Corporates are increasingly looking to partner with scaling businesses as part of an innovation agenda, or implementing strategy, finding growth, efficiencies or solving problems that need to be solved.
I’m saying scaleups intentionally, as compared to startups, as they’re businesses that are ready to work with corporates – have product traction, customers, can execute and can get through procurement…all the factors needed to succeed.
We have seen a steady increase in corporate–scaleup partnerships.
Between 2013 and 2019, there was 32 percent year-on-year growth in corporate venture capital (CVC) investments, and three-quarters of Fortune 100 companies have active venture units.
However, the growth in the need to digitise and find efficiencies has driven the need to innovate, putting even more spotlight on getting these partnerships right.
We’ve run 200+ sourcing programs, where we’ve matched a scaleup to a corporate’s problem, and along the way have learnt a thing or two about why things work well and why they don’t.
No-one wins when a partnership doesn’t work, so here’s our 9 things a corporate needs to have sorted to enable innovation, tapping into new technologies quicker than a large, bureaucratic organisation, with legacy systems, is able to.
1) Don’t waste people’s time
We see larger companies meeting and talking with growth businesses when there is no real plan to engage, outside of understanding new tech or models – there can worth to this if you’re transparent with the scaleups but try not to waste time…yours included. If you’re window shopping make sure that’s understood up front as growth businesses manage pipelines and need honesty within that to gauge conversion chances.
You’re busy, the good growth businesses are busy, so have a clear purpose with discussions and be clear if there’s a deal to be done, or you’re wasting everyone’s time.
2) Get the right help with sourcing
The corporates we deal with need help in finding the right partners. We would say that though right, as that’s our business. Whilst that’s true we’ve been involved with clients who come to us after some time, budget, or effort has been spent on trying to source the right partner which causes delays and missed opportunities.
Like anything getting the right people to help at the right time avoids wasting time and money and this is no different.
With more than 100m new businesses launched each year (according to the Global Entrepreneurship Monitor) this is no longer something – in our view – that is possible to do with a small team, or a team that doesn’t understand the ecosystem. This especially includes procurement teams as RFPs and tenders do not work into the scaleup world.
3) Understand who and what you are dealing with
There’s two key things that are part of a successful sourcing activity.
Firstly, find the business that’s solving the problem in the most beneficial way (which might mean it’s different to how you thought you’d solve the problem).
Secondly, and equally (if not more) important is making sure that you can actually work together. Spending time talking to a company that doesn’t meet your minimum criteria of compliance, regulations, procurement, or technology – whatever these might be – is wasting time.
If you need to have suppliers with modern slavery policies in place to meet your ESG strategy, or penetration testing done for tech, or compliance with privacy laws, or others then find that out upfront.
We thought this was so important we pivoted our business to do this.
4) Have a clear understanding of what a deal looks like
For the corporate this is knowing how you will execute a pilot, or the minimum acceptance criteria, or where tech integrations would be, or what a business case would look like, what the timing is, how much budget is on the table, whether you will invest, etc.
The scaleup needs to be clear what it wants from the deal. Is it reach, access to a sales channel, new products or geography? If the scaleup wants funding it would be better off going to venture capital.
5) Get the owner of the budget onboard at the start, or don’t start
It’s an obvious one but the most common reason for a partnership not progressing to a deal is that the budget holder doesn’t support the project, or needs to be sold once the work has been done. We always insist on letting both parties know where the money sits, or if there’s no money yet.
If the key exec is not into it, it will never be able to get the resources it needs.
5) Pick a problem that matters
Scaleup partnerships are not just for low-priority, nice-to-have projects only – its a mistake to think that any topic even remotely business-critical should be left to established suppliers.
Low-priority projects will inevitably yield to more important projects, leading to a long time to get started, team members getting pulled in different directions, and insufficient leadership backing when the project hits its first obstacle.
6) Both sides need to win
One of the biggest mistakes is to treat a scaleup partner just as a supplier. It is tempting for a big corporate to throw its weight around and negotiate a deal that is more favourable to them than the scaleup. Often corporates are very procurement oriented. They are trying to reduce cost. But that is not in the spirit of building a partnership. A dead (or bankrupt) partner is not much use to anyone.
7) Understand each other
Scaleups operate in a dynamic manner, make decisions quickly and implement changes rapidly. Corporates on the other hand, have extensive approval processes in place that can delay a decision for months. This difference in decision making processes can lead to frustration and failure, so it’s important that both sides understand each other processes from the onset.
8) Get to a no quickly
This is obvious, powerful, and painful all at once. Scaleups will try to make a deal work, more so than the corporate partner, which means it’s important for the corporate to be clear on when it’s simply not going to work. Have the conversation early rather than later, as silence isn’t always interpreted as a no.
9) Involve Legal and Procurement early
There’s no avoiding these two. If you have to use existing NDAs, contracts, procurement criteria, approvals, etc. then have real clarity on what these are upfront. As I said in point 3 above you need to be able to screen scaleups in/out based on this.
Ideally, you would have a streamlined or less time (money) dependant process. You can see some scaleups walk away if your contract is onerous, or procurement criteria exhaustive or not fitting the problem to be solved or the size of the business that would naturally solve the problem. i.e. a scaleup