Cagey joint venture partner makes me nervous

March 21, 2012

This article was first featured in Financial Times.

I run a start-up mobile technology company that has experienced significant growth over the last 12 months. We’ve been approached by a much larger established brand that wants to enter into a joint venture partnership with us to launch a new product. This is a very exciting opportunity that could propel my business to new heights but the potential partner is being quite difficult about answering some of the questions I have in relation to their current business model and the precise structure of our partnership. I don’t want to jeopardise the relationship and I understand I am the much smaller partner but I also want to make sure that I know what I’m getting into. Can you advise?

There is no sensible basis on which you can proceed without your questions being addressed.

If the larger more established company is sincere in its wish to work with you it should be prepared to tackle your questions in a manner that is proportionate to the opportunity that presents itself.

You should prepare a list of the key issues that need to be bottomed out before you can proceed. A meeting should then be requested to discuss these points. This will allow you to explain why they are important. Demonstrating a professional approach should instil confidence.

Without a clear understanding of critical factors, such as how the JV is to be structured, funded and owned, ownership of intellectual property in any product development and the manner in which the product is to be exploited could leave you horribly exposed. If their reluctance is because of a wish to safeguard confidential information, this can be addressed by signing a non disclosure agreement which would also be in your interests.

A poor investment decision for your JV partner may be no more than an inconvenience. For a fledgling company it could be terminal. Your instinct in this matter is well founded.

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