While large companies may see partnerships with hot, agile startups as cash cows, Sujata Mehta of FM Global takes a different approach. When Mehta is scouting potential opportunities to invest in or partner with startups, her goal is never as simple as finding the most lucrative option.
“We don’t do it for money,” she says. “We don’t invest in the hope that our startup gets acquired… As long as it aligns with…our industry, or it aligns with the technology space that we may be interested in — that’s our criteria for investing.”
FM Global is a mutual insurance company — meaning that it is owned entirely by its policyholders — with around 5,500 employees. The now-international company started in 1835 in Johnston, R.I. The company’s innovation team, which is only about three years old, interacts with startups in a number of ways, including investments, partnerships, and challenges through the Massachusetts Institute of Technology Industrial Liaison Program (MIT ILP).
Mehta is the Assistant Vice President of Innovation at FM Global, where she works on identifying evolving trends in technology and translating them into opportunities, exploring and engaging with the startup ecosystem, and fostering relationships — whether with startups, other industry leaders, or academic institutions like MIT.
In a recent interview with InnoLead, Mehta addressed key learnings about working with startups, pain points that often occur between corporates and startups, and more. This interview with Mehta is a part of InnoLead’s most recent research project created in partnership with MIT ILP. For more data and interviews on corporate-startup relationships, visit the main project page.
What is something that you know now about engaging with the startup ecosystem that you wish you knew when you first started?
The key things that have evolved are some of our processes. We would have probably been better served if we had given more process definitions so that our interactions would be more streamlined or more consistent, and our data collection of what our interactions are would have been more organized. We just started…meeting all these startups, but we didn’t really have a framework of how to store them, how to reach out to them in the future. So if something clicked it, that’s great — but we also wanted to have something where we could always go back to them or be able to check in on them. Not having that system in place, we lost some of our early relationships.
What’s an example of a successful experience that you’ve had with the startup?
I’m actually in the process of now transitioning a very successful startup engagement to the organization. … We started with the assumption that there were certain capabilities in the computer vision space that we as an organization thought would be very beneficial to our business. … We reached out internally to all our business sponsors, and figured out use cases of how we could use this…
Armed with that information, we went out on the exploration journey. We did a full landscape research, figured out who the players are in the field — the big ones, the small ones — and then we shortlisted 20 to 25…
We also talked through how we would approach this traditionally, because we knew we had to answer that question of: “Why would we go for these versus some of the traditional players in the space?” … That really helped lay the first foundation of success — because that’s usually where the issue starts to crop up, [where people] say, “These are startups, what if they decide to close shop?” … There’s lots of concerns in corporate around: “Will this work?” We had that part really researched and addressed. Then from there, we went to a very aggressive proof of concepts stage. We took those 25, and did demos and…pitches…to figure out who we really want to talk to.
From 25, we went down to four before we selected. We did proof-of-concepts with them, and then finally ended up selecting one vendor. … We ended up doing paid proof of concepts to make sure…we’re not having [the startups] do anything for free. From there, it’s been a very successful engagement because we took the time and the effort to research and made sure we like everything about the vendor — not just the product or service, but more about understanding how they work, how flexible they are, whether they’ll be deterred, whether they have the staying power — because all of those are very big, important factors. Now, we’re in the position of helping them. We’ve mentored them throughout. They have delivered really well. … We’re ready to basically transition this relationship over to our product organization, where they will work with them and actually build products around their offerings.
How do you navigate resource-related challenges that startups may have?
That definitely is a challenge… For our company, we ask a lot of them…and often they’re not set up to be checking off [our security] requirements. What we’ve done…is that we work very closely with our legal security and IP [intellectual property] department and vendor management departments. We actually meet with them on a regular basis, because this is about changing mindset. So we explain to them that these don’t require as much of an aggressive review upfront, because we don’t know if we’ll actually engage with them… If they continue to deliver on their promise of their product or their service, whatever we’re engaging with, then we should figure out a way to help them get where we want them to be. That’s worked really well.
We have a very elaborate security form that we need them to fill out. So we worked with our security department and said, “Hey, can you give us like six absolute showstoppers?” … From those 80 questions, we whittled them down to six. … If [a startup] says no to any of those six, we don’t even engage with them or they have to say that they’re willing to work towards them.
What is a common mistake that corporates make when they first start engaging with startups?
The most common is expectations…that the startup understands how corporates work. … For the startup, they have to figure out how to work within the [corporate] culture and the nuances of how that particular corporate operates…
The other one is that when you work on proof-of-concepts, the startup works great… We think it’s going to work, but when that starts to transition into real projects for the company around which our products and services are built, that becomes a whole different game changer. Sometimes corporates make the assumption that the startups are just going to automatically be able to scale or be able to comply with all the requests, and that’s not necessarily true. Putting that thought upfront and saying, “How do we ensure that there’s a successful transition from a proof of concept stage to a real project?” That would be super beneficial to have up front.