The WHY⁉️ — think first🔮
What is it what you are seeking by engaging with startups — take a step back from the accelerator fairy tale 🧚🏼♂️.
This second part gives you guidance on answering the question often not posed before ramping up such an innovation unit: The Why?!? Maybe your company is considering to ramp up its own investment vehicle. Then you should ask yourself this crucial questions: Why?!?
By presenting you possible engaging levels, we will analyze the reasoning and maturity level of your venture unit to handle such relationship, and, off course, if it even makes sense or is pure waste of time. Let's start!
So, you noticed there is something with ventures that could speed up your innovation initiatives. 🎉Hooray 🎉! You went to your board and got a “clear” mandate for innovation strategy. Congrats! And when you look around, you have got middle management peers actively blocking innovation ideas from getting the necessary attention. Welcome to #BusinessAsUsual.
You may think that all you have to do is hustle: build up a vehicle quickly, test, learn and fail fast. That methodology has its merits, but in my experience, you don’t fail fast in the corporate environment. Instead, failure is buried in continuous funding, moving all too quickly from the latest greatest innovation project to a Zombie nobody want to have anything to do with (both inside or outside your company, that is). And where does that leave you…
Tapping up some data, a recent report from Techstars: “Best practices for leveraging startups in corporate innovation findings” is out on the possible goals of engaging with startups. As all seem to be valid reasons, some are just not reachable and are more of a startup corporate fairy tale then as key findings reveal:
19% of corporates have no goals for startup engagement in place
49% have no clear ‘point of contact’ defined
38% have no impact metrics in place
Of the 5% of corporations with the highest level of experience with startup engagement, — providing mentorship, sponsorship and participation was at a much higher rate (88%) than corporations with less experience (57%)
Partnering with startups to co-develop new products (79%) was more likely than corporations with fewer startup touch-points (51%)
Participating in university startup programs (85%) was more likely when compared to less experienced corporations (45%)
The above metrics only describe a snapshot on possibilities to engage with startups or, ventures (I would also describe internal innovation projects as ventures). Digging into the myths I marked with 🧚🏼♂️ the innovation vehicles fairy tale and with 🧙🏼♂️ the wisdoms, for the fast readers:
- 🧙🏼♂️Potential proof of concept or pilot tests: Yes, this should definitely be your ultimate goal when engaging with startups. Whereas I would skip the word “potential” and substitute by: guaranteed paid, POC as a starting point to scale-up. You need a structured approach on first extracting the technology needs of the corporation and further critically challenging the technology desire and capability of your corporate partner. Scout and prove technologies, which have capabilities to reach the overarching goal of commercializing and scaling up the startups solutions within the corporate legacy architecture.
- 🧚🏼♂️Drive internal cultural transformation by adopting startup tools & methodologies: Really? I still often see this on accelerators websites or brochures, my favorite innovation vehicle fairy tell🌈🦄💩. Who in his right mind would think that, with a small unit as a lab, incubator or accelerator you could impact or even change the culture of a entire workforce🤦♀️??!! This is complete nonsense and not even desirable, the corporates culture is focusing on executing and to protect the core business. The core has to be kept profitable to allow parallel new business being funded and stabilized. These are two different tribes and no one wants to be even transformed into another ones culture. Yet you can spark 💥 little impulses on opening up a mindset of taking more risk and being curious on the ventures. This, at the end, will foster the acceptance of your model.
- 🧙🏼♂️Better understand customer or tech trends: Sad but true, yes. The big ones lost the connection to the needs of theirs customers. As a startup, if you have the chance to build a product or service that customers really need and want and is tested, do not bring it into an environment that will slow down the development, deployment and commercialization of the new product. Also areas of tension within the corporate as legal, IT, HR, Brand will come up with so many requirements and safety net, that it will again be a product no one needs. Discovering tech trends is something that should be done before engaging with startups additionally to the technology discovery phase.
- 🧙🏼♂️Be an early customer: License or buy (startups) technology. Agree on this one, while the emphasis is on “one of the early customers”. Big companies tend to be a very good fourth or fifth customers, an awful pilot customer though. The corporate ist not a sandbox to try out new MVP-staged technologies, it needs customer validation, runway and stability to then be scaled up and commercialized.
- 🧚🏼♂️Increase brand awareness within startup community: Launching a vehicle alone will not get you there. First success stories on deblocking the hurdles within the corporate of people, legacy and processes will get you closer. Building the interfaces through the corporate processes and allowing startups to build on top of the tech stack will get you there and is an attractive value proposition for the teams.
- 🧙🏼♂️Support the local/city entrepreneurial ecosystem where you are based: Corporates have assets that are valuable to pay into the system: the brand, a capital intensive technology stack , their salesforce, expertise, and real estate add value to the entrepreneurial ecosystem. It gives credibility and visibility to teams that hustle with to get this by themselves. Just don't ask anything in return at first, if your offer is good the ecosystem will accept it.
- 🧚🏼♂️Invest in them and generate return on investment:🚨BS alarm🚨Leveraging a P&L of several billion Euros will not be done by investing in seed or early stage startups, even if you double times exit an investment still will be meaningless on the corporate P&L. Either you invest heavily in growth companies or you see an investment as means to support the scaling of the teams. No unicorn 🦄 has ever gone through a corporate accelerator, exceptions confrim the rules → N26.
- 🧚🏼♂️Talent: Identify, recruit and hire innovative entrepreneurial talent: #2 of my favs🌈🦄💩. Even if your startup fails as a founder you would not want to end up in a corporate environment and vice versa, whereas , alos here, there also might be exceptions, as myself 🥳 but this will certainly not be the rule that would justify investing in an accelerator, rather than in intelligent employee branding and winning the best candidates for your business.
- 🧚🏼♂️Potential acquisition: This reason seems obvious and would be the logical next step on gaining a small equity stake at first, yet I have not seen this working in many companies. Probably because the motivation of later stage CVCs is a massive ROI and you dont find this in startups linked to the core business? Food for thoughts!
- 🧚🏼♂️Our goals are not yet established or established clear enough: well, there are some good reasons above now 👆🏻👆🏻👆🏻
- 🧚🏼♂️🧚🏼♂️Not sure: 👇🏻👇🏻👇🏻
. . . . . . . . . . . . . . . . . . . . 🧚🏼♂️🧚🏼♂️🧚🏼♂️🧚🏼♂️🧚🏼♂️ vs. 🧙🏼♂️🧙🏼♂️🧙🏼♂️🧙🏼♂️🧙🏼♂️. . . . . . . . . . . . . . . . . . . . .
As a wrap up: set your goal(s) before setting sails to charter through untapped territories and undermine them with objectives and clear KPI´s. Everything that cannot be measured; don't do it. Depending on where you want to go, unless it is completely delusional (talent, cultural transformation), there is the right vehicle for. it to achieve so. This is nothing you accomplish by just throwing budget on, instead, dedicate the right people full-time to this project and have a defined process — from structuring the corporarte technology needs, to sclaing up a startups solution — which is open to be redefined.
This is the Medium series intended to prevent more accelerators, labs and incubators being ramped up without sense, cause, purpose or impact. It seems easy when I read through my own article, but it took many years to get where we are now, a patient and risky investor and numerous people involved, take advantage of our learnings, it all starts with the WHY!
Coming up next:
1.Preparing your organization to be startup ready
2.Identify and select the best teams for your goals
3.Execute your venture activities
