Mars And Venus - Improving Corporate/Startup Engagement In Europe

If large corporations are from Mars , then startups must surely hail from Venus. While the founder of a small but ambitious startup catches the bus or underground train to work and shares coffee-making duties with the rest of a close-knit team, the corporate CEO arrives by car, takes the elevator to the fifteenth floor interacts mainly with a handful of senior executives. And while the early-stage entrepreneur may struggle to fund the next stage of R&D or the increase in payroll required to take a product to market, the head of a successful corporate rarely has to spend much time worrying about available resources. A typical founder will probably take a leading role in just about every aspect of the business. Meanwhile, his or her counterpart in a multi-national corporate will sit at the apex of a sprawling and complex machine where functions are delegated and roles clearly defined. In short, the first-time entrepreneur and the CEO of a major corporation ply their respective trades in very different worlds.

Well that's one way of looking at it. But in reality the relationship between the very largest and the very smallest companies is much closer than you might think. For one thing, startup businesses may well be targeting blue chip companies as prospective customers or distribution partners. Meanwhile, major corporations increasingly see startups as a source of innovation and a source of new products.

Widespread Partnership

And the extent to which the world's corporations are partnering with entrepreneurial, tech-led businesses is perhaps surprising.

According to a new research white paper published last week by OpenAxel - a European Union body set up to foster cooperation between accelerator programmes - around half of the world's 500 largest corporations are actively partnering with startup companies. This is true not only in the US but also Europe where “corporate startup engagement” (CSE) is a particularly pronounced trend in France, Germany, Switzerland and the United Kingdom.

Conducted in association with Wayra - the accelerator network established by Spanish telecom giant Telefonica - the research provides a snapshot of how far Europe's corporations have come in tapping into the well of talent and innovation offered by the burgeoning tech startup community.

And undoubtedly there is a huge amount of corporate interest. The research finds that 97% of Europe's corporates have analysed their need for “open innovation.” In terms of drivers, the big players see partnership with startups a means to solve technological and business problems and enter new markets. There is also an increasing awareness that close contact with agile early stage businesses will have a positive impact on corporate culture.

Shaking Up Culture

Ana Segurado, director of Telefonica's open innovation initiative, Open Futures, says the impact of startup engagement programs on corporate culture can be hard to measure precisely, but it is nonetheless tangible. She cites Telefonica's experience as an example. “We have a mentorship program involving the top level of people at Telefonica,” she says. “What we're finding is that out senior executives want to  learn from their interactions with companies that are run differently.” In particular, corporates have something to learn  from the way that small companies solve problems – without necessarily having a a lot of money - and the mentality which allows them to make rapid decisions and, if necessary, accept that the better part of valour is often a willingness  to fail fast if a product isn't succeeding in a particular marketplace.

But what do the startups get out the interactions?

As the OpenAxel research points out, the relationship between startups and major corporations is most apparent when major deals are announced - witness the 19.7bn euro acquisition of Whatsapp by Facebook and Yahoo's 1bn euro purchase of tumbler.

Accelerators And Incubators

Less well publicized are the role of accelerators and incubators offering startup companies not only workspace but also  mentoring , access to investment networking with potential partners. There is a considerable degree of variation between accelerators and incubators. Some are generalist (horizontal) and offer a temporary home to new businesses addressing a broad range of sectors. Others are vertical and take on startups operating in tightly defined markets. In some cases an accelerator will be operated directly by a major corporation but many are independent, with corporate involvement taking the form of sponsorship or a commitment to provide mentors and open-day attend pitches.

But what an accelerator or incubator should so is provide a space for the startup business to develop its products and business plan while also putting the founders in contact with investors, customers and partners that they might not otherwise have an opportunity to meet.

“The most valuable thing that an accelerator can offer is networking,” says Ana Segurado. “Corporates are very strong in offering this to startups.”

Forward Planning

Segurado advises startups to do their research before approaching a potential corporate partner. For instance, before entering the competitive process of applying for a place in an incubator it's important consider the sources of its funding and the goals of its sponsors. And armed with that research, the startup should build its own business case. “You need to have a clear proposal,” says Segurado.

On the corporate side, Segurado says any major business that plans to take CSE seriously should establish KPIs to chart the success of any programme. “And it's also absolutely critical to get support at board level,” she says. “Without boardroom support, success cannot be guaranteed.

Structures are important too. Segurado says corporates should make it as easy as possible for small businesses to engage with them. “You need a clear entry point,” she says. “You need to provide the startup with a channel.”

For startups, a relationship with a corporate can provide not only money (either in the form investment or as part of a supplier/customer relationship) but also access to mentoring and networks. In addition to accelerators, corporates are also engaging the startup community through events ( such as hackathons), competitions and corporate venturing.

The good news is that "corporate startup engagement" is taken seriously by big firms, but it's early days.  As the OpenAxel research reveals, more than half  (57%) of those running programs have not put strategic performance indicators in place and 48% do not have the direct support of leaders at board level. There is still some way to go to bridge the gap between Mars and Venus.