We talked to three collaboration veterans about their startups’ experiences working with global industry leaders. Here are their views on negotiations, proposing expanding a successful partnership and working with multiple partners.
Let’s not mince words: the world is a highly unpredictable place for today’s startups. With the enduring pandemic and volatile global economy, competition is fierce. The situation has Founders and Operators searching for new opportunities, branching outside the familiar tech ecosystem.
In recent years, large corporations have enacted elaborate digitalization agendas to become more competitive in the 21st century. New avenues for startup-corporate collaboration are now open, but how does one navigate this space? Uncertainty about corporate procurement processes, for example, may stand in the way.
Startup-corporate collaborations is what Combient Foundry is all about. We employ the Venture Client Approach to solve corporate business needs with the best-in-class startup companies. The aim of these scalable projects is to decrease the time-to-market and build new growth with novel tech solutions.
To get a holistic perspective on what startups can do to get their foot in the door, we sat down with three people from our partnering startups. In each interview, we pinpointed some of the common concerns startups have about engaging with large corporations and drew solutions from past experiences to share with you. Dividing the findings into three topics, this playbook opens up what makes collaborations successful.
Getting Started: How to Land a Corporate Partnership?
Every partnership starts with the right approach. Kristian Rode, CCO of SHUTE, a fiber-optic sensor company, spearheaded the talks with their Combient Foundry partner KONE, a global elevator industry leader. He emphasizes the importance of talking to the right people.
“It depends on where you are in the product life cycle,” Rode begins. “In the past, we’ve been quite successful in getting through to the Head of R&D or the CTO. This is because our state-of-the art technology intrigues an engineer’s mind.”
If your startup is closer to the final product, Rode explains contacting the procurement team might be a better idea. In other words, be mindful of the stage you are in, but don’t be afraid of reaching out regardless. For a hardware company like SHUTE, product development can be costly, so having a partner providing income and know-how can make a difference in the competition.
“SHUTE’s first corporate partnership began when we had been active for a couple of years,” Rode recalls. “We had sorted out all the basics at that point. It was a good time for us.”
With a channel of communication open, you need to consider how you’ll catch the other side’s attention. Rode has one solid piece of advice for these discussions.
“It often boils down to money,” he says. In his experience, corporate teams search for advantages that make their offering cheaper, better in another way, or add an entirely new feature. Here’s where the first difficult topics might come up, namely the time at hand and the scale of the corporation.
“You need to understand that large corporations have long chains of command,” Rode continues. Factors independent of the partnership, like budget barriers and other projects, can surprisingly slow down negotiations. The only way through this is patience.
“Corporations working with startups do know that scale is not necessarily a priority for the team,” he explains. “However, they will challenge you on scalability and volume right from the beginning.” Again, one should not be discouraged. In the end, even negotiations will have provided your team with plenty of insight into what opportunities are out there.
Working with Combient Foundry and KONE, SHUTE’s small, flexible, and durable sensors to improve KONE’s predictive maintenance solutions sealed the deal. Beyond the suitable tech behind SHUTE’s offering, Rode believes team chemistry made a lot of difference in the negotiation process.
“People want to work with people, not products,” he summarizes.
Doubling Down: How to Upsell an Expanded Partnership?
Foundry’s goal is to establish partnerships that stand the test of time. The greatest benefit is gained when the end goals are aligned with both parties’ long-term strategies.
Natalia Rincón is the Co-Founder and CEO of CHAOS, an urban forecasting startup. Their initial work began with examining KONE Corporation’s data. They created an index and from there, expanded their partnership to work with KONE global R&D. Rincón advises to dive right into the deep end, when you realize you’ve struck gold.
“Large companies and startups have strengths that complement each other,” she says. “Corporate expertise, market value, and established processes are fantastic alongside a startup’s lean structure, ability to iterate fast, and fresh perspectives for the market. If both sides’ strengths are used, the results can be an entirely new business model and high ROI.”
Laying the groundwork for continuing the partnership is important from the start. With set expectations and clear KPIs, it is easy for both parties to confirm the pilot or proof-of-concept has worked out and there is cause for moving forward, together.
Rincón explains the goal is to find your partner’s unmet needs. For example, the real estate industry has forecasting needs related to rental housing market prices and sustainability. To fill the demand, CHAOS’s indexes allow their clients to understand how specific locations will perform based on different parameters like footfall and sentiment of crowds, land development, services, and many more factors.
“When dealing with large enterprises, it is important to understand who buys and uses the end product,” Rincón elaborates. She indicates this to be the most difficult part of proposing an expanded partnership.
“To get more insight, you need to think of the questions like who uses the product daily, what is their greatest pain, where is the wow-factor? In our experience, if the end-user loves the product, getting buy-in further from the corporation is a lot easier.”
CHAOS and KONE are in continuous dialogue about changing needs and where to continue development. Rincón reports that the work with KONE has helped expand their offering for other customers and partners too.
“Working with KONE helped us think of our value proposition and how we can offer the same feature to others with similar needs,” she explains. “It was clear from the beginning: understanding one another’s needs means both sides benefit from the work together.”
Spreading Out: Why Work with Multiple Corporations?
Working with multiple partners is a cornerstone for satellite intelligence company Overstory, formerly known as 20tree.ai. Their corporate engagement strategy is a testimonial to this.
“We do not develop a product that is specific to one customer,” says Anniek Schouten, Co-Founder and COO of Overstory. “We develop products that solve challenges for entire industries.”
Finding new potential partnerships to complement their portfolio has a scrutinous process within Overstory. Two must-have aspects must be satisfied with each new partnership.
“First, our product must solve a real issue for our new partner,” Schouten explains. “We don’t want to be part of a ‘nice-to-have’ project. Rather, we are looking to help corporations with something that is critical to their strategy and operations.”
Second, Overstory makes sure the potential partner shares their long-term objectives and expectations. Long-term collaboration offers benefits in cost-saving, safety and reliability development, and environmental benefits.
“We know our technology can benefit a broad market of companies and organizations. But focus is key to succeed,” Schouten says. To keep focus, Overstory might have to pass on deals that risk sidetracking them.
“We have come across situations where we chose not to pursue a potential partnership, as it would stray us away from our core focus, meaning the financial gains would not help us in the long-run.”
Overstory’s approach might be challenging, but has a crystal clear reason. Creating a product that does not have the potential to become an industry leader means they are not getting the big picture of what the market wants.
“When working with many partners, you understand the priorities that are relevant for everyone in the market,” Schouten says. She elaborates that partnerships have and will always be key for Overstory.
“Finding and validating our product-market fit, maturing the product, and growing recurring revenue: all these stages have benefited from long-term partnerships,” she continues. Overstory’s partners have also benefited from innovating and iterating fast, finding new solutions for pain points, as well as implementing them in operations to gain efficiency.
The Ovestory team takes each partnership as a learning experience. Beyond commercial ones, they also engage in data, satellite, and NGO partnerships across the board. Lessons learned working with these segments complements what the corporate circuit has brought in.
“Very strict and fast qualification is key,” Schouten goes over their learnings. “Also, talking about a commercial model and pricing must be done early, just like setting critical success criteria.”
Sometimes You Need to Say ‘No’
Some of the examples above show the benefits of being open to requests from corporate partners. However, customizing for the sake of it is not the way forward. Schouten’s experiences demonstrate well where the line should be drawn.
“Requests came to us from the forestry companies, initially,” she says. “By working with a massive amount of data from many corporations and organizations, we built products to automatically extract these insights.”
Schouten recalls an example from working with electric utilities. Overstory’s information proved relevant to deal with their substantial costs and risks when managing vegetation around power grids. Overstory built a strong product for this market as well and are continuously developing it.
Overstory does receive plenty of feature requests from partners. Schouten says they are useful data points when managed successfully, as they help Overstory map out market needs. Not all requests are qualified, though.
“We first ask: is it already in our roadmap? If yes, it’s a matter of managing expectations or moving it up as a priority,” she explains. “Even if it is not, we make a point of adding it when and if it does qualify.”
CHAOS’s experiences echo those of Overstory’s. Rincón goes a step further to say there are potential partnerships, which promise profitability, but risk curing into scalability. Serving specific customer needs is not worth the trouble, if it hurts chances of long-term success.
“If you notice during the pilot phase that the visions are not aligned with one another, it might be a good idea to evaluate the partnership goals,” Rincón says. It is a choice that the team must make at that point.
Each of our interviewees emphasized end-goal alignment between them and their partners. It is one of the things that ensures the partnership begins on equal footing. Remembering this right at the beginning of partnership negotiations is crucial, and will make sure all other agreements are easier to come by in the future. SHUTE’s early work with the KONE team had both parties impressed with one another, and set the stage for working on mutual goals as equals.
“Even though you are a small growth company and they are a large corporation, you should enter the cooperation as equal partners,” Rode summarizes. “You need their funding and reference, but remember that they need your tech and know-how. It is way more cost effective for them to work with you than to develop everything themselves. That is the basis for an equal partnership.”
This story was originally published on Startup Grind’s Medium Publication in October 2020.