How to make cooperation between corporations and startups as streamlined as possible?

Last Friday we through our first ever Leaders Group event for our corporation clients. The main goal of the day was to share experiences on the pitfalls and the successes of startup - corporation collaboration. We divided our clients into three groups and asked them to discuss the following processes of collaborating with startups:

  1. Investing
  2. Partnership
  3. Acquisition

We wanted the groups to think about the most challenging experiences they've had regarding their topics, how to minimize bureaucracy and make sure it doesn't get in the way of working together with more agile companies like startups, what are the most efficient ways to kick off the collaboration fast and how not to kill the innovation and creativity of a startup and slow their pace? We also provided a case project to see how the groups would concretely start these three processes with a startup when given the chance.

Here are the main findings from the group discussions:

1. Investing

  • Start a pilot project with the startup

  • The corporation would want at least a 10% share of the stock and they would seek a spot on the board of the startup company

  • They wouldn't seek for mastery in the company to prevent any negative changes in the entrepreneurs' motivation

  • No integration operations (Although one should remember that when investing or acquiring a startup you're buying more than a product, you should be buying talent. In order to keep this talent and the money that they're making you should consider integrating the talent into your operations one way or another. If you don't, you'll probably end up being sorry because they will come up with an even better idea.)

  • Consider a co-opetition model, where a competitor can invest in the startup as well - disrupting and industry is easier to achieve this way

  • If part of the corporation's operations, exclusivity and distribution is something to be negotiated


2. Partnership

  • Allowing entrepreneurs to maintain ownership & increase valuation

  • Keeping incentives for entrepreneurs

  • Enable flexibly tailored win win situations

  • Enable autonomy & flexibility while arranging some targeted funding

  • Influence on focus of start up team to ensure match of offering

  • Footprint of big corporation providing potential route to market for start up

  • Risk sharing for both parties

  • Adds speed & agility for big corporation

  • Both parties need to benefit from the relationship for it to be sustainable, might mean something else than just a direct cash flow

  • Both parties need to openly share and discuss their goals for the partnership

  • Difficulties, challenges and delicate issues need to be discussed too

  • Agreement on a time horizon for goals and what happens when and if they're reached


3. Acquisition

  • Acquisition could function as a growing pad for a new type of business activity or even  launch disruptive technologies

  • The acquisition could be done in three stages:

  1. Acquiring ownership and investing

  2. Convertible bonds

  3. 100% ownership

  • In the beginning the startup would function as an independent company and later on as an independent business department

  • A corporate integration team would start managing the acquisition process from the beginning to ensure an effortless integration and provide the resources needed for planning a shared business plan.