Startup Strategy: The Corporations

For various reasons, it’s often new startups that manage to bring about great things ‘out-of-nothing’. The question would then be, why startups and not large corporations. Don’t they have the requisite criteria – knowledge, capital, intellectual property, talent or influence – for success?

It could be because it’s hard for corporations to create the energetic and passionate atmosphere that exists so easily in startups. And while certain startup environments within corporations do exist and certain executives have mastered this skill of creating an autonomy for themselves in which they can push innovation and act as true entrepreneurs within an enterprise (or as so-called „intrapreneurs“), they are still a rare breed. If you come across such a person in a large enterprise, hold on to them as that’s a very valuable contact to have and to partner with.

Normally however, corporations are perceived as slow and difficult to deal with – and this is where the partnership opportunity lies. Most large enterprises have acknowledged that by partnering with startups and supporting young and upcoming entrepreneurs, they can only win in the long run. They get

  • access to new people for recruiting entrepreneurial talent into their organisation;
  • insights to what the entrepreneurial world is currently building and what could eventually become their competition;
  • leads for sourcing new technologies and patents of companies that are compatible with their M&A activities

and of course they benefit from the brand goodwill of helping and partnering with startups.

A couple of well known global and wide-ranging initiatives are:

but there are many more and the nature of the partnership mainly depends on the longer term corporate interest and what they can get out of it. This may be that they can see their newest technologies into the next generation enterprises or get a foot in the door of new innovations at a time when they’re not yet competitive but rather complementary and not so expensive to invest in.

Such global organizations set up strategic accelerators and incubators such as:

and they usually have their own dedicated venture capital arm or investment fund for which many compared to the past now also have a mandate to invest at seed level. Some active and quite diverse examples are:

  • Innov8 – SingTel’s Venture Capital arm
  • BDMI Fund – Bertelsmann Digital Media Investments
  • Intel Capital – Venture Capital arm of the Intel Corp.
  • Citi Ventures – Citi’s global corporate venturing arm

Note, that it can work both ways:

  1. You may approach a large enterprise and find an intrapreneur who is willing to work with you on a certain project which supports a partnership model between the corporate and the startup. If you can get the buy in of such an entrepreneur within the enterprise who becomes your spokesperson and helps you to manage the diverse corporate interests and processes, then this is an open invitation with which you can approach their related strategic investment arms in due course.
  2. If you find it hard to navigate a large enterprise but can already show (ideally strategically relevant) traction, approaching those VC arms directly can be a better strategy. Once they’re invested, they’ll be able to help you make a lot of headway into the global network of such large organizations. They won’t do the work for you, but they certainly can help.

There are also lesser known partnership opportunities, especially in the tech sector, such as the Private’s Entrepreneur Connect program by Deloitte and the Hana Startup Focus program by SAP. And for those organizations that could really make a difference in your startup’s destiny and for which there is no partnership yet, you’ve just gotta do what an entrepreneur does anyway – make one happen.

Corporate partnerships don’t have to  involve capital. They can evolve from a simple brainstorming of ideas (have an NDA signed though!), getting a desk to work on, reselling or revenue-share models, to even gettings rights to use certain forms of their IP. A simple technique is to build a client relationship first, before exploring deeper partnership opportunities with them.

For instance, if you’re the client of a bigger global brand, you may try asking them for deferred payment for your startup to help you lower the risks and keeping the cash outflow as low as possible for as long as possible – especially in the beginning.

In my own experience at Unified Inbox, in the beginning this is not a simple thing to ask for, and you may often be rejected. But don’t give up! If you’re confident enough and have something to show (see other startup building blocks), then it’s very much worth being creative and bold about pro-actively seeking out a partnership with Goliath. You may be a David today, but they can’t afford to be beaten by you, tomorrow.

If you’re into your first startup, some parts of this strategy may seem out of reach and too good too be true. In that phase big global players can be perceived as a startups doom ,as it appears  they can easily copy your ideas. However, they’ve probably seen your idea a million times already. Why haven’t they done so yet?

Instead of worrying too much about the future, you may find them ready to help fund, support and nurture your vision from beginning till exit. This can be one  powerful (yet often overlooked) startup building block.

With this post I’d like to sincerely thank our own corporate partners, PwC and Simpson Grierson, among others.

3 thoughts on “Startup Strategy: The Corporations

  1. Pingback: 10 Strategic Building Blocks for your Startup | Toby's Blog

  2. Although many corporates promote having an investment vehicle for start-ups (internally as well as potentially externally), many seem to struggle getting to grips with a true entrepreneur’s needs and ambitions. Unfortunately, success of such Funds is primarily measured by financial return which often influences the kind of support given to the start up. Good article!

    • True story, Markus. I’ve been running into the same situation with a lot of strategic investors, mainly because many are still focused on later (B, C, D) rounds. But having missed some great opportunities over the years at the early stage, some have recognized that they need to change their strategy a bit. This can also be a problem as having them invest too early sometimes creates conflicts with other strategic investors down the line or seed stage VCs who won’t touch the deal of a strategic investor is involved early on.

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