The Mating Dance: Searching for the Right Joint-Venture Partner

Embarking on a search for a joint-venture partner is a bit like the search for an appropriate spouse. You should carefully and thoroughly review prospective candidates and conduct extensive due diligence on the final few whom you are considering. Develop a list of key objectives and goals to be achieved by the joint venture or licensing relationship, and compare this list with those of your final candidates. Take the time to understand the corporate culture and decision-making process within each company. Consider some of the following issues: How does this fit with your own processes? What about each prospective partner’s previous experiences and track record with other joint-venture relationships? Why did these previous relationships succeed or fail?

In many cases, smaller companies looking for joint-venture partners wind up selecting a much larger Goliath that offers a wide range of financial and nonfinancial resources that will allow the smaller company to achieve its growth plans. The motivating factor under these circumstances for the larger company is to get access and distribution rights to new technologies, products, and services. In turn, the larger company offers access to pools of capital, research and development, personnel, distribution channels, and general contacts that the small company desperately needs.
But proceed carefully. Be sensitive to the politics, red tape, and different management practices that may be in place at a larger company but will be foreign to your company. Try to distinguish
between what is being promised and what will actually be delivered. If your primary motivating force is really only capital, consider exploring alternative (and perhaps less costly) sources of money. Ideally, the larger joint-venture partner will offer a lot more than money. If your primary motivating force is access to technical personnel, consider purchasing these resources separately rather than entering into a partnership in which you give up a certain measure of control. Also, consider whether strategic relationships or extended- payment terms with vendors and consultants can be arranged in lieu of the legal structure of a joint venture.