In the entrepreneurial landscape, forging partnerships with established corporations presents startups with a multitude of strategic benefits. In many cases, a single organization may offer multiple potential benefits to
startups based on its open innovation program structure:
Startup benefit no. 1 - Potential customers
This is the clearest and most direct benefit as startups wish to interact with established organizations with the hope that a successful pilot will demonstrate value thereby making the organization sign a contract with the startup to deploy the technology. This usually is the expectation from the organization’s side as well since extracting value from startup technology was the reason it embarked on this activity in the first place. For example, a technology that can identify potential fraud in certain types of business transactions is adopted by a global corporation and saves tens of millions of dollars annually on fraudulent transactions that until then requires that thousands of transactions be scanned manually. Once the technology was proven to be effective through a SMART pilot (see later in this book), the corporation purchased the service in order to generate those savings.
Startup benefit no. 2 - Beta site
Startups often develop technologies that must prove their value as part of a scalable and lucrative use case in a real environment in order to prove their business viability. Often, this is an actual precondition to receiving an additional round of investment. So first and foremost, this ability to prove that a technology works by utilizing the established organization’s environment as a Beta site is a central motivation for startups. For example, a startup that has proven ability to monitor water quality and identify any potentially harmful organisms testing its ability to do the same for fruit juices at a food manufacturing facility, which if successful, opens a new set of opportunities to expand its business.
Startup benefit no. 3 - Potential investors
CVC’s (Corporate Venture Capital) are becoming more and more of a factor in the ecosystem of startup investment. A significant portion of CVC’s are both strategic and financial and so startups see established organizations both as Beta sites and as potential sources of investment. For example, a maritime port that adopts a technology for scanning new vehicles as they disembark from a cargo ship in order to identify any damage and thus, avoid demands for compensation by the importer due to such damages. It then sees potential for investing in this startup since it originally came from the car insurance industry and this new maritime port application is required at many other maritime ports around the world.
Startup benefit no. 4 - Potential distributors
Some organizations see themselves as potentially the distributors of startup technologies. The organization’s interest in this may be part of its vision to be an industry leader, generate new sources of revenue, be part of a global network of peer organizations exchanging information about successful technology deployments, as a way to deliver additional value to customers or a way to generate value through some sort of platform that the organization is selling. See as an example the SAP.iO platform.
Startup benefit no. 5 - Access to knowledge and experience
The connection and work with an established organization is an opportunity for startups to interact with highly knowledgeable individuals who work for those organizations. It isn’t uncommon for startups with certain technical capabilities such as vision analysis to have potential value in many different markets such as food manufacturing, security, and traffic monitoring. The startup has the technical knowledge but each of these domains has a lot of expertise that is specific to its needs that could be applied to similar organizations around the world. Getting access to experts with this knowledge is highly valuable for
a startup even if that organization doesn’t eventually become a customer.
Dive deeper into understanding the synergy between startups and corporates by exploring the full chapter "The Motivation Behind Innovation" from our founder Ahi Gvirtsman's insightful book.