When establishing your business, what corporate structure you choose is just important as making your…
Corporate Partnerships: 7 Key Elements to Success
A corporate partnership can drive your startup to success, providing essential expertise, capital, and network connections. What does a good partnership look like, though, and how can startups identify and engage potential corporate partners?
A startup corporate partnership can help your startup survive in the highly competitive startup ecosystem. Many startups seek VC funding in order to push through the startup failure filter, or attempt to bootstrap themselves to success via personal funding.
Startups that tether their business to a large corporation, however, gain an unequal opportunity to leverage the resources and knowledge of a far larger entity and dramatically increase their chances of success. Corporate partners are able to provide startups with the steady revenue and assistance they need to push through early cash flow and profitability issues.
Corporate engagement isn’t easy to come by, however. Data published by Innovation Leader Research indicates that fewer than 45 percent of all major corporations engage with startups, and often struggle to establish efficient or productive working relationships.
Many founders are hesitant to try and build a startup corporate partnership. They are concerned that the slow-moving decision making process that impedes rapid action in the corporate ecosystem may make it difficult for them to pivot when necessary.
A startup corporate partnership should function as a symbiotic, mutually beneficial relationship — startups benefit from steady revenue, while corporate entities capitalize on the innovative products, concepts, and services created within the startup environment.
What does a mutually beneficial corporate partnership look like, though?
Why Do Corporations Partner With Startups?
Startups hold the potential to dramatically disrupt market ecosystems and, in the case of startups such as AirBnB and Uber, overtake slower-moving corporate competition. When new startups create more effective, innovative solutions, corporations are obligated to adapt to changing market conditions or risk losing their position.
The potential benefits presented by a startup/corporate partnership are clearly defined — major corporations are able to offer resources, capital, and essential networks connections, while startup founders are able to leverage the insight and knowledge captured by market leaders.
The structure of a partnership between a corporation and a startup can vary dramatically. The most effective partnerships are long-term collaborations, however — not short-term projects. There are a number of important factors to consider when assessing a potential corporate partner for your startup:
1. Make Sure Your Values Are Aligned
There are many different corporate partnership options available to new startups — less than half of all corporations may be interested in partnering with startups, but the corporations that are present a broad spectrum of opportunities to the right startup.
Before engaging with a corporation, however, it’s essential to ensure that the values you operate with align with those of your potential partner. In order to clarify the vision and values of a potential corporate partner, it’s necessary to define exactly what “success” means to both parties.
When consulting with a potential corporate partners, don’t be afraid to investigate the long-term roadmap of a corporation, their long-term strategy, and clearly define exactly what both parties are bringing to the table. A tech-based startup focused on product offerings, for example, may benefit more from a corporate partner that focuses heavily on R&D and open source technology.
2. Define Clear, Measurable Goals
Establishing a road map that defines a clear path to a shared set of goals is critical to the success of any startup corporate partnership. The long-term plans and strategies defined when assessing the value alignment between a startup and a corporation should be used to create a concrete set of explicit goals.
Establishing measurable goals means specificity. A startup should, for example, seek corporate sign-off on an explicit, quantifiable, time-bound set of milestones and goals that are tracked on quarterly, one-year, and three-year objectives.
3. A Strong Corporate Partnership Relies on Communication
Goal setting means communication. The goals established between two parties should be tracked through a regularly scheduled meeting process that allows startups and corporations to review and measure progress toward common goals.
Creating a schedule that allows startups and corporations to make decisions faster is critical to the success of a partnership. The timing of large corporations is not ideal for the agile startup environment — larger corporations can often take weeks or even months to make important decisions. Procurement systems, for example, can often take up to eight weeks to remit an invoice.
Establishing clear lines of communication between your startup and your corporate partner can reduce administrative friction, speed up the collaborative process, streamline decision making, and ensure your startup is able to track progress toward goals with a corporate partner.
4. Connect the Right People to the Right Resources
Corporations typically operate partnerships through a partnership interface that relies on a vastly different responsibility structure. A team member in a startup often operates as a “jack of all trades,” lending expertise and time when and where it is required. Corporations, in contrast, are highly siloed structures in which decision making systems and strategic orientations are considerably different.
Startups must ensure that key personnel within their business are connected with corporate business unit leaders that possess the ability to collaborate with startups. Co-locating an internal innovation team with your corporate partner can assist in spanning boundaries, accelerating the collaborative process.
5. Choose the Right Partnership Model
- Building a startup corporate partnership isn’t simple. There are a number of different ways in which corporations partner with startups, which can be divided into four broad categories:
- Corporate venture funds, such as SalesForce Ventures, Google Ventures, and Intel capital
- Corporate accelerators or incubators such as those run by Slingshot
- Platform evangelism such as Google’s Cloud Services
- Ecosystem collaboration, such as hackathons, meetups, mentorship programs, and startup competitions.
Each partnership model comes with their own strengths and weaknesses. Accelerator or incubator programs, for example, provide startups with guidance, capital, and network connections, at the cost of equity. In contrast, ecosystem collaboration partnerships are far more flexible, but less likely to yield regular financial support.
6. Collaboration is Key
Both startups and corporations operate with a culture of secrecy. The corporate ecosystem is highly motivated to protect intellectual property — individuals that have worked in a closed R&D lab for a major corporate entity, for example, may be hesitant to openly collaborate with external innovators.
The innovative nature of the startup industry often places startups in a position in which their primary value proposition relies on confidentiality. A collaborative partnership isn’t limited to the sharing of IP, however — remaining forthright with your corporate partner regarding the strengths and weaknesses of your startup before signing on to a partnership ensures that both parties are able to proactively identity and address challenges that could destabilise their relationship.
7. Make Your Value Proposition Invaluable
The most important factor to consider when approaching a potential corporate partnership is the value proposition of your startup. Corporations partner with startups in order to enhance existing value propositions, or access previously unavailable opportunities.
The speed and agility with which a startup is able to create and integrate new solutions is the primary factor that attracts corporate partnership. By creating value propositions that seamlessly integrate with a corporation’s existing tech stack or allows them to become an early adopter of disruptive technology, your startup will enter a corporate partnership with the leverage necessary to collaborate on far more attractive terms.
Ultimately, the best corporate partnerships are those that allow both parties to create something better, together for an existing audience. By taking the time to carefully assess your prospective corporate partner, identity common values and goals, and establish clear and open communication, you can ensure that a corporate partnership drives your startup to success.
Corporate partnership is a complex process — there are many administrative, ownership, and governance factors to consider. if you’re considering engaging a corporate partner, reach out to Fullstack for comprehensive guidance today.
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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech companies, agencies and entrepreneurs.