Developing a startup is an exciting process. It takes a lot of effort and time to reach the desired results. Moreover, it is no secret that most startups fail —22% of startups fail in the first year of operations.
There is an idea currently popular that in order to develop a successful startup you need to move to Silicon Valley, New York, or Tel Aviv. Also, in the current state of the business world, we see many acquisitions and mergers. It seems that the prevailing notion is that corporations and startups cannot form a mutually beneficial partnership without ultimately buying each other out.
Startups fear losing their identity, brand value, and reputation when partnering with bigger corporations. On the other hand, corporations feel like buying the startup is the only option which would not damage the company’s character.
These misconceptions around startup-corporation partnerships limit both parties as they strive towards innovation.
What’s in it for the Startup?
For most startups, the problem of expanding and growing quickly lies in their lack of capital and expertise. By partnering with a corporation, startups do get access not only to capital but also to experts in different fields.
Corporations can provide marketing and PR as well as logistical support. Startups gain access to these resources in order to pursue and execute their innovative ideas.
Another concern for startups is the culture they maintain. Many startups fear that partnerships with big corporations will damage their enthusiastic and risk-taking culture. However, most of the time startups see and adopt additional traits such as effective communication with partners.
While the startup will most definitely benefit from the corporation’s available resources, it is not the only thing they are seeking from such a relationship. Startups benefit most from advice whether it is formal or informal feedback.
The experience and stability that corporations bring can propel startups much faster and further than they can make it on their own. The quick growth is a huge advantage as often startups are forced to sacrifice their potential to give a return on investment to investors. Also, the right corporate partnerships can give startups something that no investor can – instant traction and revenue.
What’s in it for the corporation?
The reason that corporations choose to partner with startups is that it provides them with a faster path to innovation. For example, a corporation might partner with a startup to launch a new product.
The flexibility and energy that startups provide is a faster and cheaper solution than creating an entire department, hiring, and training employees.
Moreover, some corporations find startups to be ahead of them in the market in the areas of technology and operations. For that reason, corporations want to bring in startups to gain access to the newest technology, trends, and an innovative approach. This allows the corporation to transform its operations to become more efficient and agile.
Of course, there is also the matter of the potential return on the corporate investment. However, often the main reason is the need for innovation and product development to conquer new markets.
Why are these partnerships important?
Apart from the diversity of working culture, energy, and knowledge being exchanged between startups and corporations, these partnerships also have an impact on the local economy. By ensuring that startups don’t need to relocate to a major startup hub to be successful, cities and regions can provide resources for a successful startup and can benefit from such partnerships.
Large companies can provide financing, experts, and everything else to sustain growth for the startup. On the other hand, startups contribute to the local community by creating jobs and sharing resources. By infusing money in a local startup, the money then is spent in the local economy for hiring people, obtaining resources, and so on.
Ultimately, the local economy and community are benefiting and the process can be repeated over and over again.
Additionally, we see increasing competition in the local market that forces businesses to innovatively retain or gain their market share.
How to achieve the best value in these partnerships?
What seems to be a match made in heaven, often fails in practice. Even though startups and corporations are the same in many aspects, they do not always speak the same language. So what needs to be done to achieve the best value in such partnerships?
Several factors make a startup-corporation partnership a success. One of the aspects that seem to be most important is the commitment to the partnership. Startups value commitment and feel satisfied with the partnership as they feel that the corporation is providing its best experts and the management itself is involved in the processes.
On the other side, corporations value commitment if they feel that the startup is dedicated to them. Early on, startups tend to partner with many corporations to gain access to different sectors. The startup needs to be selective in their partners. One too many partnerships can damage another, or cause unhealthy competition between the partners. the potential of another.
It is also important to acknowledge cultural differences. Openly addressing and accepting different philosophies, methodologies, and beliefs is important to effectively work together.
Lastly, to achieve great value from the partnership, certain goals and expectations need to be set. Setting clear expectations has to be the first step for developing a partnership. The goals and expectations need to satisfy both parties as well as motivate them to achieve them together. Refining expectations and setting new goals throughout the partnership are crucial for a startup-corporate collaboration.