With innovation being key to the success of both startups and corporations, collaboration between the two worlds can, in many cases, be mutually beneficial. In the past few years, corporate-startup collaboration has been a key pillar at our events and will continue to play a major part throughout 2018. In June, we look forward to an event on “Collaborating with Big & Small Players” hosted by P&G in Cincinnati.

While the right corporate-startup collaboration can prove highly valuable, it’s well-known that “elephant & mouse” partnerships are difficult to manage. A recurring takeaway from several events is to create win-win synergies, but what exactly does this entail? Based on an array of presentations and panel discussions at our events, the Innovation Roundtable® Research Team set out to delve into a few recurring insights in terms of creating such synergies.

Building the Case for Collaboration

The notion of disruptive innovation has grown to become, arguably, the most dominant theme in the innovation landscape. Among copious amounts of other competitive forces, incumbents are fearful of smaller companies with limited resources displacing them. They are becoming increasingly aware that they must tackle innovation from a different angle than before – technology doesn’t do it alone. This has led to an acute need to collaborate with pioneering startups.

At a panel at the Summit 2017, Peter Michael Oxholm Zigler, Co-Founder of Autobutler, associated these types of collaboration to a “David and Goliath” scenario. He proclaimed that there is a general narrative that startups, as the smaller, weaker adversary, need large companies more than the inverse. He believes the inverse to be the case, with large companies needing startups more than the other way around.

A key requirement toward successful collaboration is then to assess how one can truly help startups. The first question to ask yourself is why a startup would want to collaborate with you? From Innovation Roundtable® events, it can be inferred that there are numerous considerations on the topic. Speakers and panelists have repeatedly highlighted how startups primarily look for investments to actualize their business models and bring solutions to market. Speaking at the Innovation Roundtable® Summit 2017, Matthias Schanze, Director at Siemens’ separate unit for startups next47, went somewhat against this trend, explaining that, oftentimes, the very best startups don’t care about funding – as many already having financial backing. He voiced that what startups care about the most is leveraging the larger firm’s global ecosystem for customer and market access. At the same time, they also look to make use of specific capabilities within the established firm, such as for IP and technical support, for instance.

As a mainstay at our events, panels on the do’s and don’ts of corporate-startup collaboration allow for the respective concerns within such partnerships to be conveyed from all perspectives. In one such panel, at an Innovation Roundtable® workshop hosted by P&G in Brussels, serial entrepreneur, Simon Schneider, noted that there are basically two things in the minds of startups when it comes to working with large companies: testing solutions for product/market fit and driving valuation. During initial stages of a partnership, entrepreneurs look to validate whether their ideas are in fact any good. Once this is validated, they will be looking to advance toward “hockey stick growth.” Large firms can aid such a path by providing capital, brand recognition, and market access.

At the Innovation Roundtable® Summit 2016, Dr. Matthias Meyer, Founder and Head of BMW Startup Garage, highlighted that early-stage startups struggle to get their first customers and gain visibility. BMW has moved to accommodate to such needs, shifting away from the prevalent model of startup collaboration through corporate venturing or accelerators, favoring its so-called “venture client” model instead. Rather than making equity investments, BMW buys into a first sample of a startup’s solution – to validate it in a pilot project. This model is the result of BMW focusing on what it does best, while minimizing risk. Corporate venturing entities and accelerators struggle to entice the greatest startups from private venture capitalists, with most entrepreneurs preferring independent, non-corporate accelerators. In asking itself what startups truly require, BMW determined that they essentially look for three things: capital, coaching, and clients. Where private VCs may be able to provide the first two, only large corporations can offer the latter. As a result, selected startups become suppliers from day one of the venture client program.

Expectation Management & Transparency

At the Summit 2017, two startups provided interesting case examples of cooperating with large firms. In both examples, the startup ended up putting all its eggs in one (corporate) basket. The downside of such a course of action was evident. In both cases, the large player ended up delaying the process to a degree where the entrepreneurs were close to going bankrupt. From this experience, the startups learned that finding a good match between entrepreneurs and corporations requires quite a bit in terms of expectation management.

It’s quite common that expectations aren’t established and articulated from the outset. Where startups tend to work in cycles between 1-12 months, large firms can work in cycles of up to five years. Avoiding such misunderstanding appears to be grounded in fostering honest and collaborative communication from the get-go. If there is mutual understanding that both partners engage in the collaboration for the long-term, it becomes easier for startups to accept differing time perspectives. As outlined, startups aren’t necessarily all looking for the same input from large firms. It’s therefore vital to listen and understand the multiple motives for collaboration. In turn, this will ensure that all parties win from partnerships.

Corporate transparency is often thought of as an oxymoron of sorts. Startups are frequently left questioning whether they are dealing with employees that hold any decision-making authority – a vital question to answer, given the little time and resources startups have at their disposal. Speaking at a panel at the Summit 2017, Szymon Niemczura, Co-Founder of startup Kontakt.io, painted a picture of how the company had collaborated with a corporate innovation team for a few months, before realizing the distinct gulf between the goals of the corporate innovation team and those of the corporate HQ. Kontakt.io, ultimately pulled out of the partnership.

Tongue in cheek, Niemczura advised startups to steer clear of innovation managers if it isn’t obvious that they have strong authority, are part of the board, or in close periphery of people making the final decisions. Innovation departments often struggle to achieve objectives, with a lot of their time being spent gaining legitimacy within their own organizations. Partaking in the same panel discussion as Niemczura, Dr. Maximilian Marquart, Lead Analyst at BMW Startup Garage, acknowledged that this can be an issue. He stressed that the very first thing established companies need to make sure of in creating units dedicated to working with startups is to link goals to the general corporate strategy. A second prerequisite is to have a dedicated contact person attending to the interface between the startup and the larger corporate environment. Such individuals have been referred to in various guises across events – corporate mentors, internal champions, ambassadors, or boundary spanners – to name a few. Essentially, the tasks of such individuals carry the same message. They should act as the startup’s liaison, providing an insider perspective on processes, people, culture, and values. Allocating corporate mentors with a vested interest in seeing projects succeed also tends to spur startups along.

Drawing a Conclusion

To conclude, soft factors such as building trust and aligning on expectations are hugely critical, but often overlooked. It’s of considerable importance to get partnerships off on the right foot by considering how formalized collaboration between corporations and startups can be of mutual benefit, taking the perspective of startups into consideration.

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If you’re interested in participating in an Innovation Roundtable® event on corporate-startup collaboration – or another innovation theme – then check out our hosted workshops and Summit 2018. Finally, you can join our mailing list to get monthly insights on key innovation topics, innovation news, and recommended contents from our events.