The venture client model — your ally in boosting innovations
“How important are corporate–start-up engagements?”, you may ask.
Well, it’s essential to understand the nitty-gritty of the venture client model before we talk about its significance. Let’s begin with the motives behind adopting this model.
Perhaps, the most perceived motive for startups is around financing. And if you agree with this, you must know that modern startup-partnering models work differently. In an interesting article by McKinsey & Company, Mr. Tawanda Sibanda points out that the biggest driver for startups is not financing but discovering new clients and tapping into the larger firms’ market. Financing as such is abundantly available thanks to the many financial investors that exist today. And, as for corporations, it’s all about innovation and development.
Venture Client vs. Venture Capital
For many years Corporate Venture Capital was the most used model of startup partnering. You must not confuse the two. Venture capitalists like Sequoia Capital, Accel, 360° Capital Partners amongst many others take minority stakes in businesses that display high growth potential. It all began when founding fathers — Georges Doriot, Ralph Flanders and Karl Compton established ARDC back in 1946 to encourage private-sector investments in businesses run by soldiers returning from World War II. It not only influenced the growth of Silicon Valley but by the end of the 1980s, it was in-return influenced by the internet bubble.
For corporates, however, a pure minority investment like a venture capitalist is in a lot of cases — insufficient. Cut to the present, a new strategy for investing in startups is now drawing a lot of attention, and it’s been termed as Corporate Venture Client. In this model, corporates directly volunteer to become a venture “client” to amplify innovations in their existing process/product/service or even their entire business. There is no incubation involved. The model has been turning out to be a very effective innovation vehicle that fuels strategic innovations by ultimately buying the product or service offered by the startup. Corporations can stay ahead of the curve by collaborating with groundbreaking startups — at lower risk and without any capital requirements in contrast to the traditional corporate venture capital model.
Much credit goes to BMW who initially drove this new model in 2015. Read Mr. Gregor Gimmy’s response when asked about his venture client unit — Startup Garage at BMW -
“We are not an accelerator; we are a venture client. That means we become a startup’s client at a point in time that still makes it a “venture,” for example because the startup product is not ready to launch yet.”
Many large corporations around the world have jumped on the bandwagon and are establishing their own venture client units that reap benefits for all stakeholders involved. At Siemens, the mobility organization familiarly known as SMO (Siemens Mobility), is today, one of the most innovative companies in the mobility sector in Germany. To remain a leader in key technology and innovation areas, SMO has been adopting new ways to harness innovation.
Introducing StationX
In 2018, Siemens Mobility formed StationX. By leveraging the deposits of knowledge that lie within both the corporate and startup world, the StationX team aims to bring SMO’s various R&D business units and external startups together. Thus, facilitating collaboration between the two parties and ultimately progressing in terms of innovation capture.
Role of StationX in Siemens Mobility
Its primary role is to capture outside innovation that can strategically solve hindrances for internal business units. How? The collaboration process involves four major phases requiring in-depth organizational venture client capabilities:
- Scout: First, the internal pain points are curated from SMO’s ambassador network of experts who represent the various BUs. StationX then constantly looks out for collaboration partners by leveraging their extensive network to identify startups that meet the BUs’ requirements.
- Match/Validate: Following the initial contact, the technical experts at SMO are then nudged to discuss and work with the selected startup to evaluate their solution.
- Pilot: A pilot project is then set-up so SMO representatives can effectively engage with the startup and evaluate if the solution is a strategic fit in a 360-degree assessment.
- Scale: On successful completion of the pilot project, StationX guarantees a smooth transfer of the innovative solution to the business unit.
This way, we satisfy our SMO teams and the startup ventures at the same time. Let’s take a closer look at the multiple benefits both parties receive from collaborating:
Incentives for SMO BUs:
· StationX strives to reduce the complexity of collaborating with startups and decreases the workload for all stakeholders involved.
· Collaborations are short and generally last around three months. Hence, they are significantly faster in capturing innovation in contrast to internal development processes.
· Since they are existing solutions, internal research and development expenses are reduced. There are no high R&D costs nor big investments involved.
· The absence of equity involvement in the startup, decreases the risks faced.
Incentives for partnering startups
· Work in contact with SMO’s major clients to gain a reputable profile.
· Constantly improve their products/services on receiving feedback from SMO’s technical experts.
· Gain industry knowledge and improve their product-market fit.
· Ultimately, Siemens or any other corporation doesn’t interfere with the startup’s ownership structure, and they continue to have complete authority over their organization’s decisions.
‘’We want our partnerships to be fruitful and on best terms for a long time. Growing together is our ultimate goal.’’
Sebastian Greiss, Head of Startup Partnering, Siemens Mobility GmbH
To succeed, corporates must continuously understand, scout, match and scale on loop to achieve innovations periodically. Bearing that in mind, at StationX we strive to be open minded and eager to learn how new technologies will push the boundaries of the status quo in mobility. Powered by entrepreneurs and start-ups, we uncover new opportunities and overcome mobility’s biggest challenges.
We would further like to conduct use-case based discussions to facilitate innovative collaborations in the area of your choice. If you work at or lead a startup that is trailblazing at mobility solutions, feel free to get in touch.
Let’s collaborate! We are looking forward to hearing from you.
