The relationship between brands and startups has never been cozier.

The internet has fundamentally changed the way brands connect with and market to consumers, and many brands increasingly look to young startups to help them understand what innovations are coming next.

Brands engaging in pilots with these startups have a lot to gain if they structure and execute them correctly. Here are six tips for doing just that...

Be willing to bet on unknowns

Will a pilot partner become the next Instagram or Snapchat? When working with young startups, it's important to accept the reality: It is impossible to know.

So brands should focus far less on how well-known a startup is and more on the merit of its pilot pitch because even if the startup doesn't make it, the findings from a worthwhile pilot could help the brand in future pilots.

It could also help the brand identify other startups that might be worth engaging.

Make sure your brand has work to do

There's no such thing as auto-pilot when it comes to a good pilot.

While a brand and its pilot partner will have different obligations and burdens, in a well-structured pilot - the type most likley to be successful - a brand should never find itself with little or nothing to do.

If it finds itself in this scenario, the pilot plan should be revisited before launch.

Don't pay cash

This one might be controversial and subject to debate, but brands should not feel obligated to pay for pilots.

Yes, young startups typically have limited resources and one can easily make the argument that brands for which a million dollars is a rounding error can afford to throw some dollars at a pilot.

But the truth is that pilots result in soft and hard costs for brands too, and startups gain invaluable access and knowledge they never would have had otherwise. 

So while it may seem tempting to indulge a startup's request for direct compensation, in many if not most cases, it's best to take the position that the startup is being paid with access and knowledge.

If a startup doesn't see enough value in that access and knowledge to agree to partner on a pilot without money changing hands, a brand should feel comfortable indicating that it's not a good fit.

Calculate hard ROI (but don't sweat it)

Ultimately, brands work with startups on pilots hoping that in the long-term the investments they make will allow them to move the needle.

But not all pilots are going to produce an immediate and compelling ROI. Many times, pilots will show promise and suggest future experiments that build off of the lessons learned.

This is often a fine outcome.

Set clear expectations

Most startups engage in pilots hoping that they will pave the way for a deeper and more lucrative relationship if and when the pilot ends and is deemed to have been successful.

Because of this, it's important for brands to be clear with their startup partners the process by which that would happen.

How will the overall success of the pilot be determined? Who are the decision makers? If there's a longer-term relationship to be had, how long after the pilot ends is it likely to be solidified and what might it look like?

Not only will this information help a pilot partner execute a pilot more effectively, it can prevent frustration and confusion later on.

Don't let anyone walk away empty-handed

Regardless of the outcome of a pilot, neither party should come away without increased knowledge.

For brands, this means designing pilots so that knowledge is captured in a meaningful and usable way.

It also means designing pilots so that the startup can do the same.

For more on this topic, read:

Patricio Robles

Published 20 October, 2015 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (4)

Parry Malm

Parry Malm, CEO at Phrasee Ltd.

Great points Patricio!

Just one point on the "Don't pay cash" point, and as the CEO of a startup I'm probably well qualified to comment:

I've had about 50 brands offer me the amazing opportunity to give them a "free pilot." And I've turned down every single one.

Sure, the data and learning may be useful. But if something is free, you miss the value perception of the product... and then turning it into a commercial relationship is impossible.

Plus, large brands, with the limitless bankrolls you mention, can certainly afford to do a "free pilot." But how many startups can? It's a similar concept to an "unpaid internship," and ultimately inhibits innovation.

If a startup's product isn't market-ready, then yeah, do stuff for free. But if the product is in the market and you can generate revenue, even at break-even, then surely that's how to build a stronger business than offering up free stuff.

Brands *should* be actively engaging with startups and they should consider the "total cost of ownership". But startups need to consider the "total cost of customer."

over 2 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Parry,

Thanks for your comment.

I agree the issue of compensation becomes more tricky when you have a fully-baked product that you're already selling.

A lot of early startups are still trying to find market-product fit and many have few if any paying customers. I think these startups have to be realistic about expecting payment.

Startups that are further along need to decide if they're dealing with a true pilot or a potential customer who wants a free trial.

over 2 years ago

Parry Malm

Parry Malm, CEO at Phrasee Ltd.

Patricio, I totally agree, and forgive me if I misunderstood your original point.

I think this whole "minimum viable product" meme is often misinterpreted as "a sh*tty product that some idiot will pay for." Which is a shame.

over 2 years ago

Elliot Ross

Elliot Ross, Email marketing design at actionrocket.co

"a sh*tty product that some idiot will pay for."

There are plenty of well established enterprise level platforms that also take this approach. Sometimes you're better off with a start up – they're often more willing to adapt for your needs, provide good support and work harder to help you.

over 2 years ago

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