Best Practice for Corporations Partnering with Startups
▶︎Self-introduction
Hello everyone! This is Haruka, Fintech Program Manager at Plug and Play Japan. I joined PnPJ as of this February. I will be one of the official Plug and Play Japan blog writer and I am looking forward to sharing our news and thoughts on open-innovation, startup eco-system, our accelerator programs, and more!
▶︎My background
I used to work as a country manager at the translation agency, wearing a couple of hats as a project coordinator, business development manager, hiring manager, and a proofreader. Through giving communication support to those who are in need of their international business, I grew my desire to give more hands-on supports to ambitious business people who are eager to bring a positive impact to the world. At Plug and Play Japan, my main role is to give support to startups engaging with our accelerator programs for their growth and make sure the smooth sailing of our program, as well as to heat up our community to bring more fans!
As first article, I would like to introduce the Best Practices for Corporations Partnering with Startups.
In order to gain insights about best practices, we conducted interviews with over 50 startups across verticals such as insurtech, fintech, and retail. We asked startups about their interactions with our corporate partners and analyzed what worked best during these partnerships.
Introduction
Given the rise in new technologies disrupting industries such as insurance and financial services, corporations are eager to work with startups and test their ideas and solutions on a larger scale. However, while both startups and corporations can develop new strategies and concepts through pilot collaborations, these partnerships are complicated due to the potential for startups to drastically disrupt companies and industries.
We have conducted a Best Practices project with our startups in order to address and correct the problems identified in these relationships. Over the course of numerous interviews, we have devised a set of best practices that should be applied when our corporations and startups partner with each other. Having conducted these interviews and extracted some common themes, we hope that future partnerships will be more productive and seamless for all parties involved.
Challenges in Partnerships
Before diving into best practices, it’s important to discuss the problems we discovered during the startup-corporate partnership process. From initial discussions in the pre-pilot phase to the signing of the full commercial deal, both parties face challenges in implementing a technical pilot that could alter the company landscape. By listing some of the problems startups identified in the process and developing solutions, we aim to streamline corporate-startup collaborations.
1. Unclear Corporate Problem
This was the most prevalent issue recognized by startups during the pre-pilot phase. Startups identified corporations as often coming to dealflows without a clear idea of what they were looking for. This makes it difficult for startups as they are unable to tailor their pitch to the corporation and their specific problem. Executives and innovation teams often have a mandate to innovate and look at new concepts like AI and blockchain but have no specific goals beyond that. This results in innovation theater, where corporations have no objective but to engage in the culture of innovation.
2. Poor Communication with Startups
A lack of a goal was compounded by corporate partners who did not provide feedback or a response to startups following the initial meeting. This gave the startup a false sense of hope in regards to their standing with the corporation. Startups were unclear on whether corporations were uninterested in their solution or simply forgot to reply to them. Moreover, startups often felt they received positive feedback and responses during dealflows, only to receive little to no interest afterward. These mixed messages are costly for smaller organizations with limited manpower as they don’t have the resources to chase bad leads.
3. Lengthy Procurement and Security Processes
Another major problem mentioned was the length of the procurement and security processes. Startups had to go through long security and legal documents, some of which featured hundreds of questions that were also redundant. Given the limitations of a small startup, handling these documents can take a long time and draw out the pre-pilot negotiation process. This process is especially harder for younger startups who don’t have enterprise experience and are unfamiliar with procurement and legal issues.
4. Ineffective Corporate Connections
Navigating the hierarchies and structures of large organizations can be complicated, but this process is exacerbated by innovation team members who cannot properly help startups. Startups often encountered innovation team members who offered to speak to executives on the startup’s behalf but could not put the startup in front of corporate decision makers. This lengthened the collaboration process and made it more difficult for the startup to effectively discuss their solution with the corporation. These team members often were also not looped in on internal company communications and could not help the startup navigate the company hierarchy.
5. Lack of Startup Fit
Corporations also ran pilots with startups for the sake of being perceived as innovative. This was detrimental to startups who wasted valuable time and effort running a pilot with a corporation who had no intention of moving on to a commercial deal with the startup. Companies would run pilots and then realize that the startup was not a fit within the corporate culture as different departments or teams were conflicted in regards to moving forward with the startup. This gridlock killed startup partnerships as there was no unity within the organization in regards to communication or decision-making.
6. Lack of Product Integration Framework
Companies that completed a successful pilot with a startup often had issues integrating the startup’s solution into the larger corporation when the product was a new concept for the organization. Without an existing framework or product to replace, the corporation took a longer time implementing the startup’s solution since they did not know how to embed a new system within the company. These issues delayed the post-pilot process and signing of the full commercial contract, hindering the corporation’s ability to use the startup’s solution on a larger scale and preventing the startup from being paid for its product.
7. Unclear Budget Ownership
Once both companies had completed the pilot, there were issues regarding which group or party would take control of the budget for the full commercial deal. Startups encountered managers or teams that would pay for pilots but then faced a complicated process when figuring out which party would pay for the final commercial deal. This delayed both integration and full implementation of the startup’s solution. Moreover, the startup was unable to fully implement their solution and move on to subsequent projects.
Thank you for reading! We will be sharing the best practices based on the above challenges on the next post.
