#59: Case Studies in Corporate-Startup Collaboration: Successes and Failures

Hi, I'm Jeppe and welcome to my weekly newsletter on Corporate Venturing, released every week. My aim is to provide a comprehensive perspective on the latest developments in the field and its related topics, drawing from the insights of top management, venture capitalists, founders, LPs, and family offices. I aim to offer valuable information and thought-provoking content that will aid in understanding the importance of Corporate Venturing in business strategy.

Today, we refresh the fascinating world of corporate-startup collaboration from my previous newsletter #7 and #12. Specifically those facilitated through Corporate Venture Capital (CVC). These partnerships are vital for fostering innovation, driving growth, and maintaining competitive advantage in an increasingly dynamic market. By examining a mix of successful collaborations and notable failures, the aim is to uncover key lessons and observations that can guide future engagements. Understanding these case studies not only highlights the potential of such alliances but also underscores the critical factors that contribute to their success or failure.

Success Stories

1. General Motors and Lyft In 2015, General Motors made a strategic investment of $500 million in Lyft, a leading ride-sharing startup. The partnership allowed GM to leverage Lyft's advanced technology and market expertise in the ride-sharing sector, significantly enhancing GM's position in the rapidly evolving mobility landscape. The collaboration aimed to develop an on-demand network of autonomous vehicles, integrating GM's automotive prowess with Lyft's software capabilities for matching drivers and passengers, routing, and payments. This move underscored GM's commitment to embracing innovative technologies and adapting to new transportation trends. Similar industry collaborations include Uber's partnership with Toyota, highlighting a broader shift towards integrating innovative startup solutions to maintain competitiveness

2. Coca-Cola and Hivery In 2016, Coca-Cola invested in Hivery, an AI-driven startup focused on optimizing shelf space and vending machine operations. Hivery's AI technology, developed in collaboration with Australia's national science agency CSIRO, enabled Coca-Cola to enhance its supply chain efficiency by predicting sales and recommending ideal product placements. This partnership not only boosted Coca-Cola's sales but also demonstrated how startups could introduce transformative processes and systems to improve corporate productivity and efficiency. Hivery's success has led to its expansion across multiple countries and a growing client base, including major retailers

3. Walmart and jet.com Walmart's acquisition of jet.com in 2016 for $3.3 billion exemplifies how a strategic purchase of a startup can facilitate market expansion and digital transformation. Jet.com's sophisticated e-commerce platform and urban customer base allowed Walmart to enhance its online presence and compete more effectively against major players like Amazon. The integration of Jet.com's innovative technology and Walmart's retail expertise created synergies that accelerated Walmart's e-commerce growth and broadened its product assortment, significantly improving its competitive stance in the digital marketplace

4. Nestlé and Freshly Nestlé's initial investment in Freshly in 2017, followed by the full acquisition in 2020 for $950 million, marked a significant step in its strategy to innovate in the food delivery space. Freshly, known for delivering nutritious, chef-prepared meals directly to consumers, aligned with Nestlé's goals to adapt to changing consumer preferences towards healthy and convenient meal options. The partnership leveraged Nestlé's extensive resources and R&D capabilities to scale Freshly's operations, enhance its product offerings, and improve delivery times, thereby meeting the increasing demand for home-delivered meals. This collaboration showcases how startups can drive product development and operational innThis collaboration showcases how startups can drive product development and operational innovations within established corporationsovations within established corporations.

5. Maersk and Einride In 2021, I invested on behalf of Maersk Growth in Einride, facilitating the rollout of 300 electric trucks. This collaboration significantly positioned Maersk as a decarbonized supply chain player. Einride gained brand recognition and easier customer conversion, marking this as Maersk Growth's most successful collaboration. The partnership underscores the value of strategic alignment and mutual benefits in corporate-startup collaborations.

As I mentioned in a previous newsletter, collaboration success stories are essential for the survival of CVCs. The insights gained from collaboration can be more valuable than the financial gain itself from investing in startups. The Einride partnership with Maersk is a prime example of this. It facilitated Maersk's positioning as a true end-to-end decarbonized supply chain player while allowing Einride to gain significant brand recognition, aiding in their customer acquisition efforts.

Failure Case Study: Blockbuster and Netflix

On April 14, 2023, we marked the 25th anniversary of Netflix's launch. Marc Randolph posted on LinkedIn about the famous Blockbuster-Netflix meeting in 2000. This story provides valuable insights into the pitfalls of failed corporate-startup collaborations.

In the early 2000s, Netflix co-founder Reed Hastings proposed a partnership with Blockbuster, suggesting Netflix manage Blockbuster's online brand while Blockbuster promoted Netflix in stores. Despite Blockbuster's dominant market position, the collaboration failed due to several critical mistakes:

Failure to Adapt: Blockbuster failed to recognize the rise of digital streaming and remained committed to its traditional brick-and-mortar model, missing the shift in consumer behavior.

Complacency: As the market leader, Blockbuster became complacent and underestimated emerging competitors like Netflix.

Inflexible Decision-Making: Blockbuster's hierarchical structure hindered quick decision-making, making it slow to embrace new technologies.

Culture: Blockbuster's profit-focused culture stifled innovation, contrasting with Netflix's agility and willingness to disrupt its own business model.

Poor Leadership: Blockbuster's leadership failed to invest in new technology and adapt to market changes, leading to its eventual bankruptcy in 2010.

Blockbuster's failure to embrace the changing market conditions in the entertainment industry, particularly the rise of digital streaming, serves as a cautionary tale. Instead of investing in new technologies and business models, the company remained committed to its traditional brick-and-mortar store model and late fee revenue stream. This rigidity, combined with a hierarchical decision-making structure and a culture focused on profitability rather than innovation, ultimately led to Blockbuster's downfall.

Key Takeaways

Strategic Alignment: Successful collaborations require aligning the strategic interests of both the corporate parent and the startup. Corporations need to have clear goals and expectations for their CVC investments and avoid micromanaging the startups they invest in. Startups should also carefully consider the terms of any CVC investment before accepting it to ensure alignment with their long-term goals.

Cultural Integration: Managing cultural differences is crucial to ensure smooth collaboration and integration of new ideas. Corporations often struggle to keep pace with the innovative and agile nature of startups, making it essential to foster a culture that encourages experimentation and flexibility.

Leadership and Vision: Strong leadership that recognizes the potential of new technologies and market shifts is vital. Leaders must be willing to invest in innovation and be open to disruptive ideas to avoid becoming obsolete.

Agility and Flexibility: Corporations need to adopt a more agile and flexible approach to decision-making, allowing them to pivot quickly in response to changing market conditions. This involves streamlining hierarchical structures and encouraging a culture of rapid innovation.

I hope you enjoyed this week's newsletter. If you have any suggestions or contributions that you would like to share with me, please do not hesitate to reach out. I would be delighted to hear from you.

/Jeppe