The Catapult team is back from the summer holidays! We hope that everyone enjoyed their time off and were able to recharge their batteries. In case you have forgotten, we were in the midst of an article series focusing on the challenges and solutions of corporation-startup collaboration. We are picking up from where we left off, which was internal barriers that affect the collaboration and what are the most common challenges in initiating the collaboration. Today's article focuses on the challenges in the phase to of collaborating, the establishing of the relationship.
Establishing the Collaboration with a startup
This phase is challenged by the unclear communication and frustration caused by the poor translation of the startup's technical skills. Startup's aren't always the best at explaining why they're product is the best in the market and what the advantages and benefits are to the corporation. On the flip side, startups sometimes feel that their products or services advantages don't always translate to the corporate side.
Startups should be careful not to use too much startup jargon or put too much focus on the technical details. The corporate-side wants to know what problems the startup can solve and to fully engage the other party, the startups needs to show some promising figures as to convince their value. Scale-ups should focus on communicating where they fit in the organization and what they can offer to the corporation. Corporations on the other hand, shouldn't categorize where the startup fits too harshly. Involving startups in the process of defining the needs and finding the problems, can be very productive and bring fresh perspective and untraditional approaches that can lead to unexpected solutions.
Once the two parties find an understanding, the next step is to build mutual trust. Issues on the startup side, can surface from uncertainty about the corporation's motivation in the collaboration. Startups can be nervous about collaborating with much larger companies and are aware about the asymmetry created by the size of the companies that might set a different direction if things were not to go as planned.
From the corporation's side, trust issues often arise from hesitancy over competence, that stems from differences in professional cultures and attitudes. Differences in professional culture and attitudes can result from the more relaxed and less serious appearance and behavior of startup entrepreneurs, that can be interpreted as unprofessionalism from the corporate side.
Trust issues may also stem from the lack of information about other partnerships that each side might be looking to establish and the length of the time that it takes to come to a deal. The other party might feel like the other side isn't as committed, and this can lead to unsynchronized expectations, that results to ineffective resource allocation and possibly bad vibes. This type of situation can occur for example, if a startup turns down other opportunities because it's expecting collaboration, which doesn't end up happening after all.
Tips for corporations
• Be clear about the collaboration process, your motivation, timing and communicate expectations clearly with the startup. ''A quick no is always better than a long maybe.''
• Make sure that the team who's negotiating with the startup, has at least one member with technical understanding, so you get a better understanding on what the startup can do for the corporation and if there are other possible uses for it.
• Ask for a comprehensive one-pager that has all the relevant information about the startup business (business model, market situation and opportunities), including their value proposition before the first meeting.
• Differences in the startup culture do not necessarily indicate a lack of seriousness or professionalism.
A Closer look into the partnership types
Based on the corporation's strategic objectives, corporations can use different structures to carry out the strategic partnerships with startups. The figure above describes five different partnership types starting from the type that involves the least involvement to the type that's the most involved.
Procurement contracts are fairly transactional and require little formal integration, but have a laborious qualification and search process.
Distribution partnerships and agreements have the corporation side to distribute the startups offering. This form of a partnership is also very transactional and doesn't require a lot of integration, but do require some strategic alignment and agreement over the communications part.
License agreements, where the other partner, in most cases the corporation, licenses the startup's IP for exploitation. In this type of partnership, a bit more integration is required since the technology needs to be integrated into the other parties systems. Sometimes these license agreements involve equity or cash payments.
Co-Development agreement is a deeper form of collaboration, where both of the parties share resources in order to develop a product or a service together.
The form of partnership that requires the most involvement, are Joint Venture agreements. Joint ventures take co-development agreements to a deeper level, where sharing resources is turned into an entirely new legal entity with its own structures and processes.