Thursday, 30 November 2017

Why Startups and Corporates Should Engage More – For Mutual Benefit

“23% corporates see working with startups as mission-critical and 67% corporates would like to work with even early-stage startups.” (MassChallenge and Imaginatik Report in 2016)

Do you know a perfect win-win situation? It’s a collaboration between established corporates and startups with immense potential! Corporate icons like Microsoft and even Coca-Cola have programs to harness opportunities with ambitious startups.One of the best examples of such a mutually beneficial relationship was that of NBC Universal tying up with BuzzFeed for social media coverage of Olympics. NBC leveraged Buzzfeed’s online audience advertising capabilities and Buzzfeed garnered the financial heft of NBC and created a new network for more business opportunities!

We are writing this in the wake of our recent Corporate - Startup Engagement Workshop to look at just how such a partnership can work well for both parties.

Not just for Big Corporations!

Microsoft and Coca-Cola are biggies, but a collaboration between corporates and startups doesn't have to be limited by size. Startup engagement can benefit even mid-sized enterprises. Even if you are a medium-sized company, you can build relationships with startups those that create immense financial and marketing opportunities for both parties.

What is the mutual benefit?

Corporate and startups might as well be two ends of a spectrum. One has been there and done that and the other thrusting and bursting with innovation. But there are experiences that can be shared across this spectrum too. The corporates have experience, processes, knowledge, and skills that startups can observe, learn from, adopt, and leverage. More formal engagements may allow the startups to access the customer-base of the corporates with the solutions they have to offer. A more formal association with an established corporate could also help the startup attract senior-level talent when the need arises.

The flow is not all one-way. For the corporates, there is also the opportunity to draw from out-of-the-box thinking and find creative solutions to corporate challenges. They get access to a pool of fresh ideas and different perspectives. The solutions that startups have to offer could complement their own offerings and help them solidify their position in their own customer base. Corporate synergies may emerge that could lead to an expansion of business opportunity for both the startup as well as the corporate. Often corporates can leverage their association with startups with cutting-edge solutions to create a market perception for their company as an innovative, forward-thinking company. This is also a relatively painless way to dip their toes into a new area – and to then decide the nature of their future commitments to the space. In some cases, this can be a valid defensive move, for eg. when there is a potentially disruptive technology or business model that the startup is innovating. The association can help the corporate as it defines its own strategies to deal with the upcoming disruption.

Types of Association
There can be various types of association ranging from the informal to the more formal. Some options are Investment, M&A, Acquihire, Business Partnership, or Incubation. The first two are purely financial agreements, designed to let the corporate take over all or part of the startup’s business. The Business Partnership model is typically more opportunistic, driven by market dynamics, and purely by the potential for collaborative fitment between the offerings of the startup and the corporate.

Incubation is also emerging as an interesting option today. Corporates offer to incubate startups until they are ready to fly on their own. It’s not just the space, working environment or even infrastructure that they provide. They also act as mentors and give valuable education.Once startups enter the incubator, the scheme has a period during which corporations can share, guide and mentor startups, while the startup feeds it’s energy and offerings into the business plans of the corporate.
This is the win-win situation we talked about earlier as it's all about the shared success. Remember, innovation and disruption are coming from the energetic startups but to make something of that, they need the structure and execution capability of the larger corporates. Surely, their coming together is an inevitability!