Corporation-Startup Collaboration: Barriers and solutions (part 8.)

After the corporation and the startup have established a relationship, mutual trust and both parties are interested and willing to move forward, the collaboration moves to a deeper level. This phase, where the relationship is implemented and concretized, is a more formal stage that requires various internal, legal and technical assessments. The main goals of this phase are to discuss terms and conditions of the collaboration and to build a contract.

Implementing the relationship is often a lot of work for startups, especially since their working culture is some what leaner and faster compared to that of a corporation's. The slowness of this process on the corporate side, concluding agreements and assessments and going through all the details regarding IPs and liabilities, can create some hick-ups for the collaboration.

The assessment processes of startups, called for by corporations, may require the startup to produce vast documentation that is still inexistent, in order to pass all the financial and legal appraisals. These processes are time consuming for the corporate as well, because they have to review the provided information and evaluate the company's liabilities and assets to be able to give the final go ahead for the collaboration.

At this stage it is not unlikely for the other party, usually the corporate side, to ask for a non disclosure agreement - this can sometimes create additional speed bumps. NDAs consume a lot of legal resources that startups may not have. In the worst case scenario, the startup is spending scarce resources even before the collaboration is officially agreed upon. On the other hand, some large companies can be reluctant to sign NDAs if they already possess much intellectual property in that specific area, because it can be very arduous to go through every detail to avoid any conflicts of interest and risks of being sued.

Intellectual properties then, can be a bit of a pain without an agreement and issues regarding intellectual property can make it very hard to continue collaborating. Often a whole bunch of other issues like contract development, indemnities, warranties, exclusivities and publishing, are attached to negotiations on IP issues. At this stage it is key for the startup to know when they should seek for legal advice.

Often startups are worried that the large corporation is going to steal their IP, because the startup lacks understanding of all the legal procedures. The reality however is that whilst startups in many cases have intangible assets and it's reasonable to be protective of them, instances where the corporate partners mislead the startup are very, very rare. It is a lot more common that the implementing of the relationship falls apart due to the lack of disclosure. In the case of any dispute the likelihood of working through it increases, when the relationship is already based on mutual trust. With broader contractual issues, it is important to know when to seek legal help. Unfortunately this is a stage where many cash-starved startups are tempted to cut back on.

Understandably, it is not the corporation's responsibility to offer advice to startups making sure they know what they're getting into, but encouraging startups to seek independent legal advice is in the long term in the interest of both parties. Seeking peer-support from other startups and asking for advice can help simplify the whole process and reduce legal costs.

It's important to carefully consider the ownership of the IP and the rights to use it, because it can confer a competitive advantage. If the result of the collaboration is the creation of a product with unique characteristics that's very attractive to customers, ownership of the IP or the exclusive right to use it, provides protection for the investment made. It can also be useful for the startup to look up model agreements or ask advice from other startups. For example, agreements where funds are released in stages, are very popular among investors as a way of managing risk and speeding the decision-making but can in fact be very damaging to startups on the grounds that it restricts the startups' freedom to pivot and experiment, focusing the attention on short term goals.