It’s no wonder that startups are such a large part of the American dream - a way to disobey authority while risking it all for exponential growth. As Steve Wozniak once said, “All the best things that I did at Apple came from (a) not having money and (b) not having done it before, ever. Every single thing that we came out with that was really great, I’d never once done that thing in my life.”
Today I want to talk about something a little different - something I find intriguing and helpful to SMBs looking to do it big. That said, we’ll be talking about startups and their relationship with corporations.
Startups have been one of the most powerful ways to defy corporate culture, and many founders in this space tend to keep a far distance from corporations. They don’t want to be influenced by their business models; they don’t see the value of working with them. Conversely, corporations can offer a lot to startups, it’s just a matter of injecting trust between the two forces.
Two Decades of Distrust
Many startups don’t trust corporations because they view them as bureaucratic and averse to risk, which is the exact opposite of the role startups play in the economy.
An investment by a big company may prevent a startup from reaching out to customers that are competitors or may prevent it from focusing on attaining its core vision. For example, Google acquired the social gaming company Slide for $228 million in 2010 and shut it down a year later. Slide was launched in 2005 and raised $78 million, so their founders and investors most likely did well financially from this deal.
The distrust between startups and corporations have remained through the past couple decades mainly because of things like technology and innovation. When Viacom acquired Xfire for $102 million in 2006, it was purchased 4 years later by Titan Gaming who did not retain most of the original team of entrepreneurs. As you can imagine, this did not strengthen the image of corporations to startups.
Marrying Startups with Corporate Benefits
It’s unfortunate that startups have had such a negative outlook on receiving benefits from corporations during the past twenty years, mainly because resources tend to be in short supply when trying to grow at a rapid pace. With limited resources and limited customers, startups that partner with larger, more successful companies often find a great way to get to market faster while generating additional revenue in the process.
Some examples of benefits that startups may receive from corporations include:
- Reach
- Traffic
- Scalability
- Credibility
- Revenue
- Distribution
- Exit strategy
Many corporate entities are adopting CIOs (chief innovation officers) to work with the startup communities and bring their ideas back into the enterprise. CIOs typically have different perspectives of what actually works within a large enterprise.
Startups can benefit from the views of CIOs because they need to test customers and get feedback as they roll out their products and platforms to the market. Also, CIOs can address near-term competitors with valuable market feedback and expertise.
We’re sure you’re probably aware of corporate venture firms who specialize in such actions, like Intel Capital and Google Ventures. These firms invest directly into startups and offer many of the resources listed above. They can even acquire startups to inject new technologies into an already successful innovation.
Action Steps for Finding Great Corporate Partners
Credibility within the marketplace plays a large role in the relationships that could be formed between big companies and startups. For example, a company might endorse a startup as a viable business partner, which typically results in other companies taking notice.
Startup companies are often times encouraged to have early discussions with corporations who have pitched at meetings, events, and demos. These places are more likely to lead to future contracts between large successful companies and early stage startups. These talks could range anywhere from deals to corporate relationships to acquisition opportunities.
Here are some popular and reliable outlets for finding corporate partners:
- SwitchPitch. This is the ideal venue for startups to come and network with large corporations, to hear their project needs, to follow up with these corporations to fill their project needs, and to design their businesses to be scalable for large corporate demands.
- Tech conferences and fairs. This type of networking usually involves a highly specialized vertical, often accompanied by demos that are costly.
- Local tech meetups. This mixed networking opportunity can attract several different types of startups and corporations, which is why it’s less expensive to attend with no selectivity of attendees.
When looking into the above options, be sure that the corporate partner shares similar objectives and will not copy the product and compete against the startup. You may find that creating an ongoing dialogue with potential partners will better assess whether you share a common vision, or not.
It’s always useful to gather references from the corporation’s past partners and customers. However, you should be reluctant to enter a business relationship with any large partner with the sole intention of proving out their business model.
The Utopia of Collaboration
In a perfect world, it’s often helpful if the startup enters into other customer relationships rather than relying entirely on one large corporate partner to help grant it more independence to build a viable business. The most important thing to remember is to share a common vision and to have a concrete opportunity to build a business relationship.
With new technology and innovation constantly knocking on the door, there’s no telling how powerful the combination of startup and corporation can bring to our economy.