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The Importance of Collaboration Between Startups and Big Companies
In order to keep pace with the accelerating rate of innovation, many corporations are investing in, developing partnerships with, and collaborating with startups. Startup business collaborations are becoming more and more crucial for the ongoing success of companies of all sized & stages.
In 2015, for example, Walgreens joined forces with New York-based tech startup Pager. Pager's mobile platform is able to match patients' needs with nearby available doctors and nurses. Built by an early architect of the Uber platform, Pager is helping Walgreens achieve health care on demand. According to KPMG, almost 90% of corporations believe that collaboration is essential in promoting innovation.
Aline Santos, EVP of Global Marketing at Unilever, has explained, “Collaboration can no longer be viewed as an optional extra, it's a strategic imperative." But there are often barriers that inhibit effective corporate collaboration between startups and large corporations. Here are three tips to help you navigate the waters and ensure a successful collaboration.
1. Identify what strategic objective you are solving
According to a joint research study by MassChallenge and Imaginatik, both startups and corporations agree that “strategic fit” is, by far, the primary criterion for startups and large corporation collaboration (more important than startup quality, shared mission, or bandwidth). Before collaborating with corporations, understand the strategic objective you aim to solve. Does your offering cut costs or boost margins for the corporation? Does it help them gain a strategic presence in a new technology or market? Business-startup collaboration can be crucial for ongoing innovation at both types of firms.
Consider, for example, Sphero, a manufacturer of state-of-the-art robotic toys. Sphero identified that its technology, with impressive performance specs, would make for a valuable addition to Disney’s line of products. It turned to Disney not only for a lucrative path to market but also to infuse its products with more character.
As a result of extensive mentorship from Disney CEO Bob Iger, the team was able to manufacture a product that resonated strongly with customers. Sphero ultimately secured a lucrative partnership with Disney that involved commercializing the newest Star Wars droid, BB-8. The importance of collaboration among businesses cannot be overstated and allows for support of startups, but also innovation at larger, more established corporations.
Startups that fail to solve a strategic objective are wasting their efforts in attempting to collaborate with large corporations. Startups must determine what they bring to the table and why it’s worth a large company taking time to discuss a collaboration.
2. Don’t put all your eggs in one basket
Far too often, startups are so laser-focused on landing a big-brand partner that they drop everything to make a corporate collaboration happen. This is a recipe for disaster. A report by Nesta cautions, "avoid becoming a bespoke consultancy for one firm, as this creates dependency. Be especially cautious of being sucked into free or discounted work.”
A lot of risks are associated with working with a large company. There's a lot of bureaucracy and red tape that may prevent decisions from being made and contracts from being signed. It's important not to put all your eggs in one basket. Reduce your risk by reaching out to multiple large corporations. A collaboration between companies should be just that - a collaboration, not a one-sided arrangement.
In his book “Do More Faster: TechStars Lessons to Accelerate Your Startup”, Michael Zeisser, a mentor at Techstars, writes, “I have witnessed startups over investing in developing a relationship with a big company. They poured too much time and attention into developing a deal, and although the deal ultimately materialized, its benefit fell far short of expectations. In discussions with big companies, it is very easy for entrepreneurs to develop ‘happy ears,’ the tendency to hear what one wants to hear, while overlooking the signals that suggest otherwise."
When working with large companies, Zeisser recommends that startups be merciless. They shouldn't make too many concessions and they should be especially wary of signing exclusive partnerships that may impair their potential for long-term growth. Building relationships with key organizational stakeholders will help mitigate your risk. When you focus on building authentic relationships, you can better ensure that you are placing bets with people who have your best interests at heart.
3. Set & frequently clarify goals for your partnership
Setting clear expectations are the first step for a successful partnership, but revisiting (and refining) those goals are crucial for a successful startup-corporate partnership. While a startup will benefit from the deep(er) pockets of a large, established corporation, funding may not be the only thing that a young company is seeking. Startups often look for, and benefit most from, advice - whether its official feedback, or strategic and small-scale.
Corporations on the other hand may look for a "safe way" to support their innovation efforts, but the startup's culture and mission may also align with their goals. Re-setting expectations and setting new goals throughout the partnership are absolutely crucial for a startup-corporate collaboration.
4. Be realistic about expectations
Research by Nesta found that, by far, the greatest challenge reported by startups in collaborating with large corporations is the mismatch in speed. "Half of all startups reported problems with long cycle times and slow decision-making on the corporate side."
In collaborating with a corporation (even if it is just in the form of a purchase agreement), recognize that deals aren't signed overnight. According to KPMG, it takes an average of 9.4 months from the first meeting until a collaboration is established. As a startup, your time is invaluable. You need to determine whether entering into a lengthy negotiation with a large company will divert your other efforts. Weigh the costs and benefits so as to determine the extent to which the potential collaboration will derail the many other activities you need to attend to as a startup.
Collaboration between startups and corporations has become a strategic imperative for both parties. According to Unilever, 46% of startups who have not worked with corporations are likely to do so in the future. Serial entrepreneur Sherry Coutu emphasizes, “The collaboration between corporates and startups, as well as early-stage scaling businesses, has never been so crucial”.
In 2017, Unilever Foundry, a global platform for innovators and startups, released a report that predicted corporates and startups will work in the same physical space, side by side, by 2025. The report shed light on three critical factors driving the need for strong collaboration between startups and corporates: learning something new, improving efficiency, and solving business problems in new ways that have the potential to scale. The report also predicted, "Startup and corporate collaboration will evolve from an optional extra to a business–critical investment in the next five years."
The importance of strong collaboration between startups and corporations is undeniable. Relationship intelligence is a prerequisite to the formation of strong and long-standing partnerships between startups and large corporations. Yet while there's no lack of desire to collaborate, it's not always easy for startups to get their foot in the door of a large corporation. Startups need to find the right person who can act as an internal champion and who has enough guts and power to advocate on their behalf.
Affinity is a perfect relationship intelligence platform to discover this internal champion. By mapping out your entire team's network on Affinity, you can determine who is in the best position to provide an introduction to prospective large company collaborators. Affinity also allows you forge Alliances with your investors or board members in order to find to paths to warm introductions at large strategic companies that you want to collaborate with.
Startup collaborations with large strategics can also have another benefit. More and more large companies are building corporate venture arms and these partnerships could actually lead to capital.