By: Connie Qian 04/13/21

The Channel Playbook

Steve Pataky, Chief Revenue Officer at Area 1 Security (a ForgePoint Capital portfolio company), shares his lessons learned on building global channel programs.

We often hear that early-stage companies should avoid channel sales. The channel is complex to navigate and lacks a direct feedback loop from customers.

As a startup, it’s important to understand when you’re ready to start a channel program. At a minimum, you need an understanding of your unique value proposition and target market that you can communicate. In addition, a channel-ready product is easy for your partners to evaluate, implement, and manage.

Investing in the channel often takes up more time and dollars than companies anticipate — yet we have also seen startups use it as a high-leverage way to tap into new customers and markets. We spoke to “solution provider superstar” Steve Pataky to better understand how early-stage companies can set a strong foundation for their channel strategy.

1. Partner Selection: Focus on the young & hungry ones
Like a good marriage, it starts with selecting the right partner.

“Be thoughtful and specific when mapping out what type of partners are appropriate for your technology, and which partners are already the trusted advisors of the customers you’re going to target,” Pataky says.

The channel is a complex ecosystem with various business models, from a reseller (more transactional) to solutions integrator (more services). Companies with critical mass can also employ a two-tier model where distributors assist with recruiting channel partners.

Ultimately, the best channel partners are ones with aligned incentives — and for startups, those are partners looking to grow their businesses.

“There’s a lot of goodness that comes from finding those younger hungry partners. They do need to already have the expertise within their sales reps — we’re not able to teach people how to have a security practice,” says Pataky. “But I’ll give you a very specific example of a channel partner made up of a couple of former security practitioners. They’ve been in business for two years. They understand the problem we solve, and they’ll register for us 10 new opportunities a week. That’s what a young hungry aggressive reseller can do for your pipeline.”

2. Structuring Incentives: Optimize your reward-value framework
A channel partner that isn’t being fairly compensated ultimately won’t be very helpful. Instead, start with a standard market rate and find areas to stack incremental value. Pataky refers to this as the “reward-value framework.”

“Many young companies like ours want to use the channel to develop pipeline, and so that should be where value is,” says Pataky. “Deal registration is an example — if you sell the deal, you are going to earn a reasonable margin that’s consistent with the industry. But if it’s a deal that I didn’t have access to and you’re going to bring me into it through a programmatic mechanism like deal registration to get that stackable discount.”

Deal registration grants a partner exclusive access to a deal for a period of time. This process incentivizes the channel to hunt for net new deals and makes it worthwhile for a vendor to share a bit more of the profitability.

“Services is another big opportunity. When we were primarily direct, we were doing a free proof of value evaluation. When we started recruiting partners, they told us a big way they get into our customers is through gap analysis and security assessments. So, we created a mechanism that allows partners to monetize that assessment service. It generates opportunity for them in the form of the POV or post-sales support.”

3. Channel Enablement: Make your sales tools work for partners
A great channel partner is aggressive in prospecting new business, and the objective of sales and marketing tools is to enable them to do so.

“A lot of times I see vendors that don’t want to tell their partners how to talk about their business. They never memorialize it or turn it into training that can benefit the sellers inside of the partners,” Pataky says. “Capture it. Make sure you have really well-documented tools, resources, and training that’s scripted with very specific messaging.”

The following elements should be scripted, consumable, and usable by its audience, whether a technical sales engineer or a non-technical sales rep:

  • Effective prospecting
  • Pitching the product
  • Handling objections
  • Understanding the competitive landscape

To enable joint marketing, Pataky also advises startups that don’t have dedicated marketing development funds to set aside some dollars for discretionary marketing collateral.

“Depending on the partner you’re working with, they could have a very significant install base, customer base, and prospect base. Dollars invested with them could go so much further than you as a company doing just the internet marketing activity.”

4. Measuring Success: Use KPIs that actually measure engagement
And finally, the level of penetration with a partner depends not on whether they signed a contract, but on how many sales reps and sales engineers are engaged in selling the product. These are the KPIs that can help a sales leader figure out whether relationship-building and partner-enablement efforts are working.

“It’s the difference between saying, ‘We signed 30 partners and, in those 30 partners, I have a total of 100 sales reps and 70 sales engineers that I’ve engaged in my training,’” says Pataky. “And the difference between that and saying, ‘I have 100 sales reps and 70 SEs who have completed all of our curriculum.’ And then, ‘Here’s how many of them I am engaged within opportunities.’ ”

The channel has underpinned sales programs at large enterprise companies including Cisco and Salesforce. For startups, investing in channel partnerships can likewise prove to be worthwhile with the right focus and enablement resources.

About ForgePoint Capital

ForgePoint Capital is the premier cybersecurity venture fund investing in transformative companies protecting the digital world. The firm is one of the most prolific investors in early and growth stage cybersecurity companies with over 40 global cybersecurity investments. The team brings more than eight decades of company building, value creation experience and draws upon the largest network of trusted cybersecurity industry experts and customers to support entrepreneurs who are building great companies. Based in the San Francisco Bay Area, the firm partners with exceptional cybersecurity entrepreneurs worldwide. For more information, please visit www.forgepointcap.com or follow us @ForgePointCap.

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