In the first of a series of articles on the increasing trend of corporates working with startups we will take a look at the benefits as to why these two seemingly different types of companies may actually be well suited to working with each other.

Many startups are rightly concerned about issues that could arise from working with larger corporations, whether it’s being taken advantage of and bullied into unfavourable terms, the larger corporate stealing the startups ideas or being swallowed by the corporate at a knock-down price.

Startup founders also value their autonomy with many having ‘escaped’ from the red tape hierarchical corporate world in pursuit of their own goals and creations. Consequently, the thought of working again with corporates naturally makes many founders feel uncomfortable, and rightly so. Many are also adamant about keeping their identity and building their own reputation in their market.

Yet we believe such partnerships can be crucial for startups if they are handled and approached in the right way. Indeed, it’s possible for each party to get something out of the relationship if it’s constructed properly, goals and expectations are aligned and each party understands their role and what they bring to the table. Let’s take a deeper look.

Why corporates value startups?

Working with startups is attractive to corporates as they offer a source of innovation and creative thinking which many lack. They are good at what they do, unafraid to take bold decision-making and often more riskier yet potentially more lucrative decisions and are excited at the prospect of changing an industry by creating something entirely new. It’s often the case that the only thing holding them back from success is a lack of capital, which can interfere with their goals and potential for future success as it limits their choices.

Startups provide a quicker way for corporates to innovate as they are unburdened with the bureaucracy and red-tape of larger companies so they can be more flexible, agile and fast moving in how they do things. They get moving quickly, take risks, experiment, and get the job done for the corporation. Crucially, externalising the innovation capability through partnering with a startup enables the corporate to take risks without jeopardising its brand and its financial security. As the startup is learner and more agile they also don’t need to worry about developing new internal capabilities, which saves corporates time, money and enables them to react quicker.

Corporates can also benefit from the insights and new approach to developing solutions that many startup founders have. Working with startups may help to stimulate new ideas and provide an impetus to help the corporate’s own team shift towards being more innovative and creative in how they approach problems. The reality is that innovation is difficult for many large organisations who are burdened with red tape, isolated teams and fixed mindsets that can make introducing new projects difficult before they get off the ground. By partnering with startups, corporations can give their innovation efforts a boost.

Why startups can benefit from working with corporates ?

Undoubtedly the key reason that startups should work with corporates is the access that they can provide to resources, whether its financial, potential customers or other resources. Corporates can provide the resources needed for the startup to move more quickly as well as reputation ‘pedigree’ by having a brand and PR that will help to make the startup look good by associating with. This helps to give the startup greater visibility and credibility, which will enable them to move more quickly.

Access to potential customers is another crucial reason. Corporates already have an established customer base which the startup can tap into in order to market their products or services, which will provide faster and easier access to markets for the startup. Corporates will also have a wealth of data and information on customer behaviours, trends and other patterns that startups could utilise to better understand their market and to more rapidly improve their product development.

Startups provide a solution to corporates innovation dilemma:

The reality is that corporates have an innovation dilemma. Whilst they may not lack resources their own systems and processes are so burdensome that they lose the capability to move quickly in an increasingly competitive and agile environment. Through partnering with startups, in a process called open innovation, corporates have the freedom to quickly pursue their market opportunities, whilst startups have the freedom to execute on innovative ideas utilizing the corporates resources, data and access to market. Combining the nimbleness of startups with the resources and distribution channels of large companies can lead to profitable partnerships with both parties getting rewards out of working together. This model is likely to be crucial in the future as the pace of innovation picks up, which will challenge corporates to innovate successfully internally without tapping into external sources of innovation.

In this first part of a series of articles on corporates working with startups we have highlighted the clear benefits that both parties can get out of working together. Clearly if done properly it can be a fruitful partnership with each party provide resources, expertise and ways of thinking that the other needs. In future articles we will look at the reality of how these partnerships can work, issues they will face, potential growth opportunities and some common trials and tribulations faced in working together, stay tuned!

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