How Startups Can Unlock Success with Channel Partners: A Strategic Playbook

For many startups, the idea of building a successful partnership with established channel partners like value-added resellers (VARs) and managed service providers (MSPs) can feel like an elusive goal. With limited resources, brand recognition, and market presence, startups often face an uphill battle in capturing the attention and commitment of these crucial players. Further, the path to success isn’t about simply landing a partnership—it's about strategically crafting one that is mutually beneficial, sustainable, and geared toward long-term growth that's repeatable, predictable, and scales.

In this blog, we’ll explore how startups can overcome common challenges, leverage their unique strengths, and ultimately thrive within the channel ecosystem. By adopting a thoughtful approach and focusing on creating value for their partners, even the leanest startups can break through the noise and establish productive, enduring relationships with channel partners.

Overcoming the Top 5 Issues:

As someone who has been in the startup trenches for years, I've seen firsthand how even the most promising companies can stumble when building a sales channel. Here are the common pitfalls that can trip you up if you're not careful...

Issue 1: Disparity in Scale and Expectations

One of the most significant challenges startups face is the disparity in scale and expectations when entering partnerships with channel partners. Early-stage startups often aim high, seeking partnerships with large resellers like Softcat, CDW, and WWT in hopes of tapping into their extensive client networks and robust sales capabilities. However, these major players prioritize partnerships that can substantially impact their bottom line—something a startup (or even scale-up that has largely operated as a direct GTM), is often unable to deliver.  

Given this disparity, when developing your channel, it's important to find alignment that introduces innovation and achieves one or more of the following:

• Extends the value of technology the partner has already sold into the account.

• Accelerates time to value/expansion of strategic solutions within the portfolio.

• Creates better alignment with strategic OEMs in their portfolio

• Creates "tech drag" aligns to strategic investments/objectives of the partner.

These are just some examples of how OEMs can create awareness and engagement both directly and indirectly. The point is to think beyond your product/brand and develop the right strategies/talk-track that will influence partners to explore your offerings further. Once you think like the partner, you're on the track.

Issue 2: Understanding the Channel Journey

Without fail, when we engage with organizations who are struggling in the channel, they tend to misunderstand the process of channel development. We get it. Keeping partners engaged is imperative to a successful — and mutually beneficial — partnership. When your partners begin to disengage, it’s a sign that there’s likely a larger underlying problem. That being said, it can be hard to pinpoint exactly what went wrong when a new partner isn’t responding to your emails, your check-in meetings are being canceled, or you’re not getting any updates. Is it the partner engagement activities and opportunities you offer? Is your partner platform difficult to navigate? Or is it a reflection of your underlying partnership model? Your technology just isn't interesting? All interesting thoughts: however more times than not, the level of engagement isn't remotely close to being sufficient to support enablement. Enablement isn't your problem, engagement is.

Above is an example of the process organizations might go through and the mile markers that go along with that journey. The single biggest mistake companies make when engaging & enabling their channels is a lack of field relationships to reinforce the relationship. This can't be done solely by channel reps or marketing. All members of the field must be engaged and active in the channel for them to be efficient and effective. For a deeper dive, check out our article here.

Issue 3: Poor ICP (Ideal Customer Prospect) Definition

Channel partners struggle when vendors poorly define the Ideal Customer Profile (ICP) because it leads to misaligned targeting and inconsistent messaging, causing partners to waste resources on the wrong prospects. As a new technology, when you waste time or prove to have a low close rate, partners will become disengaged, prioritizing other vendors who provide clearer guidance and better support. This guidance should include both firmographics and technographics. Think size, vertical, tech stack, 'best of breed' vs. platform tendencies, persona, etc. The tighter the ICP, the more likely the partner will see success. Start-ups should obsess here. No one wants to engage with vendors who lose deals or that stall with regularity. Winning creates share of voice inside channel partner that can't be purchased, which leads us to Issue 4.

Issue 4: “Pay to Play”

According to the 2024 Gartner CMO Spend Survey, only 24% of CMOs say they have sufficient budget to execute their 2024 strategy. Marketing budgets have dropped from an average of 9.1% of company revenue in 2023 to 7.7% in 2024, a fall of 15% year over year. Worse, this decline represents a compounded fiscal squeeze following multiple consecutive cycles of reduced funding. With this context, how and where we spend money on channel marketing is critical. It’s been my experience that most channel managers will repeat the age-old adage, “We must pay to play in the channel”.  Let’s put that to bed right now.  This is not true.

Channel partners are driven by three things. (1) Account control, (2) Profitability/Margins, (3) Tech Drag, otherwise known as the ability to sell more products on top of solutions already in place. Seeking products that offer competitive margins is key for channel leadership teams. Any financial misalignment can result in a reluctance from channel partners to push the startup’s products, ultimately stalling the partnership’s growth and success.

"Pay to play" typically refers to the practice of startups or vendors paying channel partners (such as VARs or MSPs) upfront or through higher incentives in order to gain attention, priority, and commitment for selling their products. While this approach might seem like a quick way to get channel partners on board, it generally does not work in the long run for several reasons:

Short-Term Motivation, Long-Term Disengagement

While paying upfront, for example: Deal Registrations, or offering generous incentives can temporarily capture a partner’s attention, it doesn’t build a sustainable relationship. Channel partners may engage initially to reap the rewards, but once the financial incentives dry up, their commitment often fades. Without a deeper value proposition beyond monetary gains, partners are unlikely to stay invested in the product over time.

Unpredictable and Risky Growth

By relying on financial incentives rather than the intrinsic value of the product, startups are vulnerable to the unpredictable behavior of channel partners. If another vendor comes along with a more attractive "pay to play" offer, partners may switch focus, leaving the startup without the consistent support needed for growth. This creates a volatile, risky situation where sales efforts depend on financial incentives rather than on building a solid and loyal partner base which further can dilute the brand value.

Fails to Address Core Challenges

The core challenges of working with channel partners—such as aligning go-to-market strategies, training and enablement, and driving customer demand—cannot be solved by simply offering financial incentives. Startups still need to provide value beyond monetary rewards, such as dedicated support, sales tools, and a compelling value proposition, in order to build lasting partnerships.

Prioritizing behavior-based incentives gives you the power to proactively impact the key performance metrics that matter most. Sales, SPIFs and rebates are reactive tactics inspired by lagging indicators. Leading channel programs have already started adding behavior-based incentives to their mix. Focus on where your partners need to improve, and track back into the behaviors that drive those outcomes. Regularly seek feedback from your participants, monitor your KPIs and be willing to adapt your approach based on what you learn. With these expert-backed strategies and a commitment to ongoing optimization, you can transform your channel program into a powerful driver of growth and engagement.

Issue 5: Lack of Brand Power

Startups typically struggle with brand recognition, which can be a major barrier to success in the channel. Channel partners are more inclined to promote well-known brands that are easier to sell, as these products require less effort to convince end customers of their value. Startups with limited brand presence often face longer sales cycles and lower sales volumes, which can discourage channel partners from fully committing to the partnership.

To overcome this challenge, it's important to keep the company of much larger brands where possible. This is true for channel marketing, solution briefs, reference architectures, etc. When it comes to building customer trust and driving business growth, brand partnerships or partnership marketing can provide a blueprint to success. By leveraging the collective power of brand alliances, businesses can increase their market share, expand their reach, and scale effectively. Brand partnerships are vital for organizations of all sizes especially in the channel. With the right partnership marketing strategy, you can breathe new life into your channel/channel marketing efforts and leverage a larger resource pool to stimulate business expansion.

While engaging with VARs is challenging for early-stage start-ups, there is a path forward that delivers incredible operational leverage. Being intentional is essential. We work with brands to continually evolve their channel programs. In my 30 years of building world-class channels, I’ve seen how the most successful brands can integrate new ideas because they’ve adopted a framework that encourages learning from past performance and welcoming a culture that tries new things based on market feedback. By adopting a strategic approach any organization can navigate the complexities of the channel ecosystem. The key lies in understanding market dynamics, setting realistic expectations, ample creativity, and investing in the long-term development of mutually beneficial partnerships.

At ChannelSales.AI, we understand these challenges and are committed to helping start-ups create the right strategies and connections to succeed in the channel.