The final part of this series looks at how you can become a great partner to startups you partner with, and ensure that you keep your internal stakeholders happy.

Keeping your organisation engaged

With the current buzz around startup venturing, getting buy-in to launch an initiative is likely to be much easier than maintaining that interest across the first few years while you wait to see any bottom line impact.

We didn’t realise the importance of this when we started out, but now we consider it one of the top two or three factors that will determine long-term success.

In the first of these posts, we looked at areas where corporates look for a return when considering a startup venturing strategy: 

  • Access to technologies or expertise that could transform your business,
  • Making the most of under-utilised assets.
  • Accelerating internal cultural change.
  • Getting a pipeline of future acquisitions. 
  • Hedging against big disruptions to your core market.
  • Simply going for a straight financial return.

One of the areas where corporates might hope to get an immediate return is the cultural change and introduction to new agile business process and product development cycles that working with startups can offer.

However there’s a really fine balance to be struck here, because one of the biggest things than can kill a startup venture programme is the perception that too many people are spending too much time on it and it’s becoming a distraction to the required focus on immediate business objectives.

Establishing the expectations of senior stakeholders about how much of their team’s attention can sensibly by devoted to the startups is crucial.

There’s a balance to be struck between securing as much time and assistance for the startup as is needed to make a difference (and deliver long term return), while ensuring that this is not at a level that makes no economic sense for the corporate; no matter the monetary value you put on corporate change.

When you’re selling in a startup venture, there’s always the temptation to play the 'speed of startups' card to get the organisation excited, but it’s a dangerous one.

The reality is that building businesses is hard and takes time, particularly for a startup which might have fewer people in total than your business has sitting on reception.

Even for the startup 'unicorns' who’ve reached billion-dollar valuations, the average length of time from launch to liquidity event is not far off a decade.

 starting a business is hard

But while there are challenges in getting the value exchange right and ensuring it’s to mutual benefit, it is definitely worth the effort involved. When you are up close to something that’s taking off, the gains are phenomenal.

The reality for many brands in the consumer space is that entrepreneurs are creating multi-billion dollar companies with little or nothing that equates to traditional advertising or marketing. No amount of case studies can compare to the experience of being on the inside of one of these businesses that are rewriting the rules.

So working out what 'wins' you can deliver back into the organisation while you wait is really important.

Cultural change alone is hard to deliver on a scale that points to positive RoI, but when the startups are performing well you can also point to the hedge against future trends it represents, and if you’ve set up your deals in the right way there should be a significant premium for having got in early.

After the initial excitement, great portfolio management is everything, and this is something you need to get in place early, before the first writedowns or failures happen. 

Being a great partner

To be a great partner for the startups you’re involved in, you need to get very realistic about what the startup needs and also about your responsibilities back at the ranch.

Don't believe anything other than that starting a business is really very hard. The lionisation of startups and the airbrushed profiles of the success stories we read give a false belief about the possibility of overnight success, whereas the reality is that founding a company is like a constant game of snakes and ladders.

You can have a succession of good days, and even weeks and months, but there's always going to be an almighty snake ready to take a big bite.

And when this happens to the founders of a company you're investing in, will you be able to drop everything to be by their side and help out?

Will you really be able to put that sales meeting or ExCo meeting off because a server's been hacked, a negative press story is about to run or two of the founders are at loggerheads? As a rule of thumb, take the level of time you've been thinking you might offer to the startup and double it.

Even that may not end up being enough, but it will put you closer to a good estimate of the time you'll need to devote if you're going to be a good partner. If you can’t offer this, consider using a dedicated team to be your day-to-day contact with portfolio companies.

Being a great partner also requires sensitivity. It's incredibly difficult to create a great working relationship with a group of people working flat out on a new product when you're dropping in and out in the midst of doing all the things your day job requires.

Doing so requires sensitivity to what they're going through, a flexibility about operating on their timescale and not yours, and a real knack for spotting the opportunities where you can help build their capabilities as well as the moments when you can just take a whole task off their plate.

Being a good partner means acting in ways that respect and promote the “special sauce” of the startup rather than in ways that dilute or kill it. 

Be in or get out

You really need a pre-nup, and unlike a marriage, there’s no excuse for letting your short-term infatuation blind you to the possibility – and, the odds might suggest, likelihood – that not every deal will work out well.

Your internal priorities might change, supportive stakeholders might move on, or the startup might pivot to something which no longer represents a future acquisition opportunity for you. In any of these cases, you need a clear strategy to exit quickly and let the startup get on with life without you.

The worst situation for an entrepreneur is suffering the ‘slow no’, as the coalition of support within your corporation breaks down and you can no longer give them the support, cash, or even just the answers they need.

No one likes to start a relationship by contemplating its end, but smart entrepreneurs will want to interrogate the downsides as well as the upsides, and thinking this through will make it much more likely you form a good, honest relationship from the start.

If this series of posts makes it seem like having a startup venturing strategy is hard, then it’s achieved its purpose. We’ve seen entrepreneurs destroyed by putting their entire focus on a partner who hasn’t really worked out what they’re doing, but whose apparent enthusiasm was enough to lead them up a blind alley. The consequences of doing this stuff in a half-hearted or dilettantish way are almost always harder on the startup than the big corporation.

But it would be wrong to end on that note – because the upside from doing it right can be huge. Smart companies realise that their big competitor probably suffers from the same problems around agility and innovation that they do, and are therefore cognisant that exposing themselves to, learning from, and potentially acquiring the innovation that’s coming out of small teams is vital to ensuring they’re not the next casualty of a tumultuous market place.

So while we’re really focused on doing it right, above all we’re passionate about the benefits of it. Go out there and look for entrepreneurs with the resilience to keep going through the ups and downs. Find people smarter than you. Hunt out those people who combine magic and dreaming with a deep understanding of how hard it is to build something great. Find them, and it will pay back in spades.

Be generous with your time in the short term. Spend a few days with the company. Try working with their team to see if there's a good fit. Get in there and kick the tyres. Don't believe the hype and don't drink the kool-aid. 

Do all this because if you find something great, with real value, that people really love, and it's being created by inspirational entrepreneurs and brilliant teams, then getting involved in that could define the future of your business.

Frank Lampen

Published 4 December, 2014 by Frank Lampen

Frank Lampen is Founder at Independents United and a contributor to Econsultancy.

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