5 Tips for ensuring Startup-Corporate collaboration success

It’s great to be back doing these weekly blog articles. In 2020 I was writing quite prolifically and the feedback was great, but 2021 has not been so good. Admittedly, my standards have slipped and I stopped writing consistently. I got busy, things got in the way, [ENTER ANOTHER EXCUSE HERE!]. But I’ve now committed to my ‘Half-Year Resolution’ and will write an article every week until the end of 2021.

By way of background, I head up Partnerships and Corporate Venture at Liberty Mutual’s Global Risk Solutions division (we are a Fortune 100 global insurance group). Over the past few years, our global innovation team has been intimately involved in helping our business and clients to partner and invest with some of the world’s most cutting-edge innovative start-up businesses, academia and technology providers. It’s been a wonderful journey so far. Full of ups and downs, learnings, failures and some great successful collaborations that continue to this day. I hope that at least some of my experiences I share in this and future blog posts are useful to you in your own journey to innovation success.

So with the pre-amble over, let’s get to the main event…

Startup-Corporate Collaborations

Collaborations between start-ups and corporations have been around for decades. Ever since the first Corporate Venture Capital (CVC) Funds appeared to invest equity in early-stage technology businesses out of Silicon Valley, corporations have looked to the fast-moving and dynamic world of start-ups to help them to innovate, stay relevant in the marketplace, expose them to emerging technologies and develop game-changing products. These collaborations are now a global business, with billions of dollars changing hands and immense value being created across almost every industry each year.

Conversely, start-ups have also been beneficiaries of such collaborations. Working with an established (often global) player provides the start-up with a myriad of riches – access to new customers, distribution channels, additional growth capital/fundraising and industry expertise to develop value propositions and scale for growth.

If the benefits to both sides are clearly so obvious, then why do so many collaborations between start-ups and corporates fail? In a nutshell, it often comes down to a few simple things. Most importantly it's about communication, alignment and trust.

So here are 5 tips I hope you’ll find helpful no matter what side of the fence you’re on. Best of luck in your future startup-corporate collaborations.

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TIP 1: Be 100% clear up-front about what you both want out of the collaboration

It always amazes me when people talk about wanting to collaborate with a start-up because of ‘this amazing new technology they have’. Never get into a partnership just because of ‘shiny penny syndrome.’

A startup-corporate collaboration is a business agreement, but it should be fun and exciting. You both have needs and wants (cost or price is only one of them). Be very clear about what you both want out of the collaboration from the start. This is no time to be shy or timid. Seek clarity and you’ll be rewarded for it down the line.

For corporates, it’s often about solving some pain point at speed that can’t be easily solved in-house. For example, a start-up might have developed very strong analytical tools that could support the corporate in better understanding the profitability of its product lines. For the corporate to develop its own tools in-house would be costly and take far too long. That is a pain point the corporate has and needs solving. Additionally, the corporate might want to access new specialist talent via the start-up, and this might otherwise be very expensive for the corporate to access in the recruitment market.

For the start-up it’s usually about customer acquisition. Bagging a large corporate client is literally a big deal for a start-up. Often, it’s the difference between raising their next venture capital funding round and continuing the journey or getting into deep financial problems or worse. Start-ups can also gain new distribution routes via the corporate to access new markets and are provided with the opportunity to refine their product development on a live customer.

These are just some examples of what both sides might want out of the collaboration. My advice is get all the key people in a room for a ‘discovery session’ before you kick-off any serious negotiations. Brainstorm what you both want, why you want it and how you can help each other get it. It's about Win-Win all the way.

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TIP 2: Pick your ‘A-Team’ for the collaboration and never settle for second best.

Startup-Corporate collaborations are no place for mediocrity. You have to bring your best, brightest and most passionate people from both sides to be involved throughout.

A must have from the corporate-side is an Executive Sponsor. This is someone with sufficient authority, preferably leadership position, believes in what you’re trying to do, possesses decision-making authority (e.g. around budgets/spend) and has your back when going into such a collaboration. They don’t need to be involved intimately, but will provide air cover when others in the corporate might be skeptical, can provide you with a budget and resources to collaborate successfully and will hold you accountable for the results.

I’d also recommend a project/programme manager to support with the nitty gritty of getting some rigour into the collaboration. Most large corporates have teams of project/programme managers and these folk are usually well-organized, deep into the details and can help you keep track of progress. Some collaborations might only last a few weeks, but others can last many months. You’ll need to keep check on the pulse of the collaboration and ensure milestones are being met.

Relationships matter a lot. Make sure both people from the start-up and corporate get on. There is undoubtedly going to be times where challenges crop up. Trust and a willingness to work through these is built upon good respectful relationships. Personally, I like to get to know my startup collaborators over a dinner and a few drinks (pre-pandemic) both before and during collaborations and it always helped in my ongoing partnerships.

If you find through the collaboration that someone is not working out (either through incompetence, lack of passion/focus etc) then don’t be afraid to move them on. This collaboration could be the difference between the corporate finding some game-changing technology to provide them with an edge in the marketplace and the start-up getting to their next growth/funding round. Have high standards and don’t be afraid to hold people to them.

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TIP 3: Make friends with your Legal, Compliance and Procurement teams.

For those working in a corporate - Legal, Compliance and Procurement departments are not your enemy. They are there to protect your company from doing anything stupid that might cause embarrassment or worse. They are correctly doing their job.

Early on in my career, I would often find myself moaning about how difficult some of my colleagues were in these departments and why they just couldn’t get out of the way so we could make a deal happen. Over time, I’ve found that they can be some of the most helpful people in my organization. They help ensure contracts between us and the start-up are not falling foul of any laws & regulations, our interests are protected and that we are following due protocol. Once I realised this and built relationships with some of these folks, they’d often go out of their own way to help expedite a process along. Like I said before relationships matter a lot, especially with Legal, Compliance and Procurement.

Finally, make sure the start-up you’re looking to collaborate with knows what to expect with your Legal, Compliance and Procurement teams. Be up-front about it. Something along the lines of ‘We won’t get to that signed contract in a week, but with some open and honest communication we could get there pretty quickly.’ Most start-up founders understand this and will appreciate the honesty.

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TIP 4: Make sure you know what constitutes ‘success’. Metrics matter.

If you’re a corporate then the typical metrics you’re measured on (Revenue, EBITDA, ROI, etc) don’t typically work well in a start-up-corporate collaboration. You’re usually trying to test out/experiment with new/emerging technology and to find breakthroughs. Non-financial metrics often work better (e.g. no. of leads identified, no. of errors found in a dataset, gaining a better understanding of emerging technology etc.). This is where being clear about the pain point you’re trying to solve helps.

If you’re a start-up what constitutes ‘success’ for you? Of course you’re trying to gain the corporate as a long-term client, but what about within the pilot itself? Is it making new corporate executive connections, accessing a new market or being able to validate some of your product assumptions on a live client pilot? Think long and hard about what you're trying to measure.

Finally, don’t be afraid of failure (both sides). Sometimes pilots don’t turn into full-scale multi-million-dollar production engagements. That’s OK. Innovation is about experimenting, learning and being comfortable with ‘failure’. As the old adage goes, ‘there is no failure, there is only feedback.’

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TIP 5: Paid pilots usually win out over ‘freebies’. Don’t be cheap!

I’m amazed at how many people want to get ‘free pilots’ out of a start-up. Now I’m not saying you shouldn’t accept one if you’re offered it, but ask why you’re being offered it in the first place? Are you getting the full product offering via a free pilot? – it’s highly unlikely in my view.

I’ve heard from a lot of folks that want to do a pilot with a start-up but don’t have the budget to pay for one and therefore push for a 'free pilot'. Well, guess what? – it’s unlikely you’re going to get the full value out of a collaboration. Turn it the other way. Would you turn up to work and give your all for your company if your boss turned around to you and said, ‘Hey thanks for showing up today and working really hard but I’m sorry you’re going not going to get a pay check at the end of the month as I expect you to work for free!’. I’m pretty sure I know what your reaction would be. Don’t expect any different with the shoe on the other foot. Start-ups are usually capital constrained, they have products to develop, staff payroll to meet, marketing to execute etc – all of that costs money. Period.

As I get off my soapbox, I’m not saying you shouldn’t negotiate. But negotiate for Win-Win. This is a collaboration that could lead to a long-term successful partnership for both parties (and an equity investment – more on that in a future blog post). It’s not the same as an arm-wrestle over the price of a house where you’ll never likely see the seller/agent again.

What might you both be able to offer each other? – the corporate might not be able to offer the full ticket price for the pilot, but could offer other valuable items to the start-up (e.g. access to senior leadership, access to customers/new markets, access to industry specialists/trade bodies, market connections etc). There are loads of variables to trade – be creative and it’s likely you’ll end up with something even better in the end.

Well there you have it. My 5 tips for successful startup-corporate collaboration. I hope you found it helpful and please do like my post, share and comment on it in LinkedIn. I love a bit of dialogue and debate! Until my next post....

Disclaimer: The views in this article are my own and do not reflect the views of my employer or another party.