How can corporations determine whether or not a startup will be a good partner, looking beyond their funding and general market traction? Below, we will guide you through the top 5 questions to ask when evaluating a startup.
What to ask when vetting for a startup partnership
As the startup ecosystem continues to provide increasingly optimized solutions to market demands, corporations are seeking ways to incorporate this innovation into their own businesses to avoid being swallowed by their newer, more innovative counterparts. While partnering with startups is often the most effective and resource-efficient way for a corporation to introduce products or services into a business, the risk is high with more than 50 percent of businesses failing within 4 years. This is why a startup outreach and thorough vetting process is essential before commiting to a corporate-startup partnership.
What is the unique value proposition?
While many startup companies may claim they have “no competitors,” several sectors are saturated with companies that have nuanced differences that can be difficult to decipher upon first glance. The key to determining the right one for partnership is being able to sort through these differences to determine which one will thrive in the market. How do they speak about their competitors? Do they have a clear way of differentiating themselves? The startups that are the most aware of the market, and how they plan on playing a unique role within in it, will be able to communicate this understanding in order to form a strategic partnership.
Have they proved that they can scale?
While a startup that uses advanced technology buzzwords may seem appealing, it will not be able to jump into a corporate partnership if it does not have a clear plan for implementing lofty, innovative ideas. Does the startup have a plan for scaling in size as well as across markets? When building a solution with a corporate partner in the short term, the startup needs to be able to discuss how they will be able to leverage their existing (or planned) team members for the project to make it a success, as well as how they intend to scale as needed. What is their partnership history in relation to scaling? What have the successes and failures been? If the startup doesn’t have previous partnership history or are early stage, how have they built their solution in a way that is flexible for corporate partners? Do they have an API or an SDK? The more flexibility they have built into their solution, and the more prepared they are for unpredictable changes in the market, the more promising their partnership potential will be.
Are the corporation and startup goals aligned?
Many startups excited by the opportunity to support corporate innovation will be inclined to support the corporation’s mission to make the partnership thrive. While the flexibility may seem beneficial at first, a startup that is too malleable may also have a lack of direction, and therefore be less likely to focus on building a particular set of skills and capabilities. Startups that try to have “all inclusive” solutions and solve too many problems will have difficulty perfecting and expanding their solution because they will be too spread thin.
How are they prioritizing this project, and how will you manage this prioritization?
Prior to committing to a partnership, the corporation needs to have a clear vision of deal-breakers vs. where they are willing to be flexible. For example, how much time are you expecting the startup to devote to this project? If the startup has other engagements with companies, how will you ensure they prioritize you as a partner? Startups move their initiatives quickly in order to grow and get to a point of stability, and want clear expectations as they enter partnerships. The more clear information you can give, the easier it will be to set expectations ahead of time and manage resources accordingly.
Can you work effectively with their team?
Regardless of the technology’s strengths, a startup partnership can only be successful with the right dedication, communication style, and capabilities from the teams involved. Beyond the team members’ expertise in the relevant field, how do they communicate expectations and their capabilities for the project? How do they handle disagreements in expectations, and how much are they willing to compromise? This is especially important if the corporation and the startup come from different countries (and therefore different time zones) or cultural backgrounds. If the startup does show the ways in which they are willing to work cohesively with your corporation’s team despite slight differences in preferences, it will reduce the risk of running into bottlenecks along the way.
Despite cultural and structural differences between corporations and startups, there is a potential to build powerful solutions. It is the perfect marriage of resources and emerging technology. Although the risks are high when investing resources in startups without longstanding, proven success in the market, corporations that look for the right information ahead of time have the potential to play a significant role in the innovation world.
RocketSpace works with large corporations to help them identify innovation strategies unique to their business and find the best startups for partnership. For more information on RocketSpace’s corporate innovation services. Contact RocketSpace today!