Startups don't have to compete with industry giants if they collaborate.
Although large, established enterprises and rising startups reside on opposite sides of the business spectrum, magic can happen when the two work together to merge innovation and resources. However, with many startups on shaky financial ground and big businesses often mired in red tape, collaboration can be a challenge.
We’ll explore the benefits of big and small players working together and share tips on overcoming collaboration challenges to form strategic partnerships.
Why should big companies and startups collaborate?
Startups aren’t strangers to collaboration. They collaborate with business investors, customers, contractors and more to get operations running smoothly. Similarly, enterprises collaborate internally and externally to fuel business growth.
When rising startups and big companies combine resources, they can experience the best of both worlds in terms of innovation and clout, complementing each other’s strengths and weaknesses.
Here are some enterprise strengths and weaknesses:
Enterprise strengths. Large companies boast immense firepower in terms of clout, brand recognition, business reputation, resources and funding access.
Enterprise weaknesses. Many large organizations struggle with innovation, associating it with bottlenecks, uncertainty and shifts in market perception. They may be reluctant to shift their focus away from core products and services. Additionally, their financial teams are likely number-driven and reluctant to invest in unproven ventures without clear ROI validation and other metrics. And, while innovation is key to industry survival, approval processes can be slow and mired in red tape.
The startup experience differs significantly:
Startup strengths. New businesses are often full of cutting-edge talent and best-of-breed expertise. Workplaces tend to be agile, with less bureaucracy and faster time-to-market than their corporate counterparts. Their goal-oriented innovation pace is usually unencumbered by red tape.
Startup weaknesses. Startups are focused on overcoming the challenges of starting a business. They’re seeking credibility in their industries as they work to increase cash flow. Their financial, marketing and administrative resources are often stretched thin.
When large and small players bring their complementary strengths to the table, they can fill in each other’s gaps to generate new ideas, create opportunities, and increase sales and revenue.
What are the challenges of startup-enterprise collaboration?
It’s not always smooth sailing when startups and enterprises decide to collaborate on ventures. Here are a few common challenges these partnerships face.
Startups are protective of their ideas. Smaller companies sometimes fear that an enterprise partner is out to steal their intellectual property. They are reluctant to share innovations, even if their collaborator has the resources to help them succeed. In reality, big companies are likely not interested in stealing a new idea. Corporations tend to put their muscle behind scaling
Startups fear being taken advantage of. Small business owners may be reluctant to be transparent with their big business partners. This reticence can make it challenging for the enterprise to accurately assess a product’s or service’s viability. When a startup holds its cards too close to its chest, it becomes harder for larger corporations to determine whether or not the startup is the right investment fit.
Enterprises may be wary of a startup’s lack of experience. Startups obviously have little in the way of a track record. This lack of experience and credibility makes the enterprise-startup partnership a risky proposition.
These barriers – some real, some based on misperceptions and fears – have kept too many potential partnerships at bay. To forge a successful collaboration, both sides must take the risk and dive into the relationship, trusting that the other party is working toward a mutually beneficial goal.
Tip: To safeguard their innovations, startups should avoid common intellectual property mistakes, including not setting up confidentiality protections and failing to run a trademark search.
How can big companies and startups collaborate?
As with any relationship, big companies and startups must spend quality time together – far beyond emails and phone calls – to establish trusting, genuine partnerships.
When on the lookout for collaborative relationships, startups and enterprises should consider attending industry events, such as conferences, hackathons, or competitions centered on a particular solution or market theme. Both sides can use these events to seek out companies that share their philosophies and passion for ideas, innovation and partnership.
Once you have formed a startup-enterprise partnership, strengthen the relationship with any of the following activities:
Getting involved in local communities. Stepping into local technology and innovation communities will keep everyone up to speed on necessary processes and protocols while uncovering new ways to solve business problems.
Working together to meet potential customers. Small and large companies can join together to offer challenges, events and opportunities to meet potential customers.
Establishing innovation accelerators. The larger company might consider establishing or engaging with innovation accelerators to give their startup partners access to additional expertise and allow them to further their solutions.
Creating mentorship opportunities. The enterprise might consider creating mentorship opportunities for the startup within the larger organization. Mentorship relationships can bond the organizations while helping to implement innovations more quickly.
Establishing clear communication channels. Most importantly, both sides must emphasize open, two-way communication throughout the partnership – both externally and internally. Big companies don’t want to appear foreboding, and startups want to be heard. Success happens when both sides are open and respectful in their interactions.
What are examples of big companies and startups collaborating?
Let’s look at some real-world examples of startup and enterprise partnerships.
Cisco and smart-FOA
Cisco partnered with the Japanese Internet of Things (IoT) firm smart-FOA. Both parties recognized that the value of the partnership far outweighed the risks. smart-FOA, which stands for Flow Oriented Approach software, provides an information-sharing platform that can resolve problems and enable real-time decision-making. Because Japan is known for its ability to use data from manufacturing plants, FOA was a natural evolution.
From Cisco’s perspective, investing in smart-FOA would generate new value by bringing together goods, people, processes, and data. In doing this, it would significantly expand Japan’s IoT solutions across global markets. But to unearth this value, Cisco had to maintain open lines of clear communication, exhibit mutual respect and trust, and relish the quick and nimble pace of innovation that comes almost naturally to a startup.
Pfizer and BioNTech
During the COVID-19 pandemic, there was a mad rush to find a vaccine that would reduce how severe the virus was hitting the population. Pfizer collaborated with BioNTech to create a vaccine capable of fighting the highly contagious Delta variant.
This partnership actually started in 2018 when Pfizer wanted to access BioNTech’s research and development regarding mRNA vaccines designed to fight the flu. BioNTech had the technical knowledge, while Pfizer brought its experience in development and vaccine rollouts to make the partnership successful.
Toyota and Aurora
Toyota partnered with Aurora to delve into the self-driving car market. The two partnered with a third company, parts supplier Denso, to create a robotaxi. Their robotaxi hit the roads in 2021. This collaboration has led to a bigger partnership, with Toyota tapping Aurora to help automate Toyota’s fleet of consumer vehicles, starting with the Sierra minivan.
In this partnership, Toyota gets the innovation to add amazing new technology to its vehicles, while Aurora gets to tap into the largest vehicle manufacturer to grow its business.
Taking the next step in your business’ evolution
Every relationship requires compromise, communication and a little faith. When combined in the business realm, these elements establish the trust needed to drive a mutually beneficial partnership, in which each side gains confidence by investing in the other. The result is faster innovation, greater market share, and ideally, the ability to magic together for many years to come.
Kimberlee Leonard contributed to the reporting and writing of this article.