Highlights:

• Strategic Shift in SaaS: Amidst challenges, SaaS startups are pivoting from traditional outbound GTM to Ecosystem-Led Growth (ELG) and partnerships for efficiency growth
• Partnership Power: Developing aligned partnerships is crucial, acting as a revenue 'force multiplier' and orchestrating successful trade sale exits. 
• Success Stories: Partnerships leading to acquisitions, such as Google + DoubleClick and Salesforce + Mulesoft, demonstrate reduced risks and enhanced valuations. 
• Long-Term Relationships: Currencycloud’s acquisition by Visa highlights the impact of nurturing long-term, mutually beneficial relationships with potential acquirers. 
• Leveraged Growth: Structured partnerships significantly impact Enterprise Value, showcasing the importance of Leveraged Growth in securing lucrative exits.

Navigating the tempestuous seas of the SaaS industry in 2023 is no small feat. Startups have had to contend with the decreasing performance of the once-reliable 'traditional' SaaS Go-to-Market (GTM) playbook. With challenging macroeconomic conditions, combined with the rise of GenAI ‘spam’ marketing, dependable strategies - outbound marketing, SDRs, direct sales - are not delivering as they did merely a few years ago.

The linear relationship between sales and marketing costs and revenue leaves scant room for the long-term, sustainable growth required for a thriving, IPO-scale business. Hence, SaaS companies are actively seeking alternative routes for ‘Leveraged Growth’. These companies are investing wisely to unlock more profitable avenues, breaking the traditional ties of headcount to revenue.

While Product-Led Growth (PLG) has recently seen a surge in popularity, it has proven to have limitations at scale. Instead, many companies are dusting off the idea of growth through partnerships and marketplace communities, elegantly rebranded as Ecosystem-Led Growth (ELG).

Developing a partnership strategy is a long game. Understanding your "Ideal Partner Profile" is just as crucial as knowing your ideal customer. From account mapping to co-marketing and co-selling programs, companies need to establish a partnership process with well-aligned incentives and transparent reporting.

The heart of a successful partnership lies in alignment. It is pivotal to establish a mutual understanding, both within your organization and with your partner, about how you plan to generate value collectively. The goal is to recognize the benefit you bring to your partner, not merely the end customer. 

Partnerships hold the promise of propelling revenue growth and can act as a 'force multiplier', enabling you to push sales without the headcount cost of direct sales. However, the true value of partnerships extends far beyond this. Partnerships, if cultivated strategically, can become pivotal in orchestrating a successful trade sale exit.

The insight from Mike Laven, CEO at CurrencyCloud, that the most successful exits are to acquirers already familiar with your company, underscores the value of partnerships. Acquirers evaluate a technology-based acquisition based on its potential impact on their existing customer base. They consider what proportion of their customers are likely to purchase the product, the timeline of cross-selling, and the expected average value.

“Currencycloud’s partnership with Visa, our ultimate acquirer, was long and deep. The relationship was a strong source of customer acquisition, differentiation and growth and a technology partnership quickly followed - which deepened the relationship and also demonstrated to Visa our strength as an innovator. 

It made sense for Visa to participate in the Series D in 2019 alongside existing investors (such as Notion, SAP and Google) and other CVCs (such as BNP Paribas and IFC / World Bank).  

Emboldened by this, Visa stepped in as an acquirer in 2021. We played a long game with Visa that paid off incredibly well.”  –Stephen Lemon, Founder, Currencycloud."

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A strong commercial partnership can validate these core drivers pre-acquisition. It helps affirm the acquirer's financial assumptions, thereby reducing execution risks and potentially enhancing valuation.  Seeking partnerships with companies whose goals, operations, or customer base aligns with potential acquirers enhances your appeal during exit negotiations. A well-structured partnership can also reduce a potential buyer's risk, making your company a more attractive acquisition target. 

Each step in building a successful partnership can be used to further validate a potential acquisition:

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1. By carefully defining your "Ideal Partner Profile," you ensure that the partner you choose aligns with your goals and has complementary strengths. This validation is crucial for potential acquirers, as it demonstrates that you have strategically aligned yourself with a partner that enhances your capabilities and market position,

2. Account mapping plays a vital role in validating the potential for a successful acquisition. By identifying partners whose customer base aligns with your target market, you can showcase to potential acquirers the mutual benefits and market opportunities that arise from the partnership. The ability to present a comprehensive account map that highlights the synergies and expanded market reach resulting from the partnership strengthens the case for acquisition, as it demonstrates the potential for accelerated growth and increased revenue.

3. Co-marketing and co-selling programs are instrumental in proving the viability of an exit strategy through acquisition. These joint initiatives allow both partners to collaborate and leverage their combined marketing and sales efforts to reach a wider audience and generate new business opportunities. By showcasing the results and impact of these programs, you provide tangible evidence to potential acquirers of the revenue growth and market expansion that can be achieved through the partnership.
   
   
4. Establishing transparent reporting and well-aligned incentives is critical for validating the success of an exit strategy through acquisition. Clear reporting mechanisms ensure that both partners have visibility into the results and performance of the partnership, and concrete evidence to underpin the acquirers financial assumptions.

But be careful. Whilst it's crucial to nurture these relationships, ensure your partnerships don't limit your exit options. The agreements should not impose significant restrictions on your ability to be acquired or choose the best exit strategy - be careful of Right of First Refusal and other restrictive clauses which can act as a ‘poison pill’ to other potential acquirers.

Similarly, ensure the timing of partnership outcomes aligns with your exit timeline - a partnership that will deliver significant results after your intended exit timeline may not add as much value to potential acquirers.

Historically many successful acquisitions have evolved from established partnerships, exemplify how these collaborations can pave the way for lucrative exits:

• Google + DoubleClick

Google and DoubleClick's partnership in advertising began with both companies recognizing the potential benefits of combining their expertise. They collaborated on projects, shared insights and technology, and explored innovative advertising solutions. This strengthened their capabilities and solidified Google's position in online advertising. The partnership also provided DoubleClick with access to Google's vast user base, advertising inventory, and advanced technology infrastructure, enabling DoubleClick to expand its reach and improve its advertising solutions. In 2008, Google acquired DoubleClick for $3.1 billion, integrating its technology to enhance ad serving capabilities and offer comprehensive advertising solutions. The acquisition solidified Google's dominance in the online advertising market.

• Salesforce + Mulesoft

Salesforce and MuleSoft's partnership began with a strategic alliance to integrate application networks. MuleSoft provided a powerful platform for connecting applications, data, and devices, while Salesforce excelled in cloud-based CRM solutions. Through collaboration, Salesforce accessed MuleSoft's integration capabilities, enabling customers to connect CRM systems with various applications and data sources, improving customer retention. The partnership's success led to Salesforce acquiring MuleSoft for $6.5 billion in 2018. By incorporating MuleSoft's platform, Salesforce enhanced integration capabilities, differentiating itself in the CRM market.

• Microsoft + LinkedIn

Microsoft's acquisition of LinkedIn followed a similar pattern of partnership leading to acquisition. LinkedIn, the world's largest professional networking platform, collaborated closely with Microsoft on various initiatives, including integrating LinkedIn data into Microsoft products like Office 365 and Dynamics 365. The partnership allowed Microsoft to leverage LinkedIn's vast professional network and data to enhance its productivity and business solutions. The collaboration between Microsoft and LinkedIn showcased the potential synergies between their respective platforms and highlighted the strategic value of integrating professional networking with productivity tools. Recognizing the significant opportunities presented by closer integration, Microsoft made a bold move and acquired LinkedIn for $26.2 billion in 2016.

• MessageLabs + Symantec.

MessageLabs acquisition by Symantec in 2008 was built on years of concerted effort and collaboration, which started in 1998 with Symantec as one of MessageLabs three licensed virus signatures. Fast forward almost ten years and MessageLabs was dominant in SaaS email security and Symantec really wanted a foothold in that market. Stephen Chandler, CFO, was professionally engaged with Symantec at the most senior levels, but also quite non-exclusive, managing multiple relationships. Stephen’s advice: “Build relationships with potential acquirers as early as possible. It takes years of concerted effort but it is incredibly important and hugely valuable.”

A successful exit strategy is not about simply selling your company; it's about selling a vision of value and growth that extends into the future. A robust partnership strategy is not only a means to fuel current growth, but it is also an essential tool to demonstrate value to potential acquirers and ensure a successful, lucrative exit with plenty of upside post acquisition

Each incremental dollar of new revenue acquisition through partners, could be worth 100x to your Enterprise Value if it illustrates the impact on a partner's significantly larger customer base. This is the essence of real Leveraged Growth.