By Lior Susan and Jiten Behl

In physical sectors, strategic alliances are often your catalyst. They allow you to harness existing infrastructures, expand your market reach, and draw on deep experience to ignite change.

After nearly a decade in the trenches of building and growing companies, our team of former operators at Eclipse has navigated the complexities of crucial alliances that have shaped our success. Done right, these partnerships can drive both disruption and growth.

For startups, the stakes are incredibly high — one deal can tie up resources, shape your product development, and overall trajectory.  Large incumbents, on the other hand, can afford a diversified risk profile and have less to lose from any single partnership. This imbalance makes negotiations feel like an all-or-nothing game.

So, how do you flip this dynamic to ensure a mutually beneficial relationship where your company gains significant advantages while minimizing risk for the large corporation? 

Here are three questions every founder should ask when securing these critical alliances:

Question 1: Are You Ready to Embrace Their Complexity?

Negotiating with giants like Apple or Microsoft can be an emotional ordeal. You’re deeply invested in your company, and negotiations often feel like an existential battle, navigating a minefield of “us against them.”

During Bright Machine’s negotiations with Microsoft, aligning our goals with their strategic priorities — like expanding Azure into physical industries — was key. This alignment advanced our discussions, even if it meant taking some concessions on terms, for the greater good of the partnership. It’s surprising how often founders fail at making concessions, and this failure can be the difference between building a billion-dollar company or not. Remember, this process is not personal. Large incumbents have intricate internal structures with multiple layers and numerous stakeholders that you're not fully aware of.

Question 2: How Will You Equip Your Internal Champions?

Founders often zero in on solving the customer or partner’s problems, but that’s only part of the equation. You also need to understand the operational realities of large corporations. Decisions rarely rest on a single individual; typically, a coalition of six or seven stakeholders must reach a consensus. Each of those stakeholders needs to be convinced and become advocates for your cause.

In these situations, social capital is crucial. Large customers often conduct extensive due diligence, and the board can be an excellent starting point for this process. Leveraging your board not only adds an additional vector of credibility but also helps in navigating the complex layers of stakeholders involved. Arm them with the most relevant data points. For instance, when Cerebras collaborated with G42, they understood G42’s strategic aim to push the limits of AI, which demands immense compute power. The team provided their champions with compelling data, a proven track record, and clear arguments that demonstrated how their objectives aligned seamlessly with G42's goals.

Question 3: Why Should They Bet on You?

There are clear patterns of major corporations that have taken a chance on startups, both across our collective experience as operators in physical industries, and as board members and investors of Eclipse portfolio companies. The challenge is structuring a deal that advances the goals for both parties. This usually boils down to:

• Unique IP or Value: You bring something they can’t get elsewhere.
• Speed: You can move way faster than they can.
• Market Insight: You get a market segment they’re struggling to crack.

For instance, when Rivian collaborated with Amazon, they understood Amazon’s strategic aim to decarbonize their last mile delivery fleet, which was an important step to achieving carbon neutrality by 2040. This required a clean sheet approach to building the most advanced electric delivery vehicle. Cross-functional Rivian teams worked closely with their counterparts at Amazon to custom-design the vehicle and technology stack that integrated seamlessly with Amazon’s infrastructure and operations. 

Next Steps

Strategic partnerships aren’t just about closing a deal; they’re about forging relationships that drive mutual success. By approaching negotiations with these critical questions in mind, you’ll cultivate deeper, more resilient alliances rooted in mutual understanding and shared goals. This approach brings you one step closer to unlocking transformative potential in physical industries.

If you’re building in physical industries, reach out to us at lior [at] eclipse [dot] vc and jiten [at] eclipse [dot] vc. 

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