Technology startups want to partner with large, established companies and industry leaders. They know a relationship with a big company can grant them credibility in the market, provide cash flow and give them access to the resources they need to quickly scale their ideas.
Likewise, big companies want to partner with (or acquire) startups because they bring fresh new talent and can quickly develop innovative, new products without getting bogged down in corporate bureaucracy. So, if startups and big companies want and need what the other has, why is it so often hard for them to come together?
It is hard because they don’t understand each other, don’t appreciate their very large differences, don’t trust each other, and don’t know how to work together.
Calming fears on both sides
The truth is, big companies are not interested in stealing startup intellectual property because their strength lies in scaling ideas, not necessarily developing them. And, as for the concern that a large company might sideline a startup’s founders, leaders, and teams, it is often the people that make a startup attractive to a larger company more than the intellectual property. When it comes to innovation, impassioned people and their ability to execute are at least, if not more, important than any one idea.
Despite their attraction to startups, big companies must overcome many challenges to work with their smaller counterparts, challenges that startups don’t always appreciate. A lack of transparency on the part of the startup (driven by its fears of being taken advantage of) often makes it difficult for big companies to accurately assess a startup’s product or determine whether its service is compliant with requirements such as those of corporate IT (which frequently doesn’t want to work with unfamiliar and possibly non-compliant systems and software). When a startup holds its cards too close to its chest, it is difficult for big companies to determine whether the startup can support its product or service in all the time zones in which the big companies operate. Finally, the startup’s lack of a track record raises the risk variables for big companies.
These barriers – some real, some based on misperceptions and fears – have kept too many potentially ideal partners apart. Fortunately, they can be surmounted.
The new rules of engagement
Very few startups will be plucked off the streets and discovered for their innovative ideas or technologies. They must actively seek to attract big companies’ attention by leveraging the mechanisms those firms have established for that exact purpose. Many large tech companies host competitions, hackathons, and co-development events for startups around a particular solution or market theme. These events provide an opportunity to establish the relationship, meet face-to-face, and begin building the trust that is necessary for any type of partnership, whether it be as a vendor, a channel partner, or through an acquisition. Startups should use these programs to find individuals who share their passion for their ideas and work to develop those relationships.
Startups also should understand that there are a variety of ways to work with a larger company while preserving their identities and cultures. Many companies offer programs that can bring cash infusions to accelerate growth and sales. For example, Cisco Innovation Centers and other types of post-accelerator centers located in major cities around the world work with startups to help them mature their products and make them more attractive to big customers. Additionally, many companies make their APIs available to startups to simplify system integration and calm the fears of corporate IT.
For big companies
To keep the innovation pump primed, big companies should keep tabs on their local technology communities, paying attention not only to new tech but also to new business processes and new ways of thinking about business problems. Maintaining a consistent dialogue through challenges, events, mentorship programs, and simply offering help is a good way to attract startups and begin building relationships with them. It is critical to create trust with startup community leaders, and establishing innovation accelerators that help them access expertise, develop their solutions, and meet potential customers is a good way to do this.
Large companies should also encourage employees to attend events that attract startups and incentivize employees to mentor the startups they meet. Big companies can appear byzantine and forbidding to entrepreneurs, but presenting a human face to the startup community will alleviate those concerns.
Like any relationship, a little compromise and a leap of faith go a long way. The journey to trust must be built one step at a time, with each side gaining confidence in the other by co-developing pilot projects together. Ultimately, those startups and large enterprises will be able to create a thriving partnership, developing innovative new technologies that better serve their joint customers, like a match made in business heaven.
Alex Goryachev is the Senior Director of Innovation Strategy and Programs for Cisco.