The gloves are coming off: start-ups versus large corporations
There seems to be trouble brewing between start-ups and traditional, large companies. The situation is somewhat reminiscent of David and Goliath: small, agile David with his clever idea and giant, forceful Goliath — an exciting yet uneven fight. But does it really need to end in a battle? How might start-ups and large companies peacefully coexist?
The initiative Germany — Land of Ideas (Deutschland — Land der Ideen) has been initiating projects in various locations since 2005. A panel with Peter Borchers of Telekom’s hub:raum as the host and guests Maxim Nohroudi (founder/CEO of ally), Christoph Räthke (founder of Berlin Startup Academy and Director of Education at GTEC Berlin), Sebastian Fittko (RWE) as well as Caspar von Gadow (Head of Business Development and Partner Management, taskforce — Management on Demand AG, Transporting Ideas GmbH) discuss the relationship between big businesses and start-ups. After all, these men are rethinking the logic of entire sectors and are questioning the business models of the corporate giants.
Is it at all possible for corporations to protect themselves from disruption?
Sebastian Fittko: No, as long as there is progress there will be disruption. The only alternative is to cooperate with start-ups and to move forward together. The pipeline should always be full and the New Horizon Model must always be kept in mind. You have to keep an eye on the three levels of growth:
- Expand and defend the core product,
- 2. develop emerging lines of business and
- create feasible opportunities.
What are the strengths and weaknesses of large corporations and start-ups?
Maxim Nohroudi: Large companies have an enormous reach, are an established brand and have had enough time to gain extensive experience. But above all, they have the necessary funds with which to try out new things.
Christoph Räthke: And on that note, failure is not exclusively experienced by start-ups. Large companies fail as well, maybe even more regularly. If a big company’s marketing campaign fails, they lose EUR 200,000, which is a bummer but the company won’t really suffer for it. A start-up, on the other hand, will really feel the sting.
Caspar von Gadow: It is very easy to identify the weaknesses of large corporations. They are saturated and develop a company policy that ultimately slows them down. And then the result is that they move sidewards instead of forwards. The start-ups, by comparison, benefit from their particular market proximity; they develop business models and products from scratch which also means that they have enormous freedom of choice.
Christoph Räthke: In my opinion, start-ups don’t have any weaknesses whatsoever. The fundamental creativity and essential freedom, the opportunity to be your own boss — that is true progress! While it used to be big vs small, it is now slow vs fast.
Caspar von Gadow: I have to admit, however, that in terms of the German economy, start-ups do not play a significant role. Which is why we need to focus on cooperation and find a common ground.
Dreams of the future?
Maxim Nohroudi: But the question remains: How long are things going to stay the way they are now? There used to be more than eighty companies that manufactured horse-drawn carriages in Germany. How many of those do you think took that step toward motors and cars?
- Just one. This kind of thing should make even large corporations reflect. Don’t forget that there are enormous differences between Germany and the US — the automotive sector is just one example. You can still make money by selling cars in Germany as the business model still works. This does not apply to the US (we cooperate, among others, with General Motors). They have a completely different relationship with the Internet and are more prone to progress. In excess of 20% of GDP is generated by companies that didn’t even exist 25 years ago.
Sebastian Fittko: The first thing we need to do, is build interfaces that both parties use. There have to be ways in which we can all sensibly cooperate. Large companies should figure out which start-up assets they can cultivate and what the start-ups can give back to the large corporations with the help of their creative freedom. In this way, we could develop entirely new company structures. It’s all about working together and not against each other!
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Companisto is the market leader in equity crowdfunding (also called “crowdfunding for start-ups” or simply “crowdfunding”) in Germany, Austria, and Switzerland and one of Europe’s leading crowdfunding platforms. Equity-based crowdfunding means that many people team up to provide venture capital to a start-up or growth company. Investors — also called Companists — can make an investment of their choice in the start-up and, in turn, participate in the profits and increases in value of the start-up, or they receive fixed interest payments (in the case of venture loans).
Image: Bernd Brunert/ Land der Ideen