Relationship-First Strategic Deal Funnel
Build product trust before seeking investment or acquisition
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 98%
The funnel starts months before a transaction. A startup identifies corporations whose products, customers, or distribution genuinely complement its own, then develops working relationships with the relevant business and product teams. Concrete integrations, customer outcomes, or joint selling motions establish trust and demonstrate strategic value. Corporate development can be cultivated in parallel, but it should not replace operational sponsorship. An acquisition is effectively a hiring decision involving both the company and its people, so a buyer needs evidence that the teams can work together. Strategic investment follows the same logic: in Microsoft's model, roads lead through an existing partnership. This sequence also gives the startup more leverage than approaching a buyer with an expiring deadline and no shared history.
Origin
Schultz compared an acquisition to a hiring exercise and advised founders to establish product-level relationships well before pursuing strategic capital or a sale.
Core principles
- 01Acquisitions resemble high-stakes hiring decisions
- 02Trust cannot be compressed into a one-week auction
- 03Product relationships precede strategic capital
- 04Operational partnership evidence creates negotiating leverage
How to run it
- 1
Identify credible strategic counterparts
Select companies with a real product, ecosystem, or customer connection to the startup. Prioritize mutual operating value over the prestige of the corporate name.
Pro tip List the exact product teams and business owners who would benefit.
Watch out Do not confuse a potential acquirer list with evidence of strategic fit.
- 2
Engage product and business teams
Begin conversations with the teams that own the relevant roadmap, customers, or distribution. Explore a partnership that can stand on its own merits.
Pro tip Lead with a concrete customer or integration problem.
Watch out Corporate development cannot manufacture internal product sponsorship.
- 3
Produce partnership evidence
Execute an integration, joint selling motion, licensing arrangement, or other measurable collaboration. Use results to demonstrate compatibility and trust.
Pro tip Track adoption, revenue influence, and team-level working relationships.
Watch out Announcements without operational follow-through provide weak transaction evidence.
- 4
Develop the deal relationship in parallel
Keep the corporate-development or strategic-investment team informed as the partnership matures. Give them time to understand the company and its people without forcing a premature process.
Pro tip Share milestone updates tied to the partnership rather than generic fundraising material.
Watch out Do not make the deal team the only relationship inside the corporation.
- 5
Open transaction discussions from strength
Discuss investment or acquisition after strategic value and trust are visible. Preserve other financing and exit options so a single corporation does not become an emergency lifeline.
Pro tip Start before the company is constrained by runway or a competing one-week deadline.
Watch out Strategic investors may join rounds but often will not lead or rescue them.
In the wild
A startup works with an enterprise platform's product team to launch an integration and trains the field organization to sell the combined solution. After adoption and revenue evidence accumulate, the startup establishes a parallel relationship with the platform's investment team and later discusses participation in a growth round.
→ The investment rests on demonstrated strategic value rather than speculative alignment.
Instead of contacting a prospective buyer only after receiving another term sheet, a founder builds relationships with two likely strategic partners a year earlier. Both understand the product, team, and customer value before any formal process begins.
→ The founder preserves optionality and gives buyers enough evidence to make informed decisions.
Common mistakes
Starting with corporate development
Deal professionals can facilitate introductions, but product and business sponsorship supplies the operational reason for a transaction.
Creating artificial urgency too early
A one-week deadline cannot substitute for the trust and internal diligence required for an acquisition.
Depending on rescue capital
Strategic investors may invest modestly alongside others, but they are often the wrong source for emergency financing.
Is it for you?
Best for
Founders who may eventually seek a strategic investment or acquisition by a large technology company.
Not ideal for
Companies needing immediate rescue financing or running a rapid process without prior buyer relationships.
From the transcript
“getting acquired is is almost like going through a hiring exercise”
“it is indeed a relationship”
“certainly on the the strategic investing side for me all those roads lead through a partnership anyway”
From the episode
Special: A Conversation with Microsoft's Head of Strategic Investments Brian Schultz
Brian Schultz