Corporate startup relations: There is room for improvement

While the wave of corporate accelerators and incubators has long since leveled off in Germany, in Switzerland it has only now become fashionable, with the usual delay, for (large) companies to adorn themselves with startups. After ignoring these young companies for years, every self-respecting company now wants to be innovative and be connected to the startup scene. An acquaintance recently told me that they provide workspaces for startups in a prime location so that the CEO can impress his guests with "his innovative startups" - with his private zoo, so to speak. That's why I thought about the right motivation for corporate-startup relationships.

Do corporates just want to take advantage of startups?

For a project I recently sought contact with the innovation department at a large Swiss company. Although this department claims to be responsible for startup relations, it quickly became apparent that only after Startup ideas is sought - i.e. business ideas that are as fully developed as possible, which the company can then implement. The startup person can at least be proud that someone is using his idea. As an employee he could have made good money with it.

Another large Swiss company invited me to an internal pitch event that the innovation department organizes regularly. The idea is that startups and the company can get to know each other. Young companies in markets that the company is currently dealing with are specifically invited. The catch: The startup is expected to make a pitch, i.e. the company then knows the exact situation of the startup, receives market data and assessments, etc., while the large company has to announce very little about itself, after all, it is already known. Even when asked, the company couldn't say exactly what the goal of this startup event was: They could imagine operating in these markets themselves, but collaborations and investments were also conceivable. While it goes without saying that a classic investor does not become entrepreneurially active himself, the corporate smell is that it uses startups as free sources of ideas and proof of concepts.

https://www.facebook.com/piratesummit/photos/a.448793341832610.106050.170943559617591/448820338496577/?type=3&theater

On Pirate Summit the corporate guy gets burned.

Corporate-startup relationships should benefit both parties, otherwise at least one party will be dissatisfied relatively soon. The large company should be clear about its expectations and make them transparent. If the company just wants to ride on the current startup hype, the entrepreneurs will soon feel like pets being kept for the corporate pleasure. Pitch events mean a lot of effort for young entrepreneurs; after all, a good presentation has to be put together, there are hopes of financing or cooperation, and if necessary, confidential figures or strategies are also disclosed.

How corporate-startup relations can still be successful

One of the main motivations for a startup to enter into a cooperation with a large company is likely to be customer acquisition. The startup produces an innovative product and has to generate sales - the corporate has early access to this new product, can test it and possibly even help shape it (to a certain extent). On the other hand, corporate must be aware that the startup product is probably not yet fully developed. That actually sounds like a win-win situation. Unfortunately, my impression (and that of other Zurich entrepreneurs) is that corporates are not willing to purchase startup products for cash. Often it's just a vague exchange of ideas from which neither party can benefit.

Startupper in the corporate world (symbolic image).

So how should corporate-startup relations be set up so that both sides can benefit? The following questions must be clarified:

Corporate should define its goals precisely: Why do we want to work with startups at all? Do we want to use it as a free innovation department, do we want to set up a joint venture, do we want the startup to become our customer (or vice versa), do we want to secure know-how as early as possible, do we want to invest? These goals must be made transparent to startups.

The startup should also define its goals and reveal them to the corporate: Should the company invest, do we expect easier market access, mentors and know-how, etc.? A fruitful collaboration can only occur if the goals of the corporate and the startup are aligned.

Is corporate actually willing to invest in startup relations? Even though startups usually operate very cost-consciously and have lean structures, there are costs: be it mentoring effort in time, investment in cash (yes, even founders can't live just on air and funny sayings)... simply providing free workspaces and coffee is not enough.

The startup must be aware that close cooperation with a corporate (be it via investment or as the first customer) can be dangerous: Although the corporate promotes and secures the initial cash flows, there is a risk that the corporate's competitors will avoid the startup's products. VCs are also unlikely to be enthusiastic about a corporate shareholder blocking market opportunities with exclusivity clauses.

Finally, the corporate should ask itself again whether it is really serious about the commitment. Success will only come in the medium to long term; it takes perseverance. Are flat startup hierarchies and quick decisions compatible with sedate corporate structures?

I think it has become clear that I am critical of the current startup hype among Swiss corporates. As long as the above questions are not fully clarified, corporate startup programs will definitely not be a success. No entrepreneur with an exciting product will enter into a cooperation with a corporate if he feels exploited or is fighting against windmills in the corporate world. That's why, dear corporates, make a fair offer to the startups, otherwise only those startups who didn't find any money from the business angels will end up with you.

What is your opinion? I look forward to your comments here in the blog, on Facebook or on Twitter!