The value of joint ventures

Delighted to be signing after long negotiations.

 

This is the third part of an occasional series on building tech businesses.

Joint ventures, or JVs, have been a terrific growth opportunity for us over the years. Yarris Technologies began small, as just an idea, above a shoe shop in Richmond, Melbourne. It was through JVs that we really built the business.

The first turning point was when we joint ventured with the owners of a very early Internet business. They brought their online business and we contributed the IT skills. That resulted in a very close partnership for many years and Jonathan and I were joint CEOs for a long time.  We built that one into a successful online business within the first year of operation. On the back of that we had something worthwhile which we took to the US in a JV. That was very exciting until the tragic death of our US partner. The next break was a big one, when Telstra invited us to enter a JV to transform telco network construction and maintenance. Other JVs followed.

We have two approaches to JVs. One is to form a JV company, agree a shareholder agreement and for each party to charge full rates for their services. That has worked well for us. The second approach is simpler – just having a contract where each party pays their basic costs and we each take an agreed transaction fee.

JVs are an excellent way to add the resources, skills and domain knowledge which you don’t possess yourself.

Key learnings:

  • Success is about teaming with others, and JVs are a great way to do that.
  • Having a written agreed business plan at the beginning is crucial.
  • I was surprised that large important companies were willing to partner with our little organisation, but they thought we had critical skills which they lacked. Don’t be afraid to ask.
  • Having an agreed buyout formula can avoid arguments down the track.

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