SAP.iO: Two Years, Three Key Learnings
(or How David & Goliath Become Friends)
“We have a message for entrepreneurs: if you have a bold dream to solve one of the world’s most significant challenges, join us and let’s chase your dream together”
— Bill McDermott kicking off the SAP.iO Fund and Foundries on March 23, 2017
Once upon a time, the startup vs. big company story was like that of David and Goliath. The large company, comfortable (and even perhaps arrogant) in its market dominance, only to be upset by the agile, hungry, underdog startup who used its lowly position to have an ear closer to the ground of innovation.
Over the past 2+ years, as Managing Director of SAP.iO, I have had the privilege of helping to direct a different story: that of the mouse and the lion, who despite their different natures, realized how their unique strengths and sizes can complement each other.
The SAP.iO Fund and SAP.iO Foundries invest in and accelerate early-stage startups at the leading edge of B2B software innovation, who leverage a combination emerging technologies like AI or IoT, business process expertise, and new business models. We realize that agile, early stage startups complementary to SAP can expand and enhance the SAP ecosystem and solutions and also give our customers access to cutting-edge solutions. And SAP can help startups target customer needs, connect to SAP systems, and drive scale through access to SAPs broad customer base.
As a customer-first company, our #1 priority is to ensure customers have access to the innovations that help them win in their markets. At the same time, we try to minimize friction to find and work with great startups: the SAP.iO Fund often invests strategically to “learn” but is not disruptive to a cap table, while the intensive SAP.iO Foundries do not charge an “equity tax” to startups or require them to build on our database / platform.
Another key component of our customer focus is ensuring our customers’ access to the best technology and products is not blocked by bias. Research shows that women-led companies have over double the ROI of those led by men; however investors are 60% more likely to fund men than women with matching pitches and credentials. Further, diverse teams perform better. This research tells us that traditional investor “gut” decision-making has made it harder for the best solutions to reach our customers. In response, we launched SAP.iO No Boundaries, and committed to 1) investing in or accelerating at least 200 startups founded or led by entrepreneurs from underrepresented groups by 2023, as well as 2) up to 40% of the SAP.iO Fund’s investible capital in these startups.
By the Numbers:
- SAP.iO Fund investments: 19 to-date; 35+ projected by the end of the year
- Startups incubated and mentored by the SAP.iO Foundries: 109 to-date; ~170 projected by the end of the year
- SAP.iO Foundries: 8 global locations — including new Foundries cohorts kicking off in Singapore, Tokyo and Munich in 2019.
- 26% of SAP.iO Fund startups are founded / led by underrepresented entrepreneurs
- 35% of SAP.iO Foundry startups are founded- / led- by female or minority entrepreneurs
- 3 SAP.iO Foundry programs completed dedicated to supporting great B2B software startups founded by entrepreneurs from underrepresented groups, with a 4th to start in Berlin in May.
- 43 startups founded- / led- by female or minority entrepreneurs supported by the SAP.io ecosystem.
From our experiences over the past 2 years, we have discovered 3 key learnings from collaborating with startups. (Each one of these will be the subject of their own forthcoming posts)
1. There is value to be created for and by startups in building with SAP. When we launched the SAP.iO Fund & Foundries on March 23, 2017 we were taking a bet that we could “kick start” an early stage enterprise ecosystem around SAP. One test point for this thesis was to see if startups building “with” SAP would be able to create sufficient demonstrable value to raise VC funding.
So far, our thesis is being borne out. Startups that the SAP.iO Fund invested in have raised in aggregate more than $100M in VC funding, such as BigID. In addition, startups that have participated in SAP.iO Foundries have raised funding during or after SAP.iO Foundry programs from top-tier VCs; these include Ultimate.ai, Verusen, gtmhub, Slync.io, Cultivate, Acerta, and many others.
2. To be consistently successful, we must relentlessly focus on the win-win-win. At SAP.iO we measure our success by understanding how we can deliver the “win-win-win” for customers, startups, and SAP. This win-win-win includes 1) ensuring customer receive value from working with SAP.iO and our startups to drive their innovation agendas, 2) ensuring startups receive benefit from working with SAP.iO, including access to mentorship, exposure to our technologies, and have opportunities to meet and collaborate with SAP customers, and 3) driving strategic impact for SAP, from acquiring startup feedback on our platform solutions, to providing visibility to emerging trends that can influence decisions, to even enabling joint customer engagements.
To-date, we think we’re on the right track: we’ve hosted more than 300 customers at SAP.iO locations who are looking to work with SAP.iO and our startups. More than 750 mentors have been engaged to work and support our startups. We also estimate that more than SAP.iO startups have achieved in excess of 100 pilots and recurring contracts working with SAP customers. And 10 SAP.iO startups have made it onto the SAP AppCenter, with many more to follow.
3. Driving Inclusive Entrepreneurship is about business returns. As mentioned earlier, SAP.iO No Boundaries is our commitment to removing bias from the product development to customer cycle by supporting underrepresented entrepreneurs in B2B tech.
We all know that that B2B tech startup ecosystem is not inclusive. For example, only 13% of US VC funding went to founding teams with at least 1 woman; this number drops to 2% for all female-founding teams. Worse yet, since 2006, an infinitesimal 0.0006% of all tech VC funding has gone to black women.
And yet — despite the lack of support — these founders persevere and create great products for our customers. SAP.iO Foundry programs focused exclusively on Inclusive Entrepreneurship in B2B Tech have enjoyed strong customer engagement. We’ve seen first-hand how these entrepreneurs have developed unique solutions that have significant market potential and deliver value to customers. It is, therefore, our responsibility — as a customer-focused organization — to find great entrepreneurs from these backgrounds, because customers want their products. It’s more than a “social good”. It is just good business.
In summary, we have accomplished a lot in our first 2 years, ourselves a startup organization within SAP. We could not have done this without the amazing support from our friends, colleagues and leaders at SAP, without the support of our customers, and of course, the entrepreneurs who are taking a bet “with” SAP to help them become wildly successful.
And like the mouse and the lion, maybe, just maybe, this time David & Goliath will become friends.