The initial step each corporate should take is to ask what they want to achieve by collaborating with a start-up company. Only if the goals are clearly defined and transparently communicated between both partners can the conditions for successful cooperation be established. Without a clear rationale, collaborations often get lost in the void, which leads to frustration on both sides. This chapter will present the most common reasons for corporates to collaborate with start-ups.
In today’s ever-changing and fast-moving world, the collaboration between start-ups and corporates offer many benefits.
Start-ups present creative and innovative approaches, are willing to take risks, work in a quick and agile manner, and are often more cost-effective than established partners or suppliers.
Develop new products outside of the core business
Start-ups are known for developing new and radical innovations. These can provide corporates the opportunity to expand or transform their core offering. Approaches can range from finding inspiration for the development of novel products by learning about new technologies, markets or customer trends, to the incorporation of existing start-up products into the corporate’s portfolio outside of the core business.
Develop new / improved products in the core business
To stay ahead of competition, established companies need to be on top of new technological developments and innovations in their core business areas. Start-ups tend to “think outside of the box,” something that corporates are often not able to do, due to complex structures and long decision making processes. Through collaboration, this “outside the box” thinking can be leveraged by corporates to improve their core business and protect it from disruption by building new products, services, and business models that support it.
In addition to customer-facing offers, corporates can also improve internal processes by collaborating with start-ups. Business areas such as HR, finance, marketing and sales offer significant potential to be disrupted by innovative start-up solutions, especially when it comes to digitisation. Given that established companies often rely on partners to provide solutions for these areas anyways, they can offer a nice entry to collaborating with Start-ups.
Tap investment opportunities
Start-ups can also be an attractive investment opportunity for corporates through equity investments. Young companies offer potential for great financial returns, but financial investments also bear a high risk due to the rather high failure rate of start-ups.
The financial motives of corporate venture capital are usually complemented by a strategic rationale. Hence, investments are usually made in business areas and technologies which are related to the core business or which are a future target market of the established company.
Build an innovative image
A stable network of suppliers and partners is crucial for established companies. However, if the corporate company engages solely with well-established tech providers, they risk missing out on potential new sources of revenue, customers and talents. Collaborating with an innovative start-up may give an established company a competitive edge. Additionally, the corporate can build up an innovative image by engaging with the Start-up scene.
Companies need innovative, committed employees who think entrepreneurially. In turn, employees want an exciting working environment which they can actively shape. Working together with start-ups offers established companies the opportunity to create a diverse and creative environment and thus be attractive to qualified employees and talents. Established companies can also find and recruit new talents through events in the entrepreneurship scene, where not only start-ups but also talent can be found.