There are numerous examples of corporates and start-ups that have formed partnerships to the huge benefit of both parties.
When Coca-Cola teamed up with on demand stocking start-up Wonolo a few years back, for example, the result was a 75% cost reduction per outlet for Coke and a $5.7 million boost to Wonolo’s next funding round.
Corporate/agency/start-up partnerships can be transformative. For corporates, partnering can provide the speed, agility, hunger and imagination needed to stay ahead. For agencies, it can bring the necessary point of difference in their product/service in a poorly differentiated market.
And for the start-ups themselves, partnering can deliver everything from the credibility they need to attract early investment and customers, right through to the huge ‘scaling opportunities’ that would otherwise take years to build.
And yet there remains an issue: the partnerships are very rarely executed successfully to the satisfaction of those involved.
“There is a tremendous amount of misunderstanding about start-ups,” says Richard Fearn, Director at the Friday Club London, early stage tech investor and chair of the BIMA Start-Ups Council.
To cut through some of that misunderstanding, the Start-Ups Council organised a roundtable session, ‘The do’s and don’ts of effective start-up partnering’, featuring experts from the corporate, agency, ‘matchmaker’ and start-up worlds.
The session aimed to distil some of the real issues hindering seamless interaction between start-ups and corporates. Here are some key takeaways from the discussion.
Corporates: Don’t innovate for the sake of it
Too often, innovation is a corporate PR exercise; a flag to wave that may create the appearance of being innovative, and may bring collaborative people together to do something interesting, but it doesn’t deliver results.
That’s because the desire for innovation often comes first when in reality corporate businesses need to ask, ‘What are we good at?’, ‘What are we not good at?’ ‘What should we not do?’ Corporates shouldn’t do things a nimble, fast-moving start-up could.
With the right space for the start-up intervention defined, the next task is to match the challenges of the corporate to the innovations offered by the start-up.
Start-ups: Do engage the core
Corporates bring scale. Start-ups bring innovation. That’s the quid pro quo of the relationship.
Yet many corporates set up an innovation team and ask for an exciting new agenda. Then, when the agenda doesn’t land with the key decision makers, the innovation team finds itself on the fringes of the business.
The corporate doesn’t get the innovation it wants. The start-up doesn’t get the scale it needs, sits on its own and doesn’t deliver very much.
Start-ups have to engage the core business because that’s what gives them access to the distribution, marketing and other advantages scale brings. It’s also how they ensure the innovations they are aiming to deliver are the innovations the corporate wants.
Corporates & start-ups: Do commit
A relationship between start-up and corporate that’s built on misunderstanding is doomed to failure. It’s hardly surprising, then, that frustrations begin to build when a corporate finds a new innovation isn’t a 100% tailored match for the business.
Similarly, it irks start-ups to find they are engaged in PR work at the fringes rather than the impactful opportunities they felt they were promised.
For the ‘matchmakers’ at the roundtable, communication, and an understanding of the commitments made by each party was key to better relationships. These programmes, whether corporate accelerators, start-up incubators, corporate venture arms or other, all need long-term, senior management commitment, measured in years not months. And there needs to be a high level of understanding of expectations on both sides.
On the corporate side, corporates need to commit to a budget ahead of the process, and demonstrate that they are serious. If they are effectively a “tech tourist” (with no real commitment or budget), the corporate should be up-front about it, and the start-up should know when to walk away.
Partnerships between corporates and start-ups aren’t just a question of matching tech, either – the best relationships start with people. Start-ups need to be better at talking to corporates, to know what will be expected of them – and corporates need to take the time to meet and talk and understand, rather than rely purely on written submissions.
Corporates should be aware that no innovation will be a 100% fit, while start-ups need to be wary of over-promising.
And finally, corporates should be involved in selecting their start-up partners (rather than leaving it entirely to agencies or accelerators). As long as they are involved in compiling the shortlist, they are likely to feel as though they are part of the journey and have ‘skin in the game’ – which increases the chances of the relationship being beneficial for everyone.
Start-ups: Don’t call it “disruption”
Corporates want solutions. They want innovations that plug into their systems, work seamlessly and deliver positive change, but without any disruption.
In part, corporates need to understand that this is an unreasonable expectation: you can’t deliver new without, to some extent, ripping up the old. Equally, however, start-ups have tended to talk about disruption in an unhelpful, destructive way.
The conversation needs to shift, so that instead of proposing innovations that will disrupt a particular player in the value chain, they should instead focus on an end user whose life will be improved by the innovation. That end user can then decide who, if anyone, in the value chain gets disrupted.
Corporates: Do learn how to be start-up friendly
If corporates want a culture of innovation, they need to help the start-ups help them to achieve it. Some points that can help achieve this include:
- Don’t kill the start-up. They are fragile entities!
- Don’t just agree a budget (welcome as that is); agree how to spend it.
- Avoid the ‘soft yes’ that strings start-ups along for months.
- Walk in the start-up’s shoes. Understand how squeezed a start-up and its (few) staff will often be.
- Avoid mammoth contracts, first options and unfair paying practices. Start-ups talk with other start-ups, and the easier a corporate is to work with, the greater the chance they’ll be rewarded with the best collaborations.
Start-ups: Do consider agencies
Aligning with agencies can be good business for start-ups. It immediately gives them access to experts – social, search, content and more – who can support them.
Being under an agency’s wing can also make it easier for a start-up to get paid, ‘piggybacking’ on the agency’s approved supplier status without having to go through the rigmarole of establishing its own. With that said, agencies should respect the above points as well.
Corporates: Do give feedback
It’s a measure of just how rarely start-ups receive feedback that their response to any feedback at all (even in support of an ‘it’s a no’ response) is rarely bitter. On the contrary; it’s often hugely appreciated.
Start-ups: Do understand the expectations
For all the many ways the procurement process could be simplified for start-ups, there’s still a requirement to face up to it. Start-ups need to prepare for their interactions with corporates and clearly distinguish between the sort of investor meetings they may be familiar with and the corporate meetings they may not.
Put frankly, corporates don’t want to know where the founder came from, or how well your funding round is going; they are focused on problem solving.
Corporates: Do understand the value of the start-up
There’s a stubborn core of corporates who still believe ‘tech start-up’ is synonymous with ‘bedroom coder’. When they get out and meet the start-up and find it’s a serious, well-run business often headed by someone with corporate experience and entrepreneurial flair, perceptions change.
Working with start-ups can energise a business. Meeting start-ups can remove the fear of the people and the tech. And focusing more on ‘emerging tech’ (seen as supporting and enabling) rather than ‘innovation’ (sometimes seen as threatening) can change the willingness to engage and experiment.
All of which can leave a corporate better placed to understand the true value and risk of working with start-ups.