The battle to rise to the ranks of market leader has always affected traditional business and startups, but never before has one been pitted so directly against the other. Though multinationals are considered financially stable, they are often slow to innovate and extremely risk-averse. And while startups tend to operate in chaos and lean heavily on funding, they are far more adept at enduring in digitally disruptive climates - to the extent that they’re now taking pole position ahead of even well-established companies.
In order to have the best of both worlds, an entity would need to learn the lessons of its rival, with big business adopting innovative approaches like lean methodologies and/or startups snapping up talent from large corporates. There does however exist another more palatable solution, which is a win-win situation for all concerned: collaborative partnerships.
This post takes a look at the different requirements, approaches and advantages of such partnerships - for both startups and established enterprises.
This post is also available in Spanish.
What do startups and big business need to do in order to work together?
In order to establish the terms underlying a collaboration, as well as help businesses overcome any initial reservations about working conjointly (such as the classic startup worry that a corporate would hijack its innovative approach, dominate in negotiations and derail the initial focus of any initiative) both parties would need to be able to answer the following questions with no little sincerity:
- Do our companies share the same values?
- Are we in this business partnership for the same reasons?
- Is it actually possible to establish a partnership that is advantageous for both parties?
- Do our companies trust one another?
What possible partnerships are there?
The collaborative approaches between corporates and startups usually fall into 3 categories:
- Corporate venture capital, wherein a large company funds a startup by becoming its shareholder, thus making profitable gains and having direct access to disruptive innovation.
- Inside-out collaborative working, in which large companies help transform employees into fully-fledged entrepreneurs who go on to launch their own spin-off startups.
- Corporate accelerator programs (or “outside-in” working), through which corporates offer startups in the same sector mentoring, workspace and other services in exchange for direct access to the startups’ products and/or ability to influence their business plan.
TOP 20 CORPORATE ACCELERATORS IN EUROPE
What do startups get in return?
The biggest plus for a startup is being associated with a financially stable household name and, in some cases, having direct access to the corporate giant’s clientele. That said, there are several other benefits of cementing a partnership that are less obvious, yet just as important:
- Firstly, collaborating with a successfully established company gives a small-time tech startup instant credibility, both to existing clients, potential future clients and especially competitors.
- Secondly, a long-standing company can bring a wealth of knowledge and experience to startups, particular in terms of team management, workflow efficiency, product improvement, distribution, advertising, PR and the identifying of (as well as entry into) potential new markets.
- Finally, a solid partnership can naturally pave the way for a future exit strategy in which the entrepreneur behind the startup can assure the latter’s future as a company subsidiary, and thus be able to move onto initiating a new chapter of innovation in another sector.
Even though the relationship between big business and startups is far from straightforward, the enormous benefits of working collaboratively should not be dismissed, especially since doing so would result in a win-win for all concerned.
This post is also available in Spanish.
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