A procedure with clearly defined objectives, budgets and processes on the corporate side helps to set up a collaboration that is successful for both parties, right from the start. This chapter will give an overview of important points to consider before starting an actual collaboration with a start-up.
Understand the start-up culture
The perspective and circumstances of start-up founders are fundamentally different from the conditions in which corporate managers act. An understanding of what motivates, influences and drives their decisions and actions is therefore essential for a successful, mutually beneficial collaboration. Start-ups operate under constant pressure to develop their operations with few resources, all the while dealing with the insecurity involved in the struggle to survive. These pressures affect business processes of start-ups that are often considered normal among established companies, e.g. long sales cycles that take more than one year can put a start-up out of business.
The constraints under which start-ups operate are often similar across national cultures. The following table gives an overview of different circumstances and mentalities under which start-ups and corporates operate. Remember that these cannot be generalised to all companies, but are rather meant to give a picture of the differences between start-up and corporate culture.
Willingness to take risks: High: “Fail-Fast” mentality
Product development: Early customer test (test & sell every prototype)
Financing: Milestone-based equity financing
Profit sharing: For founders and potentially for the team
Working mode: Very agile, with frequent adjustment of direction
Legacy: Low, almost no business which can be risked
Willingness to take risks: Low: “Don’t fail mentality
Product development: Customer is only shown 100% finalised products
Financing: Secured for the entire development/project phase
Profit sharing: None or very limited
Working mode: Pursuit of determined strategy
Legacy: High, risk of losing existing revenues
Develop a strategy for collaboration
Only a few companies have a clear company-wide, long-term strategy for working with start-ups. As a result, collaborations often depend on individual employees and are decided on a case-by-case basis. Since very few start-up founders have a clear idea of how to cooperate with established companies, unnecessary misunderstandings can arise right at the beginning.
A strategy with clear goals, budgets and processes (on the part of the company) and clear objectives (on the part of the start-up) can help to establish successful cooperation for both parties right from the start.
When developing such a strategy, companies should first take stock of the situation:
Which start-up activities already exist in the company?
What do the guidelines, processes and responsibilities look like?
How many resources are available for start-up collaboration?
Finally, the strategy should be agreed upon with all relevant stakeholders and communicated within the company.
Create a foundation for collaboration
Large corporates are complex organisations; to collaborate with dynamically growing and changing start-ups, they need clear structures and processes. The following aspects should be taken into consideration at this stage of the collaboration process.
Define framework conditions
Develop standard contracts and control mechanisms
Keep in mind: Such structures are not static! They have to be constantly checked for their practical suitability.
Appoint clear responsibilities
Some of the biggest hurdles when initiating collaboration with start-ups arise from unclear internal responsibilities. It is often not clear who is responsible for giving the final “go” for start-up collaboration or who is to pay for the endeavours. Such uncertainties can lead to a long and complex initiation phase and ultimately to collaborations petering out after initial enthusiasm.
This is especially detrimental for start-ups if they get forwarded from contact person to contact person within the corporate and if decisions get stalled, since time is usually one of their scarcest resources.
To avoid such consequences, clear responsibilities are needed within the established company, especially with units or individuals who control and supervise the collaboration. These responsibilities should be communicated both throughout the corporate and also externally, so that start-ups know whom to contact if they wish to approach the corporate.
To adequately fulfil this task, those who are responsible within the corporate need:
technological and business understanding to evaluate start-ups
the authority (budget and HR) and strategic vision to take decisions on this cooperation, or to have a direct line of communication with the corporation’s decision makers
a good internal network to be able to refer start-ups to the right person within the corporate
Five Questions a Corporate Should Ask Themselves Prior to Collaboration
Takwa Khelifi, LEONI Wiring Systems Tunisia: Five questions a corporate should ask themselves prior to collaboration
The global business landscape is transforming at the speed of light because of the digital transformation, which is helping to create new products, services and ways of thinking. Like other corporates, we at LEONI are speeding up the game by finding external technologies and innovation, as well as developing those that we have in-house.