Financial company goes all in on startup partnerships

Allianz, an international financial services provider, has altered its incubator to become a division of the company that primarily invests in technology.  

The move involved the company scratching many of its projects that were early in the development process and focusing more on outsourcing research and experimentation through startup investments. 

Allianz X, formerly an incubator, is now the digital investment unit of Allianz. The division aims to invest in digital growth startups that are supportive of its business model and part of the ecosystems related to insurance (Allianz’s core competence). The Allianz X website states the company has made 14 investments across five continents. Some of those investments include American Well, BIMA, MoneyFarm and Simplesurance. 

Simply put, if in-sourcing innovation is not a core strength consider investing in complementary, but external ecosystems and technology to keep up with changes in your sector. The large company-startup partnership is useful because legacy companies are not thought of as being able to respond to fast change in the industry, at least not quickly. To do so on their own would require a massive restructure, something many large institutions are not willing to take on.

Financial services companies like Allianz, however, are leading the way in terms of changing their industry through these partnerships, much like companies in the real estate industry are stepping out of their comfort zones and changing their business models to deliver for their customers. Examples include Keller Williams declaring that they are no longer a real estate company and Lennar becoming a technology investment company. In the mortgage industry, American Pacific Mortgage has partnered with Modex, a mortgage recruiting and research platform dedicated to empowering both loan officers and employers with technology and data transparency to create better employer-employee connections. 

Partnering with startups allows for progress to be had without anti-experimental mentality, and the bureaucracy found in large corporations to validate the needs of consumers more quickly.  

More examples of the benefits of these partnerships can be found in the Innovation in Real Estate 2018 report. 

Companies must devote resources to experimentation to validate the needs of consumers. For large banks looking to partner with a startup, here are the options to consider: 

• Be an early customer – Help the startup mold its product in the short term into something you could have a bigger engagement with in the future.
• Make an equity investment – Acquire a part of the company and leverage limited upside of the disruptive technology, without the implications of developing internally.
• Acquisition – If a true belief in the future of the product exists, go all in and buy it out to monopolize any and all upside. 

Banks should also utilize the Business Model Portfolio when making investments. The model helps assess whether a company currently maintains a healthy mix of business models, how likely it is to be disrupted and its smartest investments for greater sustainability. The key is to explore new business concepts while continuing to exploit operational efficiencies in the company’s existing core business. 

In today’s ever-changing landscape, large companies must be willing to disrupt their own business models. It takes a certain amount of creativeness and willingness to test limits for a company to sustain itself in the future and partnering with startups is a key piece of that.