The first step each start-up should take is to ask themselves what they want to achieve by collaborating with an established organisation. This will influence all steps that follow: Which companies are suitable partners? How to contact them? What form should the collaboration take? How to best execute the collaboration?
Start-ups are confronted with the challenges of complex markets. In order to grow, they need know-how and references, pilot customers and resources, as well as financial and organisational security.
A strong partner can support young companies in the course of their professionalization, providing...
Revenue
Expertise and network
Material resources
Market access
Credibility
Funding
Of course, the start-up can pursue the collaboration for multiple reasons, but it is still important to be clear on which goals matter the most and why.
Below we describe each motivation and provide a best practice example.
Revenue
The aim of getting more revenue is by far the most prevalent motivation for collaboration between start-ups and corporates, especially when it comes to start-ups with a B2B business model. The typical form that these collaborations take is a supplier relationship, in which the corporate becomes a customer of the start-up.
Expertise and Network
To build up a company, a lot of know-how in various areas is required, but founders of start-ups often have little or no management experience and lack a viable network within the respective industry. Established companies can provide exactly these resources. Besides close connection to other market participants, corporates usually have a lot of expertise at a product or an industry level. Another area in which start-ups can profit from corporates’ expertise is functional business areas like HR, marketing and finance. Furthermore, the feedback of an experienced partner is very valuable for start-ups which are new to the market.
Material Resources
The test and production phases, in addition to the evaluation of a business idea, are crucial aspects of the development process. Especially in the case of hardware start-ups, this is closely linked to a significant amount of resources. The lack of tools and equipment to adequately proceed in these steps can be a bottleneck in the development of a start-up.
Being able to use the existing infrastructure of established corporations, like machinery and factories, can come in handy to overcome this challenge. Some corporates even provide spaces and infrastructure for their partner network, in order to support them on a material basis. In this case, start-ups can profit from existing contracts and economies of scale.
Market access
Another reason for start-ups to collaborate with established companies is to create a direct interface with their customers. Startups can use the existing distribution network and brand recognition of established companies to sell their products separately or bundled with their partner’s solution; with this strategy, both parties can potentially reach new customer groups. Additionally, the corporate benefits from the expanded product offer.
Credibility
As unknown players in the market, young companies pose a risk for customers and business partners: Does the product deliver on its promises? Is the team trustworthy?
To gain the trust of potential partners, investors and customers, references are essential. Having convinced a corporate to become its partner is a strong seal of quality for a young start-up.
Funding
Growth requires capital, but most start-up founders lack financial resources. In addition to institutional venture capital, there is also the option to look for corporate venture capital investors. In this scenario, corporations invest capital in start-ups that have strategic relevance for them. The capital provided is usually “smart”; it comes with the corporate’s knowledge, expertise and network that is leveraged to help the start-up grow.
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Best practice examples
A Door to a Corporate World with Example of SAP.iO Foundry
Best Practice Example – InstaDeep
