Rapid Pace of Innovation in the Technology World and the Need for Corporate Startup Outreach Programs

Corporate startup accelerators engage with innovative startups at a more deeper level providing mentorship, technical product assistance, business development introductions, recruiting support, fundraising advice, etc. Corporate accelerators enhance and move forward the learning and execution process for the startup.

Notably, established companies own valuable resources such as a global infrastructure, strong brand reputation, business relationships, experience with regulators, scientific knowledge, process excellence and access to data. Startups and exponential organizations on the other hand, can offer corporations a flow of ideas, organizational agility, and the willingness to take risk and the drive to scale rapidly. And, a Corporate Startup Outreach program is a marriage of convenience and complimentary skill sets. However, in practice it is rarely so. From our experience, a number of criterion including varying speeds of decision-making process, mismatched expectations, evolving strategies both at the corporate and the startup level lead to sub-optimal output for both parties in the partnership.

From our experience, some key points to ensure the best is derived from the corporate startup outreach program include:

• Toning down the “Holier Than Thou” attitude: Almost every large corporate has its own worldview and that of the industry. And, most often than not, the company, its senior management and employees live in denial regarding the new and cutting-edge innovation happening outside their company and tend to belittle it. A large corporation is almost always proud of its size and believes it is untouchable. This attitude extends while dealing with young, innovative startups as a part of their outreach program as well. As much as there is intent to work collaboratively and integrate their technologies, products and solutions, one entity in the partnership believes that it is superior than the other, and this needs to be toned down for a successful partnership.

• Hiring Professional(s): Typically startup outreach programs within corporates are initiated and led by an enthusiastic, mid-to-senior level employee with an entrepreneurial mindset (Intrapreneur). And, in most cases, Startup Outreach Programs are added responsibilities for this employee and not the sole one. And, once the initiative is kicked off, the outreach program champion and the team struggle to manage and cope with their regular corporate job responsibilities and the outreach program. Also, they lack the necessary objective industry experience to onboard, incubate and grow young and agile startups. Hiring professionals such as Investment Bankers (in case of corporate venture funds) or consulting firms/ independent accelerator teams will ensure the successful setup and smooth operations of corporate startup outreach programs.

• Startups need to be patient: Startups, especially young ones are agile in their technology and product development, and expect the same agility and speed with their corporate partners associated with them in the outreach programs. However, they need to understand that decision-making in large companies is most often than not democratic and they have their own processes and it will take time. This needs to be factored into the startup’s plan. The startups (especially, B2B and Enterprise) can use this experience as a prelude to their business development process when they eventually approach large corporates as potential clients.

• Stage of growth matters the most: From our experience, one key criteria that matters the most when it comes to the success of both the large corporate and the startup through corporate startup outreach program is the “stage of growth of the startup”. We have observed that corporate startup outreach programs work best when the startup is in the early ideation, prototyping and development stage and figuring out the product-market fitment. For startups that are in the growth phase, the corporate programs might prove to be slow and decelerating. In a strategic investment deal we were involved in, a European technology giant’s venture team and management trying to invest in a growth stage startup took almost a year to decide on the valuation difference of USD 2 million (less than 30 percent). Eventually, the startup had to scrap the deal and move on, and within 3 months managed to raised 6x the amount with over 5x valuation (that was offered by the corporate) through institutional funding. Corporate managers need to understand that regardless of their deliverables in the short term, they will get their monthly paycheck, but startup entrepreneurs do not have that luxury.

A corporate startup outreach program built to achieve economic benefit through integrating external startup innovation can yield additional benefits for the organization, namely building an experimental, risk-ready and entrepreneurial culture. To achieve this culture change, there needs to be a program in place which continuously teaches employees that there are opportunities for them to become intrapreneurs, as well as a program which brings the senior management of different business units in touch with the startups. The senior managers should learn to think of themselves as investors. This can be achieved by a regular internal demo day, creating several touch points between the startups and management, but most importantly, investments should be considered in the budgeting process in order for the management to be able to act immediately upon an opportunity through investing financial and/or human resources.