Playing In the Startup Sandbox

By Kaitlin Milliken |  April 2, 2019

Corporate teams know they should be tapping into the startup ecosystem somehow, but they don’t always know how to get started. In this episode of Innovation Answered, we walk through different models for working with startups and find out “Should big companies even try to plug in to the startup ecosystem?”

Listen to the full episode or read the transcript below. You can listen to past episodes of Innovation Answered on StitcherSpotifyApple Podcast, and our website. Special thanks to our friends at Techstars for sponsoring this episode.

Additional Resources:


Mohan Sawhney: Partnering with startups is obviously a very complimentary marriage in theory.

Arvind Purushotham: The next big thing is being worked on by a great entrepreneur.

Jenny Lawton: Starting to engage with startups, the earlier you can the better.

Kaitlin Milliken: Hey, you’re listening to Innovation Answered, the podcast for corporate innovators. In each episode, we ask a central question about the things that make change hard at large companies. Then, we get answers from experts about how businesses can overcome these challenges and make an impact. I’m Kaitlin Milliken from InnoLead.

In this episode, we wanted to know: Should big companies even try to plug in to the startup ecosystem?

I know you’ve heard me mention startups a lot.


Kaitlin Milliken: Startups. Acquiring a startup. Several startups. In the startup world. Startups?


Kaitlin Milliken: And I mean a lot. So we decided to dedicate a full episode to corporate-startup partnerships.

When well-executed, a corporate-startup relationship can have benefits on both sides. Northwestern University professor, Mohanbir Sawhney, compares these partnerships to a marriage.

Mohan Sawhney: When you combine the agility, and the creativity, and the speed, and the sense of urgency, and the risk taking ability of a startup with the scale, the capital, the customer relationships, the brand, and the resources of a large company — you know — theoretically you have a marriage made in heaven. But like most marriages, its not so simple.

Kaitlin Milliken: Often times, corporate teams know they should be tapping into the startup ecosystem somehow, but don’t have a clear goal. According to Mohan, this lack of focus makes forming meaningful relationships nearly impossible.

So before starting the journey into the world of startups, your team has to have some kind of compass. Where are you trying to go? There are many possible directions.

Mohan Sawhney: So this is sort of a spectrum of engagement — from sort of the educational engagement to incubation, and brining startups in, to an acquisitions. So you have to sort of define the whole portfolio of how the mechanism the mechanisms that you’re going to use to engage a startup and then have clear organizational units and accountability to try to move each of those forward.

Kaitlin Milliken: Defining the goal is step one. Then, you have to define the right partnership model for your team. And there are a few different options including: setting up your own accelerator or incubator, partnering with one that already exists, collaborating with startups to help test or roll out their products, corporate venture capital, and acquisitions.

I know that’s a lot of information. But don’t worry. We’ll discuss all of these different models in this episode, starting with corporate venture capital. To get the VC perspective, I called Arvind Purushotham. We’ll be back with Arvind after this break.


Looking to plan a summer trip? Well, we’re going to London this summer for our first international field study. That’s right on June 26 through June 28, you can join us across the pond to engage with a global community of innovation leaders. We’ll explore London’s most innovative spaces and have breakout sessions run by global brands. The best deal on tickets is only available to members. So get a membership and a ticket today


And we’re back with Arvind Purushotham. Arvind is the Head of Venture Investing at Citi Ventures. In this role, he oversees the bank’s efforts to invest in and partner with startups. Before working at city ventures, Arvind spent close to a decade at Menlo Ventures in Silicon Valley.

Kaitlin Milliken: Can you tell us a little bit about what Citi Ventures does for folks that might not be familiar with it, and how your team works withs startups?

Arvind Purushotham: Citi Ventures is Citi’s innovation group. You know, our mission is to bring the outside in and have the mindset that, by doing that, we can actually reimagine solutions that drive progress for our clients, for Citi’s clients.

And my particular team is the venture investing team. Our goal is to find best-in-class and leading startups in areas that we care about, and then work with those companies, first by making an investment and then driving the partnership with those companies.

Our belief is that a lot of the innovation that’s happening in financial services and related areas is actually being driven by startups, and so having that sensor network out there to know what’s happening in the startup ecosystem, figuring out how that can benefit Citi’s clients, customers, and operations, and then bringing that in is sort of a core part of what we do.

Kaitlin Milliken: Walk us through the process how does your team decide which startups to invest in?

Arvind Purushotham: The first thing that we did is to, you know, identify five areas that are critical to us. The first area we call financial services and technology. Second is commerce and payments. Third is analytics and machine learning. Fourth is cybersecurity and cloud infrastructure. The last one is customer experience and marketing technologies.

We’ve identified these five areas are areas where, not only is there a lot of innovation happening in the startup ecosystem, but these are also critical to Citi’s success and Citi’s ability to provide those next-generation experiences and technologies to benefit our clients and customers.

And so we start to look at these areas, divided into subareas, and look at the various startups that have been founded and run in the space. That’s one way. That’s sort of the top-down approach, if you will.

The bottom-up approach is, of course, because of the team that we have built we’re always out there talking to entrepreneurs as well as talking to venture capital contacts about what’s happening in their portfolios, what’s happening out there in the ecosystem.

And then, we come across companies that have relevance to Citi. Even though it may not exactly fit into one of the five areas, we know that it’s relevant to Citi’s businesses because we’ve actually discussed that with the business units leads and product people within Citi.

So that’s another way we find these startups as well which is more of a bottoms-up approach.

Kaitlin Milliken: When your team is looking at all of these different startups, not all of them are going to be a perfect fit. How do you decide which ones to move forward with and when do you end relationships with startups that are not aligned with your mission?

Arvind Purushotham: We use the venture capital model, right? When we meet the company, because of the experience that we bring, we start to utilize our skills to identify whether a company is promising from a company sustainability and financial performance point of view.

Our belief is if a startup is not going to be financially successful, it’s not going to be strategic to Citi or to anybody else for that matter. We use that process to identify those great teams, interesting technologies, companies that are attacking the large market problems, and so on, to identify the opportunities that we will want to invest in.

Then we apply that additional filter, right? Is this a fit for Citi and its businesses? Does it fit with the way Citi currently works in, let’s say, the data area or in the payments space. Does it fit the priority of one of our business units or one of our functional groups? We apply that additional additional filter to figure out if we should be working with that startup or not.

Working with a startup, that has two parts to it. There is the equity investment part. There we operate pretty much like any other VC. Once we become investors, we’re investors, we’re supportive investors, invest in follow-on rounds, and operate pretty much like any other venture capital firm does. The ending of that relationship, if you will, is when there is an ultimate exit for the company and the company gets either public or gets acquired by another company, etcetera.

But on the commercial side, we essentially at some point bring the business unit people or IT people in, have them start to work with the startup, and hand that commercial aspect over to our business unit, or our technology people as the case may be.

It’s important to point out that we’re a team of 12 professional investors, and we’re quite a small team relative to the size of Citi and the size of the areas that we operate in. So we’re highly selective in who we work with. Even though we meet several hundred startups, we work with a small percentage of them on a year-to-year basis.

Kaitlin Milliken: You mention that you act like any other VC firm where the company goes public or they get acquired. Is Citi doing any of that acquisition?

Arvind Purushotham: The way we think about that aspect of it is we want whatever is best for the company. In many instances, that could be a sale to a larger technology company or it could be a sale to a larger financial services company.

Historically, so far none of our companies have been acquired by Citi itself. But that’s not to say that it will never happen in the future.

Kaitlin Milliken: In your experience, what are the benefits of working with startups?

Arvind Purushotham: We know that repeatedly the next big thing is being worked on by a great entrepreneur or a venture-backed company. It’s not necessarily the big, existing technology companies that are working on those next big things.

That recognition has come into the broader corporate world and has certainly been recognized by the financial services world as well. The goal of having the venture investing team is to be able to identify some of those signals early, some of these potential partners early, and start to work with them because we think that that’s the best way we can benefit our customers and clients.

We bring that experience of working with startups from our previous backgrounds of venture capital partners. And we marry that with people within Citi who are looking on the outside, who are looking to partner with external startups or larger companies. And we end up being that bridge between the startup world and the Citi business unit.

We can advise the startup on how to work with Citi, how to navigate a large organization which can sometimes be complicated and also vice versa. We can also advise our internal business partners on, “This is a startup. It may be somewhat earlier stage. So, you can’t expect this but these are all the other things that you can expect and these are some of the milestones that the startup is hitting.” We can give them a sense of whether a startup is ready for enterprise scale or not, which is important for us.

Kaitlin Milliken: Do you have examples of really successful partnerships or investments that Citi Ventures has made?

Arvind Purushotham: One of the things that we are proud of is over 50 percent of our startups are beyond the pilot phase. And many, many of our startups actually have had commercial engagement with Citi where the technology is either embedded in our IT stack or a service has been launched in conjunction with the startup and is being distributed to Citi’s new clients and customers.

So one example of that is we are investors in a company called C2FO. C2FO is in the space of what’s known as dynamic discounting which is in the trade finance area. Citi has a very strong trade finance business. In addition to an investment, the trade finance team at Citi has done a commercial partnership where we’re able to provide dynamic discounting services to our large clients based on C2FO’s technology.

The partnership is going extremely well. We have closed tens of very large clients jointly with C2FO. That’s a great example of how the power of the startup technology and the power of Citi’s network are leveraging each other beautifully.

Kaitlin Milliken: Citi and Citi Ventures both have a lot of experience in this field. What are some mistakes that companies make when they begin to work with startups?

Arvind Purushotham: Because companies are trying to identify startups that are working at the forefront of technology, there is a inclination sometimes to stop working with startups when they’re very early in their development.

Sometimes a larger company doesn’t understand that it’s really a startup and doesn’t understand how mature it is and how to work with such a young company. People tend to go too early, and that ends up causing some growing pains for the relationship. That’s one thing that we’ve come across when we’ve looked at this background before.

The other thing that we see is expecting the startup to have the same kinds of compliance and regulatory requirements that a large bank like ours has. This is obviously relevant more in the financial services area. And so here, one of the functions that we serve is we obviously don’t want these startups to get into any kind of regulatory issues. We’re able to, by talking to the management team, understand how they think about regulation and vet that aspect of it.

Then we’re able to recommend to our internal business partners that from our assessment, the team is serious about regulations and compliance and how they think about that and how they’re trying to put processes and operations in place so that they can mature their compliance and regulatory functions.

Kaitlin Milliken: So we talked about some challenges what other advice do you have for teams working to build more meaningful partnerships with startups?

Arvind Purushotham: We believe that every company is in the software business these days. It could be an industrial company. It could be an automotive company. It could be an oil and gas company. It doesn’t matter in what business you’re in. You’re in the software business.

Having that mentality of “I need to be out there looking for companies, looking for startups, that are working in software technologies that could impact my industry,” that’s a critical function and one of those important arrows in the strategic quiver.

Then number two. I think it’s about finding the right people and setting the right expectations. Even if you’re doing just a partnership and taking a partnership approach, having the right people who have experience of working with startups, having the right mindset and being open to partnerships rather than having and “not invented here” mentality, those are all super critical and super important.

This function is a long-term game. In addition to working with these startups and vetting them and getting the impact of that from a dollars-and-cents perspective, we also learn the valuable lessons of what’s happening in the market, what’s happening at the forefront of technology. So having that open approach is critical to making this type of a function successful.

Kaitlin Milliken: Building the right corporate team to play in the sandbox is game-changing. Experienced, and visible, point people can make partnerships with startups more successful.

So we heard about Citi Ventures, but how are other companies working with startups? To find out, we sat down with Jenny Lawton, the COO of Techstars. Techstars has been working with startups since two-thousand and six. Each year the their team chooses three hundred startups to participate in their three month long accelerator programs. Techstars also works with established companies build their own accelerators and network with startups in their industries.

On top of overseeing operations, Jenny is also a mentor at Techstars. And I should mention that Techstars is a sponsor of a recent research report from InnoLead focused on startup engagement, as well as this podcast.

Kaitlin Milliken: So there are a lot of ways companies work with startups. What are the types of partnerships that are the most common, and what are their pros and cons?

Jenny Lawton: So I think that the most common relationship that a company might have with a startup is often just a corp-dev relationship. So a business partnership where there is a one plus one equals something bigger than two. And that’s sort of your standard sort of engagement for a company to have with a start up.

I think when you look at the world of innovation and how it’s changing. The word accelerator is becoming a lot more common. And the concept of a corporate engaging with a startup to help them accelerate or to help them think differently about their innovation is becoming more common. So you might look at an accelerator, an incubator, a bootcamp, something like a startup weekend are terms that are coming into play.

Kaitlin Milliken: And you mention accelerators and corporate venture capital is another thing that we see, what are the pros and cons of both of those types of relationships?

Jenny Lawton: Well when you look at an accelerator, an accelerator’s purpose, it’s mission is to help entrepreneurs accelerate their business either just simply to accelerate their business or in partnership with a business partner that might have a common theme or interest that they might have.

So It’s a great way for a corporate to understand their technology to see how maybe its being disrupted. I think that one of the best examples of a good use of an accelerator is when a corporate has a business that is both being disrupted and is also disruptive. So it’s a good way to get in touch with people who are disrupting the market and might be able to help you accelerate that disruption cycle yourself.

So that’s different from a corporate venture capital position where there might be a more stayed position. “We think that we know what we need to do, what we need to invest in. So we’re going to make an investment in a startup to help us accelerate.” It’s a much more directed way to look at the market.

An accelerator can work hand-in-hand with corporate venture capital to help the corporate venture capital arm understand what they need to invest in if they’re not exactly sure what their thesis is.

Kaitlin Milliken: Another method that we see is through mergers and acquisitions. Can you talk about that and what makes that move difficult?

Jenny Lawton: There are lots of different reasons why people might acquire companies. So . they might acquire them because they have a business line that they want to have that they don’t have. And they want to have it now versus later.

They might acquire someone because they see someone as a competitor that’s really disrupting the market and perhaps they want to not have them disrupt the market.

And then there’s another reason for M&A. I mean there are lot’s of reasons for M&A, but another common reason for M&A is to acquire IP that you can add to your IP portfolio to help accelerate your business.

I think one of the things that’s interesting about a corporate running an accelerator is the ultimate outcome of an accelerator with a corporate is to get to the concept of do I buy build or invest in these startups. So it gives you the options across the range of things that a corporate might look at. Their venture arm might want to look to buy something. There might be a business unit internally that might want to invest. Or they might look at some of the startups and say, “Wait a minute. This is a disruption theme that we know how to build ourselves.”

Kaitlin Milliken: So there are all these different options but what are some considerations that companies should make before they choose one of these paths.

Jenny Lawton: So first off, you really have to understand what your purpose is. A lot of times when we talk to corporates about what their innovation needs are, they’re looking to change. Or they’re looking to move faster than they might be able to move. They’re definitely looking at some level of disruption — either to disrupt themselves internally or externally. So I think you have to know what the motivation is to have the right fit.

If you’re looking to look for an early stage company that can help you with a buy, build, invest situation, then it might be that you want to run an accelerator and start to see what’s out in the world.

Another option that you could do there is an option that Techstars provides with an engagement manager program is that we can look across a portfolio with a corporate, understand what the thesis is that they might be looking for, and go hunting for them in terms of where they might find some startups.

And then there’s the option where someone might just be wanting to test the water. And they might do that just by some roundtables. Or maybe they want to disrupt how innovation works internally. And they might want to do some work internally in terms of how people can work differently and how companies can think more like a startup internally so that intrapreneurship can come into play as well.

So you really have to know where your going. Just like anything in business, you have to know what you want in order to know where you’re gonna start.

Kaitlin Milliken: So as you’re going on this journey. There might be some roadblocks. What are some challenge that you often see corporate innovators struggle with when it comes to building relationships with these startups?

Jenny Lawton: Startups move at a different pace then big corporates. Not all of them, I’ve seen some big corporations who move very quickly. But often there’s a perceived culture clash between the way a startup might run their business and a corporation might run their business.

I think that’s actually the best opportunity for the two to come together, because they each have something that they can share from each other to learn from. And so not being afraid of something being different is the advice that I would give to a corporate as well as a startup. And to test your perceptions of what’s really going on.

And I think that the second one is the concept of how capital works. And what you need to think about to put in place before you put your capital into play works differently in a startup as it does in a corporation.

So there’s a lot more lead time and intentional thinking that might go on in a corporation versus a startup. And making sure that you understand how those two things go together is important.

Kaitlin Milliken: Understanding is obviously very important. But are there any tangible steps corporate innovators should be taking?

Jenny Lawton: I think that the best success we’ve see is when a corporate innovation program is well communicated internally within a corporate. So it’s not great when its a bolt on. It is great when its something that’s codified within the company.

So making sure that people in the company know that corporate innovation is important, and we’re going to be working with startups and this is why. It’s not meant to take away anything from your job and maybe it’s going to do something helpful for you. Almost in anything in a company, making sure that there’s good internal communication is important.

But also being able to see what the value exchange is. So if I as a mid-level manager has the opportunity to work with startups and be able to share what I know as a mentor, that’s a real plus. That means that maybe the people operations or human resources have to be involved on how are we bringing learning and development opportunities into a company.

So really being thoughtful is the most important thing. Is it one person who’s doing that thinking or is it buy in from the top or the executive team. Making sure that the company is not just doing something as a one off, but bringing it in in a codified way.

Kaitlin Milliken: Another thing that we cover a lot at innovation leader is a company spinning out an idea as a startup. Can you talk about some cases where you’ve seen that happened and what challenges are associated with that?

Jenny Lawton: One of the challenges with a company spinning out of a startup is that it has implied tension that someone inside of the company actually raised their hand and said, “Hey I think I want to try something that I might want to take outside of the company.” So sometimes there’s fear around that concept of “what if they don’t let me?” And then what if they say, “Oh, you’re not really invested in this company.”

So being able to create an environment where ideas are allowed to be surfaced and that’s an option and its a safe option is, first off, thing one inside of a company in order for that to be allowed to happen.

We have had a few accelerators where the corporate partner has brought internal teams into the accelerator to help them accelerate either a business line, or to be able to accelerate the business to be spun out afterwards. At the end of the program, if they want to continue and spin out the company, they actually have to take that hard step to go forward, create the corporation, leave the corporation.

But they’re doing it with a lot of support from the quote, unquote parent company that’s doing the spin out. I think it requires a lot of thoughtful planning in order for it to succeed.

Kaitlin Milliken: So I want to ask you the big question of this episode: Should big companies even try to plug in to the startup ecosystem and are there instances when working with startups may not be a good idea?

Jenny Lawton: I would say it’s never too early to test the waters so long as you don’t make discussions that you’ll regret or you can’t really undo that starting to engage with startups, the earlier you can the better. Almost any corporation wants to be a good partner to the place that they are in business. And a good way to start to engage with startups and the whole ecosystem is to wade out into the ecosystem that you’re apart of. Start to interact with influencers. Understand what the investment community looks like. What are the colleges doing? What are the entrepreneurs doing? What are the themes that are found in the market and how does that apply to me as a corporate? Start doing some pattern matching.

In terms of what people are seeing, I don’t think there’s any harm ever in talking with startups. In talking with startups, I think that there’s so many different ways for big companies to engage with startups and there’s so much for big companies to learn from startups and that startups can learn from big companies that I don’t really see any reason they couldn’t. So I think that the answer is no, there’s no reason why they shouldn’t.

Kaitlin Milliken: So the bigger question is more picking a way to pursue those relationships that make the most sense for your company.

Jenny Lawton: Absolutely. So you can’t just go about a scatter-shot approach and expect to come up with the answer. But you might have to sample a lot to figure out what’s gonna work for you. But I like to think that the best way to sample things is with a plan and to know what your testing and to know what your expected output is. And did that work or not? And if it did, why did it work? And really look at what the root cause is in terms of what your looking for to help yourself with disrupting and being disrupted.

Kaitlin Milliken: So it’s never too early to start working with startups. Just make sure that you’re organized and have a strategy for your partnerships


You’ve been listening to Innovation Answered. This episode was written and produced by me, Kaitlin Milliken. Special thanks to Mohan, Arvind, and Jenny for sharing their insights. To join the innovation leader community, sign up for a membership on our website. Check out for more information about our report on startup engagement as well as other great resources. If you loved this episode, rate and review us on iTunes. That helps other innovators find the show. Thanks for listening and see you next time.


Special thanks to Techstars for sponsoring this episode. Innovators know the importance of tapping into the startup ecosystem to see what new technology can transform their businesses. But it’s difficult to both find and forge meaningful relationships with the startups that will go on to disrupt industries. That’s where Techstars comes in to support corporate partners.

With more than $18 billion in equity from thousands of startups in their portfolio, Techstars attracts the best and the brightest entrepreneurs from every tech vertical from around the globe. Techstars has worked with hundreds of corporations from fin-tech to energy to retail to healthcare. By matching industries with the right entrepreneurs, they are accelerating innovation across every industry. So no matter how much experience you have in the sandbox, Techstars has something for you. For more information visit