Start-up Dives - PartnerStack
Together we grow
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In today’s edition, I will be covering PartnerStack. They are a Toronto based Y-Combinator company that raised USD $29 million last week in Series B funding, led by 3L Capital and with participation from Whitecap Venture Partners, HarbourVest, and existing investor RRE Ventures. PartnerStack helps SaaS companies build and operate partner sales channels to drive partnership revenue.
Origin and the business
PartnerStack was founded in 2015 by Bryn Jones, Jonathan Mendes, Luke Swanek and Neil Chudleigh. At one point they were called GrowSumo and prior to that they were building software for non-profits. Check this excerpt from Bryn’s funding announcement to get a gist of how they identified the problem that they are solving today:
We were building collaboration software for nonprofits, a product which I can only describe as being like Slack, but worse in every single way. We struggled to sell it, and not only because of its questionable quality. Despite its shortcomings, there was actually a market for what we were building. We just simply weren’t able to reach them on our own — but we soon discovered partners could. Once we launched our own partner program, we started getting real leads we could actually close.
In the process, however, we also realized just how painful setting up partnerships for SaaS could be. When looking at partner relationship management (PRM) software available on the market, we were surprised that they lacked so much essential functionality for building a partner program, like paying out partners, automating emails, tracking more than one conversion per customer, and even running more than a single partner program.
Most importantly, we realized that the ideal SaaS partner sells multiple products together as a single integrated solution, but most PRMs only allow partners to sell a single product from a single portal.
Partnerships were proven to work, but SaaS companies weren’t investing in partnerships as a go-to-market channel for a simple reason: the tools to do it well didn’t even exist. We dropped our collaboration product and pivoted to building a complete partnerships platform, designed from the ground up to support SaaS businesses in building and scaling partner channels.
So what does PartnerStack do?
Have you ever read a productivity article that talks about Asana or Evernote and subtly prompts you to sign up for these tools? Or watched a YouTube video where the creator suggests a particular software product? You might have been in the market to find something that lets you write better and once you learn about Grammarly you want to get some reviews of the product on YouTube and a creator talks highly of it and sends you to Grammarly’s website through their link to buy the subscription. Each of these are instances where an individual creator/agency affiliate partner is trying to help a software company sell their product to you. When you use their link to sign up or make a purchase they get a kickback from the software vendor. PartnerStack facilitates the relationship between the affiliate partner and the software vendor.
Software companies have a few ways of reaching their customers. They can do a ton of paid marketing and show ads, they can have a free version to get you to try the product. And they can find partners who can make their pitch. Having these creative supporters and product evangelists is great for Software companies but it takes a lot of effort to build partnerships. They first have to identify partners, then educate them on their product to build the right distribution, track their leads and then at the end pay out these partners for the leads and signups they generate. This is a lot of work and vendors need a team to establish partnership programs. PartnerStack takes care of all of this work for SaaS companies that choose to use their product.
A SaaS company you create their own partnership program and choose how they want to pay their affiliate partners. For example Grammarly below has chosen to pay its partners $100 for every qualified referral and Calendly pays between 15%-20% of monthly/annual referrals.
Once they decide their criteria for a partner to work with and their payment strategy, they can have the partnership program up and running on PartnerStack’s marketplace. The marketplace has 65000+ partners who can then choose to partner and promote the software to their readers/viewers across their web footprint. Each time the software company adds to their revenue through a signup or a customer the partner also earns and PartnerStack manages that payment process as well.
Okay! How does PartnerStack make money?
PartnerStack makes money by selling subscription plans to SaaS companies that use their platform to run partnership programs.
What is exciting about them?
I think PartnerStack is solving a real problem for companies and has exciting growth ahead of it that has been accelerated by the pandemic. It is a Growth partner - Companies are always looking to grow their revenue and creating partnerships is a great way to do so. PartnerStack is enabling this. Look at some of the companies using their platform:
Also the numbers are telling a growth story. Their 65000+ active partners have driven over $120 million in revenue for programs hosted on PartnerStack in the past year.
I am excited to keep an eye on this business as they continue to grow 🤞
A Book Recommendation
I have been trying to make time to read and recently completed Sarah Frier's book 'No Filter'. She tells the story of Instagram in a captivating narrative. Instagram started in 2010 and was bought by Facebook in less than 2 years for a historic $1 billion. At the time they had only 13 employees. More than the early start of the app and the product decisions made by the co-founders, I found the story of the co-founders staying on after the acquisition and trying to maintain Instagram's beauty and brand within Facebook, the most interesting. I highly recommend the book.
Below is an excerpt that you might like:
"Each month, more than 1 billion of us use Instagram. We take photos and videos of our food, our faces, our favourite scenery, our families and our interests and share them, hoping that they reflect something about who we are or who we aspire to be. We interact with these posts and each other, aiming to forge deeper relationships, stronger networks, or personal brands. It's the way modern life works."
That’s all for now :)
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