Owner-Customer Technology Partnership
Solve industry bottlenecks by investing in, using, and shaping the solution
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- 93%
The framework turns an operating constraint into a strategically aligned investment. Begin by identifying problems that could impede the company or industry's ability to scale, then search for startups addressing those problems. Where a credible partner exists, use patient balance-sheet capital to acquire an ownership stake rather than remaining only a buyer. Become a genuine customer, contribute domain knowledge, and provide real-time feedback that improves the product. Ownership aligns the established company with the startup while allowing the investor to wait through a long adoption cycle without a forced exit. The result can be a stronger internal technology stack, a useful product for the wider industry, and financial upside if the partner succeeds.
Origin
Erik Hirsch described how Hamilton Lane used balance-sheet capital to invest in more than fifteen private-markets technology companies while helping them develop and adopting their products as a customer.
Core principles
- 01Start with a consequential operating problem
- 02Partner where no adequate solution exists
- 03Align incentives through ownership
- 04Become an active customer and feedback partner
- 05Use patient capital when adoption requires time
How to run it
- 1
Find the scaling constraint
Identify a recurring technology or infrastructure problem likely to impede future growth. Prioritize constraints shared by other industry participants.
Pro tip Interview internal operators and external clients to distinguish structural problems from local inconveniences.
Watch out Do not begin with a desire to invest and then search for a problem that justifies it.
- 2
Test the solution gap
Evaluate available vendors and determine whether an adequate solution already exists. Define the missing capabilities and desired outcomes clearly.
Pro tip Use real workflows and data requirements rather than a generic feature checklist.
Watch out Building or investing is unnecessary when ordinary procurement can solve the problem.
- 3
Select an aligned partner
Find a startup whose management team shares your understanding of the problem and has the ability to build a scalable solution.
Pro tip Assess the founders' openness to domain feedback as carefully as their current product.
Watch out Strategic relevance cannot compensate for weak management or unsuitable technology.
- 4
Align through ownership
Invest patient balance-sheet capital and choose an ownership level proportionate to the strategic opportunity. Avoid structures that create artificial pressure for a premature exit.
Pro tip Document the strategic benefits expected in addition to potential financial returns.
Watch out Keep client and fund capital separate when the investment primarily serves corporate strategy.
- 5
Become a working customer
Deploy the product, provide ideas and real-time feedback, and expose the startup to authentic operating conditions. Treat the relationship as active co-development rather than passive sponsorship.
Pro tip Give the startup direct access to the people who experience the problem daily.
Watch out Ownership without adoption or useful feedback creates alignment in name only.
- 6
Evaluate dual returns
Measure whether the partnership improves internal capabilities and whether the equity investment creates value. Continue patiently when strategic progress remains credible.
Pro tip Track operational adoption, avoided costs, scalability, customer value, and investment performance separately.
Watch out Do not retain a failing partnership merely because the original strategic thesis was attractive.
In the wild
Hamilton Lane saw that private-market investors wanted ESG data but differed materially in which metrics mattered. Finding no suitable system, it joined other institutional shareholders and the management team to create Novata, supplying capital, industry knowledge, and a customer perspective rather than imposing one universal score.
→ Novata became a large collector of ESG data for private companies and allowed customers to consume the underlying data according to their own priorities.
A hypothetical asset manager discovers that portfolio reporting relies on incompatible spreadsheets and manual reconciliation. It finds a promising startup, takes a minority stake with balance-sheet capital, deploys the platform internally, and gives the founders structured feedback from investment, compliance, and client-service teams.
→ The manager gains a scalable reporting system while the startup develops a product validated by a demanding enterprise customer.
Common mistakes
Investing before defining the problem
A strategic investment becomes unfocused when leaders cannot specify the scaling constraint, affected users, and desired operating outcome.
Acting like a passive shareholder
The model loses its strategic advantage if the investor neither adopts the product nor supplies actionable feedback.
Forcing a venture-style exit clock
Technology infrastructure can take years to mature, so capital with a forced exit horizon may undermine the partnership's purpose.
Is it for you?
Best for
It is best for well-capitalized organizations facing industry-wide infrastructure or technology gaps.
Not ideal for
It is not ideal for routine software purchases, short-term experiments, or firms unable to support portfolio companies actively.
From the transcript
“we were starting to meet with these firms who were trying to identify problems and areas that we're going to impede scaling in the private…”
“if this is going to be something that's good for us, it's going to probably be good for others in the industry”
“then we'd rather align with them by actually being an owner as well.”
From the episode
The Future of Private Credit with Erik Hirsch