Corporate Startup Engagement (CSE) is certainly a trend. We found out that more than half of all corporates in the Austrian Traded Index (ATX) are already collaborating in some form with startups (see Venionaire Survey on Corporate Startup Engagement, 2017). We see many new startup challenges emerging in all kinds of industries, calling for promising ideas, services or products. The goal is always to attract the best startups with a specific profile. The awards are ranging from simple publicity over close collaboration to direct investments. However, the underlying objectives of corporates are very different and should be taken into account when implementing a CSE strategy.
In this rather comprehensive article, we want to share our experience on how to find the right startup engagement models, which do fit your corporate objectives and match with available resources. This is based on our theoretical models as well as our practical experience as co-founders of “Innovation to Company”, which is Europe’s biggest Startup Challenge, helping startups to accelerate their business. Once a specific CSE program (note: most corporates use more than one channel to strategically interact with startups) has been selected and is about to become implemented, it’s important to design an offer which is likely to attract the right amount and quality of startups to work with.
- Values Matter
- Define Clear Objectives
- Holistic Landscape of Corporate Venturing
- Types of Startup Engagement Programs
- Starting an Accelerator Program
- Example: The Startup Challenge “Innovation to Company”
The most successful startup programs in Europe have a clear set of principles. We believe at least five key values should be applied to every startup program:
- Think ‘Founders First’ – It’s very important to understand founders needs and foster their international development, instead of soaking them up as a strategic corporate.
- Be transparent – Put all cards on the table, make motivations and goals of the corporate completely transparent.
- Have a coaching mentality – Facilitate business relations and be open to learn every day.
- Results matter – Efforts are nice, but what matters is a true business outcome.
- Keep things fun – Take your work seriously, but be not afraid to have fun and encourage founders to be themselves.
Define Clear Objectives
Objectives behind startup challenges and any other startup program (e.g. open innovation, partnerships, preferred offerings, etc.), incubators, accelerators or corporate venture funds are very different. However, we wouldn’t recommend corporates to start such a program just for the sake of a good public image. Young entrepreneurs are normally well connected and word of mouth will run fast among them. In our daily work with corporates, we spent a lot of effort to carve out the motives and goals for launching a startup program. This is necessary, as the objectives are determining how and what kind of program is the best fitting one as we are going to explain below.
Holistic Landscape of Corporate Venturing
Every Corporate Startup Engagement initiative starts with its goals. In general, there are 4 major arguments for corporate startup engagement:
- Better access to new, innovative ideas
- Possibilities for testing new products
- Lowering the costs of innovation
- Reducing the risk of innovation
We usually start with the big picture of a holistic CSE landscape and challenge our clients which approaches they already have in place or where they have had specific learnings in the past. The graphic above illustrates the arguments for corporate startup engagement combined with the possible directions of single solutions. However, as they closely play together, most of the time it is hard to argue that a standalone solution will deliver all needs for all business units and strategic goals of the corporate. Therefore, most corporates implement a set of programs in order to cover all aspects. If corporate startup engagement is set up right, most startups will probably move within the holistic CSE landscape (hopping from one program to another). Over time, some programs will fit best at first and others will become more important as the positioning and development of a startup or the underlying market change.
Agreeing on a valuation is one of the most critical point for a good corporate startup relation. We developed a startup valuation tool to help with that.
It is important, that corporates examine different startup engagement possibilities in regard to their objectives. The following figure shows how you can cluster specific programs into different strategic approaches for corporate innovation.
If you look at the different corporate startup engagement possibilities from the corporate objectives point of view, you can cluster specific programs into different strategic approaches as shown in Figure 2. You need different solutions, whether a corporation has a stronger emphasis on strategic or financial goals. However, the boundaries among the forms of engagement can be clearly set in theory, but in reality, they will often overlap. As conditions tend to change quickly in the startup world, the holistic approach to corporate startup engagement is a recipe for successful adjustments to the newly established conditions. This framework provides necessary agility for quick and efficient shifts.
We are always focused on a user-centric development when working with startups and also apply this approach to fine-tune specific solutions within a CSE Framework of a corporate. Venionaire’s CSE-Spider-Function (Figure 3), was developed to define strategic and operational dimensions and available resources.
We have identified strategic and operational dimensions which must be understood in relation to each other. The CSE spider function can visualize potential conflicting objectives. An obvious but recurring standard problem could be, that a corporate is not willing to invest enough financial and human resources (implementation effort) to a certain program, which naturally will not enable this program to deliver the strategic goals set by management. Visualizing this conflict enables a more transparent discussion and will eventually help you to get faster to a sound solution.