In a recent Q&A email, a member of the Innovation Leader community asked the following question:
“How do you collaborate with, or acquire, startups without ‘killing the butterfly’?”
Below, we’ve summarized a few of the top answers from the community.
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Keep them separate — Insurance industry respondent “We keep them separate. Merging into the larger company just does not see to work well. Different cultures, speed, etc.”
Collaborate, then question — Consulting firm “You collaborate with it first. In the process, you get to know the principals, their technology or product, their plan and their performance to plan. You develop mutual trust. Then you answer the question, “Can this solution succeed in the market and does this team have the ability to make it happen?” Table below outlines primary strategic choice for each scenario:”
Learn from one another — Machine Industry Respondent “Approach the startup with learning mindset. You are involved with them for a reason. Imposing your will, processes, and culture on the startup may destroy the very thing you valued in the relationship. Both organizations should learn from one another.”
Four points — Consulting firm
- Be easy to partner with. Don’t make them integrate into the entire system and expect them to scale at the beginning. Scale with them.
- Don’t ask them to do too much. Keep the value proposition very simple at the beginning
- Give them an answer right away. Yes or no. Just give them real info.
- Pay them for their work. Pay them real money to help them succeed. They need money and corporates have it.
Culture and product phase — Financial services industry respondent I work for a large bank and we often struggle to work with start-ups. There are two things which I have noticed that might help:
- Culture: Corporate culture and startup culture are so different. Instead of trying to impose wills on each other it should be more about actually the good in the other leveraging a new interim way of working.
- Phase of product development: The rules of the game need to be clear for different phases, before getting to scale the corporate bureaucracy needs to be scaled back and when the product is ready to scale the startups need to be willing to allow for more governance.
Use open innovation — Pharmaceutical industry respondent The way we do it is through open innovation. We have different structured vehicles where we invite nascent companies to work in our most important commercial challenges, looking always for the construction of win-win-win relationships where we offer our support (budget, mentors and commercial channels) to validate their solutions and take them to uncharted customers and markets in a very fast way.
Expectations, maturity, empathy, and IP — Food & beverage industry respondent “There’s no simple answer to this question. Collaboration between a large corporation and a startup follow different paths, depending on several aspects. I find these variables especially important to define that path: expectations; maturity; empathy; IP ownership. The following questions help me define that path.
- Intention and expected outcome: Is the to acquire the startup? Is the startup looking for an investor? Is the startup looking at your company as their exit strategy? What do you want to get out of the collaboration? What is the startup expecting to get out of the engagement with your company?
- Maturity: Where is the startup in their growth path? How much capital do they have and for how long that capital is going to last?
- Empathy: The empathy – or lack of – between the startup leadership team and the company host team that will be driving the relationship should not be underestimated. The chemistry, the ability to adapt to each other’s needs and the understanding amongst the founders and the host leadership team will be inevitable subjected to pressure and tensions.
- IP ownership: This needs to be defined at the very beginning of the collaboration: Is the IP relevant and a key element on this collaboration? Who is going to own it? Shared IP? How much of the IP resulting from the collaboration will be shared or completely proprietary?
You can also look at this from an investment perspective. If you think on 2 possible ways you can invest in a business partnership: capital equity vs. “sweat” equity, the attached 4 quadrants will give you an idea of where the relationship falls. The bullet points within each quadrant are some of the main aspects that frame each zone, but there are plenty more I can think of: