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4 Reasons Why Corporates and Startups Should Collaborate

4 min read

Words like “startup”, “accelerator”, and “incubator” are all people seem to want to talk about these days. Many industries that were once dominated by large corporations are now experiencing disruption in their chosen market.

Even though there are people who think that startups will make corporations a thing of the past, in reality, startups and corporates are destined to work together. This article talks about the 4 main reasons why startups and corporates should really just get to together.

1. Corporates can´t innovate radically

Although corporates and startups have the same skills when it comes to innovating, startups are known to innovate faster and more radically. Startups and the creative nerds who run them have found new ways to do the same things that corporates do, only faster and simpler.

Corporations have liabilities and internal barriers that startups don’t have giving them the freedom to be agile in their creativity. In a recent survey of 250 executives of large and small corporation conducted by Inc. 40% of executives stated that they felt their industry was being disrupted by startups who were at an innovation advantage because they were able to take more risks and have greater agility.

40% of executives stated that they felt their industry was being disrupted by startups who were at an innovation advantage ​

As a result, many corporates that are achieving limited growth are financing startups in the hope of achieving better innovation with the help of startups. For example, Campbell (the soup company) recently invested $125 million in a venture fund to finance food startups after it’s growth and profits began to shrink. They financed the food startups in the hope of benefitting from their agile innovation to develop their product line further and achieve a fuller bottom line.

2. Startups can leverage the assets and resources of corporates

Whilst startups are great at innovating ideas they lack the manpower and large-scale logistical and resource capabilities that are available to corporates. As a result, startups are unable to successfully scale their proof of concept. This is why a startup/corporate marriage is likely to succeed as startups can leverage the assets of corporates. One of the biggest roadblocks to a startup is their lack of capital and startups that have teamed up with corporates have reaped the rewards.

For example, General Motors recently funded the autonomous vehicle startup Cruise Automotive with $1 billion in funding, allowing the startup to expand at a faster pace due to this leveraged capital. 

In addition, a startup’s lack of resources including assistance in branding, PR expertise, and credibility and contacts within an industry can also be easily bridged through collaboration with an established corporate. For example, Boulder Brands acquired the gluten-free food startup Udi in 2012 and allowed the startup to leverage the company’s resources in order to drive its growth of scale. This increased the startup’s revenue from $93 million in 2012 to and eye-watering $300 million in 2015.

3. Corporates have limited visibility of startups

Just like dinosaurs, corporates don’t spend much time looking at the ground and don’t see the latest startup trends before they’re hard to ignore. According to the Harvard Business Review, most corporates are “woefully unaware of startups” and fail to notice significant activities in the startup ecosystem.

Because of this, corporates ultimately end up missing out on up and coming datasets and consumer/business trends that can help them orient themselves within a changing market. What’s more, corporates who aren’t connected to ecosystems are unlikely to see competitors to their business until it’s too late. By then, the corporates are unable to acquire or collaborate with the hottest startups who have grown too big to take down.

Most corporates are “woefully unaware of startups” and fail to notice significant activities in the startup ecosystem​

Unilever, figured this out early on and created the “Foundry”, a platform and ecosystem which allowed the company to collaborate and innovate with up and coming startups in Unilever’s focused industries. This allowed Unilever to keep an eye on the ecosystem and meant the company could nurture startups into propositions as opposed to competitors; this added value to the corporate business.

4. Corporates need entrepreneurs as problem solvers

The slow internal and external processes of corporates often leave corporates with one hand tied behind their back when it comes to problem-solving. However collaborating with a startup gives corporates access to entrepreneurs and problem solvers with a more creative outlook. 

According to BMW Group Financial Services UK CEO Mike Dennett, it’s opening of a BMW Innovation lab was the biggest benefit to the corporation. The project allowed BMW to expose the company’s technical flaws as collaborating with startups and entrepreneurs allowed the company to see “a new mindset and fresh approach to problem-solving”.

The most common type of collaboration between startups and corporates however, is through “hackathons”. These timely problem-solving engagements between corporates and creative minds help corporates solve specific issues with the help of the outside world. Most famously, IBM runs its BlueMix Cloud Hackathon with the help of entrepreneurs from different ecosystems. The program has helped the company to promote emerging technical and business solutions and develop fledgling ideas into workable IBM products.

Given these benefits, it’s no wonder that many KOLs see the trend toward corporate and startup collaboration as a match made in heaven. Because of their different skill sets, startups and corporates are naturally destined to fit together because opposites really do attract.

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