Startups & Corporations: Trials, Tribulations, Turning Points
Imagine a world in which the average company lasted just 12 years on the S&P 500. That’s the reality we could be living in by 2027, according to Innosight’s biennial corporate longevity forecast. Truly Schumpeter’s creative destruction applied to the 21st century!
Disruptive Trends Impacting All Industries
There are a variety of reasons why companies drop off the list — new trends and technologies, like Artificial Intelligence (AI), Virtual Reality (VR), Internet Of Things (IoT) and the On Demand Economy (ODE), are impacting a wide range of sectors, from retail and consumer products, to financial services, manufacturing, hospitality, healthcare and real estate. The world is simply moving too fast to depend on organic innovation within a corporation alone.
To keep up, corporate executives not only need to navigate a complex, perpetually evolving external world, but also most of the time a complex internal org chart with conflicting priorities and ambiguous decision processes. Now add to that mix the new necessity to engage with the innovation ecosystem in a smart way to avoid unexpected disruption.
The Rise of the Startup Revolution
There’s been a clear startup revolution over the last 10 years. I witnessed it firsthand when I was running the BizSpark program at Microsoft in 2010. We saw a tremendous number of startups popping up all over the world. In three years, we recruited more than 50,000 companies into the program (<$1M revenue and < 3 years old). We also witnessed a full-support ecosystem blooming right before our eyes (accelerators, incubators, co-working spaces, seed funds, angel investor groups, startup weekends and beyond). This quantitative and qualitative rise of startups can be attributed to a few factors:
- Democratized access to technology (cloud computing and storage)
- Global distribution channels (e.g. Apple AppStore for B2C and Salesforce AppExchange for B2B)
- “Startup Founder” became a legitimate and exciting career choice around the world (not only in Silicon Valley)
- Broad access to (smart) capital (crowdfunding, Angelist, rise of Corporate VCs)
Startups + Corporations: Trials & Tribulations
As a result of these unprecedented startup activities and new disruptors entering the market, more and more corporations have launched various startup engagements from accelerators, incubators or venture arms — all in an effort to connect with startups and embed themselves more deeply in global tech ecosystems.
However, startups and large corporations are not always the most natural fit. By nature, startups are lean and agile, while corporates are large, established entities with complex sets of stakeholders, business requirements, procurement processes, and objectives.
Throughout my experience at Microsoft, Salesforce and now Silicon Foundry, I’ve witnessed a lot of interest from corporates to engage efficiently with the startup ecosystem and it became clear that a little bit of preparation is needed on both sides.
Corporates: Where are you on the startup engagement maturity level?
Corporations recognize the need to work with startups, but how are they doing so? Far from a universal playbook, here are three areas of consideration that all corporations should address internally before they begin any kind of startup engagement.
- Define what you can PROVIDE startups / your unfair advantage.
- Access to customers and/or distribution
- Proof of concept capability
- Skilled talent / mentors
2. Define what OUTCOMES you want to get out of engagement.
- Strategic partnerships (from distribution deals to moonshot new products, co-developments)
- Transactional (licensing, vendor relationships, investments, acquisitions)
- PR/Brand (buzz, legitimacy)
- Trend reporting (insights, research, marketwatch)
- Culture and talent development
3. Define how you plan to OPERATE (cf: Steve Blank’s article).
- Partner — Innovation or BD outpost
- Incubate — Accelerator/Incubator
- Invent — Innovation Lab
- Invest — Corporate VC
- Acquire — Strategic + M&A
These are obviously not mutually exclusive but of course requires different levels of investment and support by corporations internally.
Startups: Are you ready to engage at the corporate level?
Entrepreneurs are waking up to the many distinct strategic advantages that corporations are increasingly bringing to the table, including significant funding at all stages of the life cycle, strategic advisory and operating support, as well as scale and growth drivers (access to target customers, distribution channels and paths to exit for their startups). But how startups go about engaging with corporates should also be addressed — here are five tips to keep in mind, based on countless conversations and personal experience.
- Pick your ecosystem early and identify the unfair advantage that you need to look for.
- Beware of teams without budget or internal access.
- Be demanding, require skin in the game and clear milestones.
- Define the “relationship” in a way that still allows you to survive independently.
- Pull the plug if needed or postpone.
At Silicon Foundry, we work at the intersection of the innovation ecosystem and see this type of collaboration between startups and corporations on a daily basis.
Our network of corporate Members (British Petroleum, Deutsche Telekom, Estee Lauder, Ford, L’Oreal and UPS, to name a few) are some of the most interesting and innovative companies out there, and what they all have is a desire to think outside the boundaries of what’s traditionally been done.
In working with each of them, we really roll up our sleeves and get under the hood with CEOs and senior executives — together we look at their portfolio, strategic objectives and innovation challenges. We examine their goals for extending their products, services and talent into the digital domain and identify the barriers to relationships within the startup community while creating new opportunities for collaboration.
As their trusted partners, we catalyze those insights into actionable foresight which often results in direct investments, partnerships, alliances, M&A transactions and co-creation opportunities that serve to disrupt their own businesses and help them stay at the forefront of a changing world.
Ludovic Ulrich (@ludoulrich) is a Partner at Silicon Foundry. He was previously heading Startup Relations at Salesforce, where his team launched the Salesforce for Startups program and the Salesforce Incubator in San Francisco (now expanding to Europe). Prior to joining Salesforce, he was VP of Business Development at UP Global (now TechStars), a global organization powered by Google for Entrepreneurs dedicated to fostering entrepreneurship, grassroots leadership and startup communities. Prior to that he spent 10 years at Microsoft between Paris and Seattle and served as Global Program Director for Microsoft BizSpark, a program designed to help accelerate the success of early-stage tech startups.