Short answer: Market development funds (MDF) are money a vendor sets aside to help its partners create demand for its products. Most companies treat MDF like a marketing budget for dinners, events and swag. That’s the wrong read. The M stands for market, not marketing, so any partner motion that produces pipeline qualifies. And if that motion delivers sales-qualified opportunities cheaper than your MDF does today, it has already earned the budget.

What are market development funds (MDF)?

Market development funds are a pool of money a vendor gives its partners to grow the market for the vendor’s products. Resellers, distributors, integrators and cloud marketplaces all run on it. So do most large tech alliance programs.

In practice, MDF works like this:

1. The vendor sets a pool. It’s usually a set amount per partner, per tier or per quarter.
2. The partner proposes an activity. That could be a campaign, an event, a webinar or a joint outbound push.
3. The vendor approves it. Approval is based on the plan, not the result.
4. The partner runs it and submits proof. Then it gets reimbursed or paid directly.

Most pools are use it or lose it. If a partner doesn’t claim the money by the end of the quarter or fiscal year, it goes away. AWS partner funding programs are a well-known example of how a large vendor packages these funds.

Some industries call it something else: co-op funds, partner development funds or joint marketing funds. The mechanics are close enough that the same rules apply.

The M in MDF is market, not marketing

Here’s the position I take with every partnerships leader I work with. It is not marketing development funds. It is market development funds.

That one word changes what qualifies. Because MDF exists to develop the market, any pipeline-generating activity belongs in it. So a co-sell play built on account mapping data qualifies. And so does a joint outbound motion into shared target accounts, or a partner-sourced campaign with a real conversion path.

Yet when most teams hear MDF, their minds go straight to events and digital ads. One partnerships team asked me that exact question: does everyone default to events when they think MDF? Mostly, yes. That default is the layer you have to get past.

In fact, MDF is often a forgotten line item. When I remind a CRO it exists, the reaction is almost always the same. They light up, because it’s money that doesn’t hit the P&L of a department that won’t spend.

Where most MDF actually goes

Most MDF is spent to be spent. The quarter ends, the pool resets, and somebody books a dinner.

Take what one partner leader told me about his EMEA program. The funds were use it or lose it every quarter. So they paid for partner rep lunches, dinners and CXO events around big industry weeks. None of that is bad on its own. But none of it was tied to a pipeline number either.

And the reporting often makes it worse. I’ve heard channel executives describe MDF utilization numbers that looked great until you asked what the money bought. A large share went to partners attending the vendor’s own events. That counts as spent. It doesn’t count as market development.

So I understand the skeptics. Some operators call MDF an overused buzzword that gets thrown around and rarely delivers. I agree with the problem. I disagree with the conclusion. The fund isn’t broken. The way most companies spend it is.

Analysts see the same shift. Forrester on partner incentives beyond MDF describes partner funding moving from reimbursement toward strategic investment. That’s the right direction. If you want the tactical version, I covered it in MDF programs that generate real pipeline.

How to justify MDF: the cost per SQO test

One number decides whether a partner motion deserves MDF. It’s the cost per sales-qualified opportunity (SQO). An SQO is an opportunity your sales team has accepted as real pipeline, not just a lead.

This is the test I run on every MDF conversation. It works because it compares the partner motion to what the buyer already pays for pipeline.

Step 1: Find your benchmark

First, work out what one SQO costs through today’s MDF spend. Then add what it costs through paid media and outbound. Most companies already know these numbers, or can get them fast. If they can’t, that’s a finding on its own.

Step 2: Price the partner motion on the same unit

Next, price the partner program the same way. Take the full cost (the plays, the people running them and any tools) and divide by the SQOs you expect. Build three versions: worst case, commit and best case. Then bank on the commit number.

The worst case matters most. Even if the program lands at 10% of projected production, does it still beat the benchmark? If yes, the price objection goes away. Once a buyer accepts the worst case, everything else looks good.

Step 3: Scale it or stop it

If the motion beats the benchmark, you have the case to pull more MDF and scale it. That also means your champion never has to ask leadership for new money. If it misses, you stop, and the lesson cost far less than a year of dinners.

This is also how you prove MDF ROI through deal attribution, which is one of the questions partnerships teams ask me most. Attribution only matters here if it lands on an SQO your sales team accepted. Forrester’s research on MDF ROI shows how long the industry has struggled to measure it. Cost per SQO is the simplest answer I’ve found. If you need the play itself first, start by learning how to build a co-sell plan.

Who has MDF (and where it hides)

When a buyer says there’s no budget, they usually mean there’s no budget in their team. That’s rarely the same as the company having no money.

Your own company

At big, siloed companies, every team says it has no money. But if the activity generates pipeline, market development funds are the place to look. The partnerships org is often the worst place to find budget. Sales enablement, rev ops and sales sometimes have money. However, MDF is the sweetest spot, because it’s already meant for this.

Your big partners and the cloud marketplaces

Also look at your partners’ pools, not only your own. Large platforms, hyperscalers and distributors often carry more MDF than their partners can use. There’s also committed cloud spend. Companies commit to AWS or Azure spend that has to be used, and much of it sits idle. Tackle on engaging marketing for cloud GTM is a good primer on how marketing teams tap those cloud programs.

The mid-market question

Mid-market companies have less MDF of their own. That’s real. But their bigger partners often have plenty, and a mid-market vendor with a proven play can ask those partners to co-fund it. So the question isn’t whether you have MDF. It’s which partner in the deal has it.

How to get a program funded with MDF

Partnerships teams often ask me whether it’s as simple as asking, “can you fund this with your MDF dollars?” It isn’t. A blunt ask almost never works.

Fund programs, not software

Instead, sell a program. When you pitch a software subscription, the buyer looks for a software budget, and the partnerships team rarely has one. When you pitch a program with a cost per SQO, the buyer can fund it the way they fund any other pipeline motion.

I’ve watched this framing land in the field. Reps who switched to funding campaigns and programs, instead of individual software, got a different response. The buyer said, “let me take that back to my team.”

Lead them to MDF instead of asking for it

Then position MDF early. Build the pipeline math with the buyer, using their own numbers. Once they see the cost per SQO beating their benchmark, they reach MDF on their own. That’s the conversation you want.

Also, go to the person who owns the MDF, not just the partner manager. MDF owners can see exactly how much money is sitting unused in their own system. A funded program is the thing they’re missing.

Keep the agreement separate from the MDF claim

MDF usually needs a proposal, proof of delivery and an invoice. So separate the commercial agreement from what gets submitted as the MDF claim. Tie each MDF invoice to a specific activity and its output.

Tools are catching up on the admin side. PRM platforms like Introw and Euler now automate MDF requests and claims. That helps. But tools track the money. They don’t decide what’s worth funding. That still comes down to the cost per SQO test, and to avoiding the reasons why co-sell programs fail.

MDF vs co-op funds vs SPIFs vs rebates

These four get lumped together. They do different jobs.

Lever	What it pays for	What to measure
MDF	Partner activity that develops the market	Cost per SQO
Co-op funds	A share of partner advertising, earned from sales volume	Cost per qualified lead
SPIFs	Short-term bonuses for partner reps on a product or deal	Deals and speed to close
Rebates	Money back to the partner after they hit a sales target	Revenue and margin

In short, MDF and co-op funds pay for demand. SPIFs and rebates pay for closing it. If you’re funding a partner program that creates pipeline, MDF is the right lever.

Make MDF performance-based

Here’s where I think MDF should go. Partners should earn it by producing.

The model is simple. Once a partner produces pipeline, they earn MDF to drive more top of funnel. You can even match it. Very few companies do this, and it’s silly not to.

Because spend follows production, the program funds itself. You aren’t pulling from existing budgets. You’re routing money to what already works. And that’s an easy case for a cash-conscious CEO to approve, because the results justify the spend before it goes out. It’s the same logic behind valuation certainty in partnerships: predictable, proven pipeline is what earns more investment.

FAQ

Does MDF have to be spent on marketing?

No. MDF stands for market development funds. Any partner activity that develops the market and produces pipeline can qualify, including co-sell programs and joint outbound.

How do you measure MDF ROI?

Measure cost per sales-qualified opportunity. Compare it to what an SQO costs through your current MDF, paid and outbound spend. If the partner motion is cheaper, it justifies more MDF.

Can a vendor or partner fund a co-sell program with MDF?

Yes, when the program is built to produce pipeline. Pitch it as a funded program with a clear cost per SQO, not as a software purchase.

Is MDF available in the mid-market?

Less of it, but yes. Mid-market companies often tap their larger partners’ MDF pools for joint programs that serve both sides.

What’s the difference between MDF and co-op funds?

MDF is a pool set aside to develop the market, usually approved per activity. Co-op funds are usually earned from sales volume and cover a share of the partner’s own advertising.

The bottom line

MDF is the biggest partner budget most SaaS companies never touch. The test is simple. If a partner motion produces SQOs cheaper than what you spend today, it’s MDF-eligible. Stop asking whether you have the budget, and start asking which pool it’s sitting in.

Forecastable is an independent third-party professional services company. Our evaluations of other vendors are based on publicly-available information as of September 2026 and our own client experience.

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