The Venture Client model enables large companies to become early adopters of a startup’s product or service before it is mature enough for a more traditional and transactional business relationship.
Over the past few years, many well-known companies have established Venture Client units, but this alone does not mean that they have been successful in their efforts. After 200+ launched Venture Client projects, we pulled together our take on the key factors that affect the likelihood of being successful in startup purchasing.
1. Have a strategic vision and alignment for corporate venturing and startup engagement
2. Set well-defined goals and performance indicators for Venture Client activities
3. Gain top management support and mandate
4. Source access to organizational business needs
5. Understand internal resources and constraints and tackle potential bottlenecks against effective solution implementation
6. Allocate resources and optimize model set-up (Venture Client process)
7. Startup-friendly fastlane procurement
So what do Venture Clients then actually do to achieve these goals?
Venture Client units typically gather innovation needs and challenges, which they then prioritize. They proceed to source for solutions, which often involves diligent scouting and evaluation work to find out which startups could potentially be a fit for those needs. These startups are then matched with business teams for Proof of Concept projects, facilitating the overarching process and interactions.
Why startup scouting alone does not cut it?
Scouting for startups alone isn’t sufficient to fully leverage the strategic potential of the startup ecosystem and successfully implement their solutions. Merely finding high-quality startups through scouting or screening activities won’t yield results if there isn’t a corresponding need or if the organization rejects them. Often, startup scouting falls short of delivering tangible outcomes because either the capabilities to identify the right business needs for suitable solutions are lacking, or the existing methods and organizational culture for implementing startup solutions are flawed.
We need a more structured and strategic approach to startup purchasing. The solution lies in adopting the Venture Client model, which emphasizes a business need-driven approach. Serving as a comprehensive corporate venturing mechanism, it builds upon possessing the necessary competencies and resources. This mirrors the foundational requirements of any other successful business function.
Building a Successful Venture Client Operation
Building a successful Venture Client operation in a rapidly developing external innovation environment requires strategic foresight and careful implementation. An approach based on strategic vision and alignment places startup engagement as a key strategic imperative, ensuring a strong relationship with overall business goals. Defined goals and KPIs form a stable foundation that steers projects towards concrete results and ensures top management’s support and authority to navigate the innovation path. Access to organizational business needs and dedicated resourcing are paramount, ensuring effective problem-solving and implementation of solutions. In addition, a well-planned operating model combined with startup-friendly procurement processes accelerates the adoption of innovative solutions, promotes sustainable partnerships, and accelerates the growth of the organization.
1. Have strategic vision and alignment
Failing with external innovation is almost certain without alignment between corporate venturing activities and the firm’s overarching strategy. It involves prioritizing startup engagement as a strategic imperative, with a defined long-term vision and shorter-term objectives. Strategic areas for collaboration are identified based on shared goals and complementary resources with the startup ecosystem, fostering sustainable, goal-oriented partnerships. This approach focuses on solving key corporate pain points by closely matching startup solutions to identified needs, mitigating risks, and ensuring scalability.
2. Set well-defined goals and KPIs
Effective corporate venturing relies on the clarity and alignment of its goals, such as growth, strategy implementation, or operational excellence. Venture Client initiatives require establishing a realistic, actionable, and measurable process framework that includes key performance indicators (KPIs) and development milestones. It is essential to to allocate resources and responsibilities accordingly to match the goals and ensure a smooth execution.
Good goals for startup collaboration differ from company to company and develop over time, but they are always transparent, measurable, and concrete objectives, such as:
- Yearly number of Venture Client projects and Proof of Concepts (PoCs)
- Number of screened startups
- Successful PoC ratio, transfer rates implementation and commercialization
- Venture Capital leveraged (M€) ie. how much in total Venture Capital investment was backing the startups who were part of Venture Client activities
3. Gain top management support and mandate
Innovation’s success leans on C-level engagement and leadership’s pivotal role. Active support from top management is crucial, overseeing and steering the development of external innovation, setting the goals and strategy, and supporting operational work with their mandate, resources, and connections.
4. Source access to organizational business needs
A good Venture Client can effectively and systematically identify internal problems that startups solve best. How do you tell one? If you notice a high-velocity pipeline for business needs and prioritization, they’re on to something! Prioritized Venture Client Cases are based on real business problems: such as key identified needs in technology and commercial strategy gaps, customer needs, or competition. This needs penetration inside the organization, and access is gained through top management support and day-to-day operations. A high-performing Venture Client unit needs:
- Visibility to organization’s strategy and technology roadmaps
- Capability to identify gaps in strategy execution, internal capabilities, or customer delivery
- Access to the relevant stakeholders and teams with needs, such as key business units or R&D teams.
This will need both top-down and bottom-up approaches, such as management steering, as well as active organizational awareness building, legwork, and navigation of the right internal stakeholders.
5. Understand internal resources and constraints
Understanding the internal resources available and constraints is critical in defining the scope and scale of Venture Client projects. The success or failure will depend on correctly understanding internal capacity, capabilities, and limitations in terms of financial (budget, headcount needed) and non-financial (competencies, culture, and readiness) resources. This awareness is needed for informed decision-making for prioritizing the areas for external innovation against in-house development, and systematically strengthening capabilities in underperforming areas.
6. Allocate resources and optimize model set-up (Venture Client process)
Developing dedicated processes, resources, and teams is crucial for transferring and adopting startup innovations effectively. Venture Client units not only match business needs and solutions but also enhance project throughput and solution adoption rates while tackling organizational challenges. They collaborate closely with business units, identifying and solving strategic problems with leading startups. Having a process in place to secure the needed capabilities, resources, and business case potential before launching a Venture Client business opportunity towards the startup ecosystem enables successful outcomes of individual projects.
Two key aspects of the Venture Client model setup both revolve around access to success factors:
a. Access to key project resourcing:
Dedicated project lead and support team with clear roles and responsibilities, involving needed expertise from tech and business to evaluate solutions. Allocated time and resourcing to the project, including budgeting and a preliminary project team for a Proof of Concept with a startup.
b. Access to impact:
High-level estimation of the business value of the problem or opportunity to initially understand the potential, either through revenue or savings impact. Access to key internal stakeholders to ensure the buy-in and speed of the project. Access to internal communication channels to increase the visibility and momentum of the project for a smoother adoption.
7. Startup-friendly fastlane procurement
After the internal alignment for the Venture Client operation setup, it’s important to get ready to work with startups and growth companies. Startup-friendly procurement involves developing streamlined processes with relatively light and standardized contracting, particularly crucial during the Proof of Concept phase to rapidly test and validate the startup solution to justify further collaboration.
In a well-functioning Venture Client operation, for the Proof of Concept phase, the aim should be getting to the issuance of a Purchase Order as easily as possible, leveraging established standard contracts, NDAs, and Information Security documentation templates. Both sides should realize that lengthy negotiations for this phase do not bring significant benefits compared to starting collaboration quickly. This enables effective scoping of the initial steps of startup collaboration against time, investment, and associated risks. The process must be trusted by all stakeholders involved.
– Jonas Gustafsson, Senior Venture Collaboration Manager at Scania
This phase is often a bottleneck, posing challenges for startups and corporate project owners aiming for swift solution testing to validate the solution’s implementation potential. Strategic involvement from legal and procurement departments is essential, as these functional departments can develop the right working model and frameworks (purchasing & legal templates) that help expedite the contracting process. Their mandate and mindset are critical, focusing on efficient support rather than traditional negotiations.
Combient Foundry as a Venture Alliance:
All beginnings are hard. Becoming a Venture Client is no exception. Embarking on the journey together and sharing load and learnings, can be a great way to increase the likelihood of success. As a shared and synergistic resource for multiple corporations, working with Combient Foundry will lead to a more efficient setup and reduced costs for Venture Client operations and Proof of Concepts per each industrial member company. The Combient Foundry approach helps mitigate associated risks while offering the following benefits:
- Holistic corporate venturing vehicle and extended corporate resource addressing all key areas of driving successful corporate-startup partnering
- An experienced and trusted partner for a network of globally leading corporations
- Access to industry best practices on venturing and knowledge sharing between members
- Access to leading scouting technology and fine-tuned, scalable processes
- Global access to leading startup hubs and technology growth companies
- More attractive towards the startup ecosystem as a multi-company player
- Possibility to cooperate and drive synergies between members
