Unlikely pairings often produce remarkable outcomes.
Such is the case with partnerships between startups and corporates: What may initially seem like an odd combination, is often a complementary alliance waiting to happen. For instance, Google partnered with Uber to enhance their existing maps feature by offering users a convenient way to request rides.
Startups pride themselves on speed, innovation, and risk-taking, but often have difficulty scaling. Without consumers to test ideas, products, and solutions, startups risk building the wrong product. For startups with a short supply of funding, this type of misdirection can be crippling.
While large corporations have proven their value in the marketplace over time, they risk becoming inefficient due to cumbersome hierarchical structures, outdated technology, and an inability to adopt and implement new ideas and methods.
Both organizations desperately need what only the other can provide.
Startups and Corporates: An Unexpected Partnership
For startups, a fast track into experienced pools of executives who know the space, provide valuable feedback, and have user groups ready to trial products and services is a huge benefit. Likewise, for corporates who need a hand with innovating, pairing with startups can provide fresh ideas, insights, and technology fast. Recent data from KMPG's annual New Horizons study supports this sentiment. According to their research, 94 percent of 137 startups surveyed said they would likely repeat a collaboration process within a large organization.
What traits do startups need to look for in corporate partners? How can these global leaders provide valuable growth opportunities? Let's look at some of the common challenges and benefits experienced by both startups and corporates to see if these assumptions hold true.
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Partnership Challenges
Startups:
As a startup founder, your biggest hurdle is "the ticking clock." No matter how much capital you raise, it probably will never feel like enough. The pressure to produce significant results before the next round of funding can be enormous.
Compare that sense of urgency to a large corporation with tons of red tape, money, and time. Does a company like Google, Amazon or IBM really need to return your call? No, they are doing just fine without you. Unfortunately, the responsibility of managing the timeline for forging corporate-startup-corporate partnerships usually lies on the shoulders of the startup founder. In most cases, the corporations you target will have absolutely zero incentive to fast-track meeting with you.
Enter into a lengthy negotiation process that doesn't pan out, or ends poorly, and you will lament how that time could have been better spent (e.g. improving customer acquisition rates, optimizing sales funnels, scouting top talent). Additionally, identifying the right individuals within the organization — the ones who will actually embrace your solution — can prove challenging.
Corporates:
On the other hand, large corporations also face significant challenges when it comes to evaluating partnerships. Despite their willingness to innovate, many corporate managers lack clarity around how to best solve the problems faced by their respective departments. This absence of understanding often leads to poor communication with outside vendors offering fresh solutions.
Interestingly, many of today's corporations have constructed special innovation teams dedicated to identifying new opportunities for both cultural and methodical improvements.
However, these teams often struggle to create real change in the face of static bureaucracy: Can they get their desired airtime with board members? Will they have the resources they need to effectively do what they have been tasked? Unfortunately, the answer to those questions is often "no."
Partnership Benefits
Though the road to forming worthwhile partnerships may be challenging, the rewards can be substantial when you land the right company. The best partnerships are win-win, providing both startups and corporates with invaluable experience, savings and resources. Here's a look at what both sides can expect to gain:
Startups:
- Easy access to a large + targeted client network
- Greater perceived legitimacy + investment power
- Feedback on how to best pivot products + services
- Easy access to helpful business expertise
- Potential for joint ventures + acquisitions
Corporates:
- Improved effectiveness of existing technologies applied to customers
- Increased profitability due to more cost-effective + innovative solutions
- Increased risk-taking, agility + willingness to experiment with new ideas
- Potential for mutually-beneficial joint ventures + acquisitions
How to Work Effectively With Corporates
The good news is large corporations definitely want to partner with startups. According to a study from MassChallenge and Imaginatik, 82 percent of corporations now view interactions with startups as "somewhat important" to "very important" to their objectives.
With that said, many corporates don’t know how to initiate a startup partnership. By approaching corporations with a methodical plan for partnership, startups significantly increase their chance for a successful outcome. Follow these three steps to get started:
1. Clearly identify the problem you can solve
Before approaching a specific corporate partner, you must understand the significant problems they would like to solve. The key here is to get really specific; have conversations with cross-functional executives within your target organizations to better understand their priorities and roadblocks. With that information, you can effectively position your technology as an ideal solution.
2. Assess costs and budgets
Once you have identified a corporation you are considering partnering with, it's important to ask yourself the following questions:
- What is the revenue model selling to (or with) the corporate? What is your share?
- How many employees will have to use the product to achieve a substantial return?
- How much time and budget will be spent to launch a collaboration?
- What is the minimal fee that will make the project viable?
It's essential that both sides have some skin in the game. Only when someone is paying for your services can you evaluate whether they really need the product and are able to follow through with their commitment to thoroughly test your services.
3. Construct a mutually beneficial agreement
Before launching your pilot, work with key stakeholders to define key performance indicators for measuring success. Corporate collaborations come in all shapes and sizes, from short-term, transactional commitments to long-term, evolving relationships. Make sure you have agreed upon benchmarks to meet along the way.
Instead of focusing on top-line business outcomes, focus on what constitutes a successful working relationship, like the speed of new product development or how much time it takes to learn something new. Remember: A pilot is meant to test the efficiency of your working relationship and to test drive what a technology implementation and relationship may look like. The smartest startups create protocols ahead of time that open the possibility for switching gears or parting ways.
Find Your Ideal Corporate Partnership
When is a partnership truly successful? When both the startup and corporation are gaining something equally worthwhile from the collaboration.
For a startup, that may be as simple as obtaining vital feedback to improve their MVP. For a corporate, learning a particular technology isn't suitable for the organization without having to invest in an entire restructuring. Even if the partnership doesn't end in investment or acquisition, the knowledge obtained from the experience can often be invaluable for both parties.
At RocketSpace, we match tech startups with compatible corporations who can offer advice, partnerships, and other opportunities. Our list of more than 170 corporate partners includes a wide breadth of industries, covering everything from agriculture to blockchain.
Want to learn more about how to effectively partner with corporates?
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