Big businesses are increasingly keen to engage with startups in the UK. After years of growth there are now about 40 accelerator schemes, where big corporates host thrusting young startups in the hope they will inject some much-needed ‘innovation’.
At best they are mutually beneficial, allowing big companies to benefit from fresh thinking, an outside perspective, new technology and fast paced development while offering startups access to advice, cash and customers to try their products out on.
However success is never guaranteed. Indeed there is potential for these partnerships to go disastrously wrong. So how best to engage with startups if you’re a corporate? And indeed, how do you approach corporates if you are a startup?
One company sat down with Techworld at Infosys Confluence 2016 to offer a few words of wisdom: RWE New Ventures, a Silicon Valley startup-focused offshoot of German energy and utilities giant RWE.
We spoke to managing director Stefan Padberg, who has been leading the team since launch in January 2015, alongside senior vice president Hans-Martin Hellebrand. Read on for their tips for both corporates and startups on how best to work together.
For corporates on working with startups
“Only carry the load you can handle. Don’t go too broad too quickly. If you immediately just buy 20 startups that is not going to work.”
Consider the ‘why’
“You need to consider which very concrete problems you want to solve, then find an ideal startup that can solve that problem. After that, you can go a bit wider. But to start you just need to consider what will solve problems – not necessarily now, but what fits with the future corporate strategy.”
Don’t be too overbearing - or too distant
“We have observed that startups tend to be a bit scared of us [big companies]. Some big corporates shower them with love, squeeze them too tight then they run away. The second type just throws money at them and doesn’t see them again. Don’t be in the market of just giving away money and hoping it’ll work out, but also don’t inhale them into the company. Stay on the edge.”
Get top board-level backing
“We report to the CEO and that really helps to gain traction for startups. We also have Hans-Martin [Hellebrand, SVP of global innovation] on the board of one of these startups, so we can discuss strategy and give them subtle hints. They are sometimes in desperate need of advice.”
Don’t overburden startups with bureaucracy
“You can’t do it like an M&A deal where you talk for months. These guys [startups] have to work. You have to be the link, the translator between the corporate and startup and take the pain away from them. You’ll have lawyers in your department asking nasty questions then you have to go and get information from startups without overburdening them. You’re the middle man. It’s a bit like being in PR.”
For startups on engaging with corporates
Learn from the corporate’s experience
“We have 23 million customers, that’s a huge asset we can offer startups, who can help us engage with them in different ways and provide them with better, more meaningful services.
“A lot of the startups we see have experience marketing to the US customer, but not so much in German markets with labour laws, data protection, all that good stuff, so they are blank on that. The answer is to use us as a vehicle to enter new markets. Learn from our mistakes and our experience.”
Be demanding and be specific
“When dealing with a big company, startups should be demanding. If you beat around the bush for too long it is a waste of time for both the startup and corporate. So startups need a clear value proposition: ‘I have this, and for you to benefit from that, I need this’. Not just a generic offer like ‘we have an IoT platform’.”
Communication, communication, communication
“Many of the startups we work with are very technical, led by very technical people. They don’t necessarily see the business needs and the customer needs. So you need to provide a commercial perspective sometimes. Technical guys have a tendency to educate the world: ‘if you don’t get it there’s something wrong with you’. Sometimes actually, you have to change that, get them better at communication so they present themselves the best they can.”
Don’t be afraid to walk away
“Sometimes it just doesn’t work or it is not right, for whatever reason. You can see a startup with a good product, a good approach and they’re a good company – but the corporate is just not the right partner for them.”
Focus on outcomes
“You have to set your priorities and focus on them. Our [RWE New Ventures] priority this year is making money. It’s accepted it will take some time for our investments to pay off, but if they never ever pay off it’s a waste of resources.
“A lot of innovation hubs do everything apart from focus on whether at the end they make money. The ultimate proof point is whether it brings value. Otherwise it’s just a lovely colourful ‘nice-to-have’.”