Garima Bharadwaj

Head of Business Development

5:22 PM, 15th Mar 2018

Startup & Corporate partnership : need for speed

Much has been written and observed about the startup ecosystem in the recent years.

The world has witnessed their peaks and plateaus , success and debacles, expansions and shutdowns, hiring and firing, and the things keep in adding up

However, the world of startups is much more to what we observe myopically – startups are even changing the way the traditional corporates work than just strengthening the ecosystem.

There is a new liasion between the large scale corporates and these startups which is stronger and more strategically aligned than ever before. There are many underlying factors for this unison :  quest for innovation, market/customer access, financial returns are just some of the many

Why do they need each other: Startups are unparalleled at conceiving successful proof of concepts; corporates on the other hand have been historically successful at scaling the proof of concepts. Startups detect and unlock the emerging and latent demand. Large companies have advantages in procurement, supply chain, manufacturing, as well as sales and marketing.

Why have these startups gained acceptance and popularity with the corporates – The corporates are generally seeking product development innovation.

More and more companies are upping their game by liasioning with startups – depending on the need.

There are companies – who follow a narrow focus approach or a wide view approach – depending in the nature or need of their business.

The narrow -focus model is relevant to the corporates/sectors that are looking to strengthen their R&D/core competency. These sectors generally comprise of pharma, healthcare, manufacturing. The wide view enterprises are the ones looking to get innovation across various verticals in a short span of time. These would mostly be tech, media, and consumer goods companies.

This traction/innovation that the companies are looking at is easiest gained by leveraging on a startup. There could be various startups working with a narrow approach for a certain product or a tech capability, which these corporates may be able to utilize or implement in cognizance with their idea/product.

In case of the startups which are more generic and more aligned to the service sector forms a better fit with the enterprises looking to roll out new ideas/ products in the market that startups have already gained traction in.

Finance or a strategy decision?  So what drives the motivation for such a strategic partnership? Is it merely the cost effectiveness and the resource optimization that is the biggest driving force or are their more underlying factors that are contingent of this move.

Probably both.

There are no ways about it that such a strategic alignment needs to have the monetary sense & return on capital. Where it is a mutually beneficial unison of commercialization to both the entities. But what is also important is the value creation by this synergy.

In a lot of cases the enterprises are looking not only to leverage on the market penetration of a startup, but also be able to close some market-knowledge gaps.

A lot of companies have invested or are looking to invest in the startups which they can later utilize to enhance their own capability, expand the market offering or new customer acquisition.

With effective execution of the partnership acts like an enabler to the enterprise and the startup alike – providing the correct economics, expansion, strengthened portfolio and the needed disruption and the required market entry.

There have been some illustrations recently to show how partnerships have been a catalyst in some of key innovations of the corporates:

  1. Coca Cola: Being a brand as big as coke has its own set of problems, one such major issue is getting the supply chain bit right to avoid any stock outs. With a multi billion dollar business that coke is – a stock out is a major monetary concern. Coke hence teamed up with a startup called Wonolo – an on demand stocking platform to help coke to restock their shelves immediately. This turned out to a winning partnership for the coke has increased its coverage and reduced 75% per outlet, and Wonolo raised close to $6 mn of funding via coca cola founders.
  2. Diageo: Now this is a company focused on product development, they worked in partnership with a startup called – Thinfilm; to create a smart bottle. Thinfilm provided for open sense electronic sensor in the bottles to track the where the bottle has been opened and where is it located in the supply chain, this has helped Diageo not only to strengthen their supply chain capability but also help to collect user data. On the other hand found a terrific company and user base to test its open sense technology on.

Corporate Accelerators & Incubators: Sparking innovation, the reason that has propelled the number of corporate accelerator and incubator programs – globally as well as domestically.

This kind of a partnership helps the companies in a multiway approach, these incubators help the companies venture into the more blurry prospects which can gain importance and focus over a course of time. These accelerators and incubators have started gaining traction by providing the necessary momentum and avoiding stagnancy in growth prospects. In this case as the market changes course the companies are ready to take the business plunge and grow new business.

Also these corporates can cherry-pick the startups to which add to their value and vision. At times these companies also end up investing in these companies for a future stake.

Globally companies like wells fargo, AT&T, Daimler, Samsung , etc are some big names that have gone the corporate accelerator way to utilize the startups add to their prowess in their own capacities.

Companies in the likes of Microsoft, Cisco, Target, Barclays have already started to foray into the Indian startup ecosystem via their accelerator programs and in the coming times we will just get to see more of these partnerships given the burgeoning startup ecosystem in our country and the quest of the enterprises to strengthen their specialties and capabilities.

Summing up startups are more subversive and corporates are more conservative Their unison makes for not only for some desired business results, tangible/monetary benefits, optimization of resources but also a great opportunity for a more innovative business horizon. 

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