We recently joined forces with one of the leading Nordic venture capital funds, Maki.vc, to co-create a survey about startup-corporate collaboration. Our goal was to pinpoint the pain points from scoping a pilot project to scaling the finished product. In this post, we will analyze the survey results in-depth and offer our point of view on what corporations can do to become great partners for startups.
The topic has been widely discussed in tech conferences, media, and it is also something we see every day, so we’ve decided to offer our two cents. We surveyed both entrepreneurs and representatives of large companies (not just Combient companies!) and compared the results together.
Our experience is rooted in the Venture Client approach. We have worked as a joint unit for the Combient associated companies in scoping pilot projects with unique solutions, on a global scale, within their respective fields. Our aim is to build lasting commercial partnerships between them, through the scalable projects the setup and build together. For the startups, we want to provide the most valuable assets for them to acquire a global reference client. The data and experiences we have worked with are about real business cases with proven solutions.
Now that you know more about our background, let’s move on to what we found in the survey:
Expanding Offering & Growth Opportunities
Out of the responding large company representatives, 26% stated that they are engaging with startups to broaden their product and service offerings. Only 6% of startup companies stated the same. This is in line with what we are witnessing: startups typically look for top-line growth and global channels of large companies. Large corporations, on the other hand, look for new capabilities in startup companies to build new services with. For corporations looking to find new startup partners, emphasizing the opportunity for growth and expansion is what sets you apart from other ecosystem partners.
Looking for Revenue
What better opportunity for expansion and growth than a reliable source of revenue? Startups (almost by definition) are always short on cash. Well performing and funded startups, inherently, contain a very talented team, advanced technological solutions, and world-class delivery capabilities. But they typically lack major cash reserves and time. Founders have put their livelihood at stake and are looking for clients and revenue. It’s no wonder that 53% of founders are primarily looking at generating revenue when they are working with corporations.
Criteria for Building Long-Term Commercial Partnerships
We’ve been lucky enough to witness the vast majority of Foundry projects enter into a long-term commercial partnership. This is also a key metric for us internally. The underlying success criteria here, we believe, is in the homework we do beforehand. We spend significant time with Combient companies in identifying real business needs that are of significance. ‘Nice to have’ solutions won’t fly. You need to find a committed team in the organization with the will, resources and bandwidth to go forward with the solution, when and if it has been identified.
To maximize your chances of having an appealing proposal at the negotiating tables, here are three more tips on how to pitch your corporation to a potential startup partner:
1) Access to New Markets
One of the pitches we at Foundry use is the access to our companies’ multinational markets. The survey data supports this advantage, with 85% of startups and even 70% of corporations saying their collaborations opened up new markets to them, at least in part. When scoping a partnership with a startup, it is a good idea to bring out which of your markets are ones where you would be working together, and where potential scaling would happen too. Moreover, many startup programs emphasize local ecosystems, with partners, mentors, and talent usually coming in from the same city; corporate collaboration as such is a good way to build on this experience by taking what a startup knows global. Again, think of opportunities for growth and expansion.
2) Clear & Common KPIs
One of the data points with the most discrepancy between the groups was the understanding of mutual KPIs. Whereas corporations were overwhelmingly confident in the KPIs being clear and shared (80% at least partially), startups were more split in their answers (down to 61%). Also, startups have also reported that guidelines handed down from procurement are at times mismatched with the initial goals; for example, already in the piloting stage, a startup might be faced with compliance guidelines that have nothing to do with the project at hand. This is one of the reasons why Combient Foundry offers a standard contract to help simplify the process. Corporations looking to collaborate with startups should have procurement guidelines in place to accommodate for more narrow pilot projects.As Maki.vc’s Paavo Räisänen elaborated already in his entry, do take KPIs to the negotiating table right at the beginning, and establish a way both can monitor and report their results. Be sure to check out Paavo’s blog in full here.
3) Freedom to Do What They Do Best, How They Do it Best
Another widespread fear of collaborations is the incompatibility of company cultures. Startups prize lean and fast ways of getting things done, while large multileveled corporations have established structures to make sure thousands of people can effectively work on their common goals. For 65% of startups, the struggle to work with them is real, whereas only 5% of corporates report this as an issue at all. To make your case for your startup partners, be absolutely transparent about how it is the corporation works and connect your activities on a manageable level. Nothing kills a partnership like an overloaded pipeline. Beyond that, show your startup partners what they can learn from you here too. While learning new ways of working is not a priority for 91% of startup respondents, 62% reported that they have in fact improved efficiency with new ways of working.
For the next part of the series, we will turn to our associated companies at Combient to hear their take on the results. We’ll be back at the end of November!
P.S. Founder, are you looking for your global reference client? Join us at Slush for a chance to meet six of our associated companies at once! #thenxt100