerships at Productboard, which helps product teams build better digital products.

Billy’s story below is about a negotiation during his time leading partnerships at Zendesk (2015 - 2020). As you’ll see, Billy highlights how partnerships require combining hard skills (data analysis) with soft skills (relationship-building).

If you have a partnership principle you live by and a story to go with it, reply to me on how you can share it with This for That readers.

Partnership principle

Know Your Data. When you are doing a partnership deal, know your data so that you can find a deal that creates a win-win environment. Bonus: Strong relationships FTW.

Background

Zendesk builds software to improve customer relationships. Launched in 2007 in Denmark, Zendesk helps companies like Mailchimp, Calm, Vimeo and others manage requests from customers. Today, Zendesk is valued at over $14B (2014 IPO) and has over 5,500 full-time employees. Zendesk’s SaaS partner marketplaces features over 1K apps that integrate into the various Zendesk product and they have hundreds of global partners that range from technology platforms (e.g. Atlassian, Slack, etc) to solution providers like Accenture and more boutique players like Envoy and 729 Solutions.

Partnership story

Sometimes data is the best route to build internal support to unlock a deal.

When I was at Zendesk, we had a very successful partnership with a high-growth (now iconic) ecommerce platform. Zendesk had started earlier than the partner, they were a Zendesk customer and the CEOs got along very well. All of these facts led to a very healthy and productive partnership.

As our partner hit hyper growth, their priorities changed. This is not uncommon for companies operating at scale. Our partner was shifting from value creation to value extraction from their ecosystem.

Zendesk executives were interested in the new partner program, which focused on larger, more established customers. But a key component of this new program was mandatory revenue share. At that time, Zendesk had never done any revenue share, so this was a foreign concept to the Zendesk executive team.

Thanks to the strong relationship I had with my counterpart at the partner, we had very direct conversations. When the eCommerce partner originally proposed revenue share, I told them to “pound sand.” 😁 Although we could afford it, this revenue share was designed for smaller, no name brands, not publicly traded companies with immense customer love like Zendesk. Ultimately these negotiations dragged on for months.

By analyzing Zendesk customer data, I was able to unlock these negotiations. We had sufficient data to know these eCommerce customers were great Zendesk customers. Historically, eCommerce has been a great market segment for Zendesk, usually the 2nd or 3rd most popular vertical (at least from 2014 - 2020). But what we uncovered in our analysis was that this specific eCommerce platform’s customers had a higher Zendesk trial conversion rate and MRR growth rate compared with average populations. This gave us conviction to pursue a revenue share agreement and ample room to negotiate.

During the extended negotiations, we were able to model multiple scenarios to develop a strong data-driven foundation to explore our options. The partner proposal was an App Store like cut of revenues, in perpetuity. (Note: I looked up “perpetuity” - turns out it’s a VERY long time!).

For the original lead generation, I can understand the clear value created; however paying in perpetuity is flat out obnoxious. We used our analysis to illustrate to the executive team that under most scenarios this partnership would continue to be productive and value creating for Zendesk. In particular, Zendesk is such a strong “land-and-expand” business that as long as we capped the revenue share at the initial contract value, we would happily pay a percentage of the initial revenue in perpetuity because this customer segment grew revenue at a best in class rate. For example, if a customer paid $10,000 annually when they signed up, we would pay 10% (for illustrative purposes) annually to our partner. Meanwhile, the customer would grow 30-40% annually and Zendesk did not share the expanded revenue with our partner.

The partner conversations dragged on for a few months. During this period, my original counterparts either left the company, moved to new roles or were out on parental leave. This meant I transitioned to a new primary contact, with whom I did not have a strong relationship. As a result, the negotiations were definitely trickier and more obtuse for the final stages of the discussions. But what emerged through my discussions with these various contacts was this eCommerce platform needed to maintain that “every partner in their marketplace is on a revenue share model.”

In the end, we found a win-win compromise because we knew our data and understood the partner’s key priorities. The partner got Zendesk on a revenue sharing agreement, albeit at a lower rate than market and did so in a way that protected Zendesk expansion, which remained the critical driver of future Zendesk ARR.

Lessons learned

Know your data. Understand what customers are worth and what you are willing to pay for them.
Relationships FTW. Having strong relationships with your counterparts allows you to have very candid conversations about what is or is not acceptable from your executive team’s perspective, as well as grok the other side’s POV.
Harness those relationships to uncover key deal insights. The partner needed to be able to say that they were collecting a revenue share from “every partner.”

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