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Business Development Roundtable at TheBDEvent

August 6, 2010

By guest blogger John McArthur, President of Walden Technology Partners

First of all, a big thank you to Rose Ross of Launchpad Europe for providing an excellent writeup of the portions of the BDEvent that I was unable to attend. And another thank you goes out to Gregg and VaNessa Duplessie for letting my son, Sam, founder of BlueRim Technologies and author of the BlueRimTech Blog, attend the event again this year.  Last year, Sam closed about $700 worth of business at the event, when he sold this Flash animation to Axxana, one of theBDEvent’s participants.  Not bad for a 14 year old.

This year, Mike Miracle and I had the privilege of chairing the Business Development Roundtable, which closed out the last day.  For the roundtable, Mike and I represented the business development side of the picture, since we both focus, at least in part, on helping our clients develop partnerships and OEM relationships with larger systems or software companies.  Our panelist included George Symons, VP of Business Development for Xiotech, who provided perspective from both the OEM-In and the OEM-Out sides, Gerry McAndrews, Senior Director of Corporate Development at EMC, who provided the acquisitions viewpoint, and Scott Card, a Partner at Americas Growth Capital, who provided a perspective from the investment banking side.

It was perfect timing for me, since I was in the thick of it trying to push forward several potential OEM deals and was facing some tough issues around assignment and change-of-control provisions from the potential OEM partner.  OEM deals are great in that they provide the supplier tremendous leverage and the partner/customer tremendous development cost savings and time-to-market advantages.  But assignment and change-of-control provisions can be tricky, and the collective wisdom in the room was very helpful in developing strategies that would protect the interests of both parties.   I’ve written a couple of posts that are outgrowths of that discussion, which you can find on my blog here and here.

Other topics of interest were valuations and acquisition prices and how OEM partnerships impact the valuation of a company and the potential exit strategy.  There was general consensus that in the event of an acquisition by a current OEM partner, the OEM partner would discount revenue that came from them in determining the value of the acquired company. The logic is that, post-acquisition, the revenue coming from the former supplier would represent nothing but an intra-company transfer.  To make matters worse, they would also discount revenue that came from OEM agreements with competitors, since those agreements would likely terminate post acquisition.  Seems you can’t win.

Panelists and the audience believed that having a strong reseller to complement the OEM business would drive a much higher valuation at exit.  I think it was at this point in the discussion that Nancy Hurley, CEO of Bocada, gave a rousing endorsement of the California-based ChannelChargers, which provides similar services to what Launchpad Europe offers in the UK and Europe, for their cost-effective channel development capabilities.  By the way, Nancy met the ChannelChargers team at theBDEvent last year, and later inked a deal with them.  Now that’s BD! Back to valuations, the panelists thought that the highest valuations would come when a third party, with whom there is no existing relationship, makes a move to acquire a company.

It seems that one of the best ways to drive a company to a successful exit is to simply focus on growth and profit, and to develop partnerships that stand on their own financial  merits, without regard for a potential exit.  Surprisingly simple logic, isn’t it? But logic that too many miss.

Other topics that were discussed included the value and challenges associated with a strategic investment by an OEM partner, the limits of strategic investments, the impact of the go-to-market and sales model on the ability to raise capital, the challenges of mixing reseller and direct sales models, and how major systems suppliers determine when to build and when to buy technology.  We covered a lot of topics that I can’t adequately cover in a single blog post, and all of this from one morning session. My only disappointment in this year’s event was that I was only able to attend the morning of the last day.  Maybe next year, all the deals will be buttoned up before hand, and I can attend all three days.  Hope to see you there!

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