More and more Venture Client models are emerging in the field of Open Innovation.
According to a study by Capgemini and MIT, by 2025 startups and innovation labs will be the top sources of innovation for corporates, overtaking R&D and internal business units.
We spoke to Ilan Misano, Program Manager at the Google Startup Growth Lab in Israel, and Michael Wlaschitz, Manager and Head of Venture Design at Pioneers, about the challenges of startup-corporate collaborations, the advantages and how to incorporate them within a successful innovation strategy.
Right from the start, CRIF InnovEcos has been connecting startups, colleagues and clients to foster innovation and growth. Within our Venture Client Lab, we accelerate collaboration between CRIF and startups and scaleups through the continuous development of POCs, optimizing our products and resulting in a better offering for internal and external clients. “The Venture Client program we started in 2020 is constantly teaching us about different dynamics, speed and approaches to testing. Via learning, experimentation and pilot project, InnovEcos has gained expertise and knowledge on how to adopt, successfully maintain and scale the Venture Client approach through partnership models within a global organization,” explained Natalia Shchelovanova, Global Open Innovation and InnovEcos Lead at CRIF.
If you are a startup wanting to make a difference or a company interested in leveraging open innovation experimentation, get in contact with us.
Has the number of collaborations between corporates and startups increased or decreased over the last few years? What are the main reasons for this in your opinion?
One of the biggest challenges for startups is to gain credibility and trust - this is crucial to hiring better talent, getting more customers and obtaining investments. Partnerships with corporations are a great way of achieving this.
For early-stage startups there is an even bigger need - finding the right product-market fit, or even before this, getting help in developing a product. A design partnership with a corporate can take startups from 0 to 100 really quickly.
It’s hard to find specific data about how common this phenomenon is, but one of the metrics that can help is looking at by how much corporate investments in startups are increasing. This is because corporates know their needs, and usually don’t invest out of their comfort zone. The question is, how do they do this? They love ‘playing’ with technology before buying-in (in other words, forming partnerships!), and their investments are often aimed at solving a pain they know exists and are affected by.
Corporate investments in startups are growing fast, and you can read more about it here.
In my view, the average number of new collaborations per corporate has decreased. This is because many companies are more strategic about entering into collaborations today than 5 years ago.
Due to negative experiences from initial less coordinated collaboration attempts, corporates today are very selective and take several measures to evaluate the startup’s fit with the company’s strategy and needs. While they would have entered into talks with any interesting startup some years ago, today corporates do their internal homework first. They define strategic innovation goals and clear use cases before engaging in a targeted search and partnership talks.
In your experience, what are the most common challenges that derail the success of these partnerships?
In the majority of cases, when entering into a partnership with a corporate, you’ll probably have to deal with different stakeholders - in particular, some high-ranking decision maker is going to formally accept the agreement, but you’re going to speak on a frequent basis with B-level managers. It’s crucial that all those involved are kept in the loop and feel involved in the partnership, according to their own responsibilities and KPIs.
If you manage to get a partnership agreement because you’re friends with a C-level executive, but then the B-level managers collaborating with you don’t understand how working with you will be beneficial to them in the long term, you’re going to find resistance, which can mean that your partnership is not as useful as it could be.
If the request for your product/partnership arises from your relationship with a B-level manager, that’s great! However, you'll have to invest your time and effort into explaining to C-level executives how you can help their KPIs and the business on a higher level.
I still see a sort of “arrogance” of many corporate employees towards early-stage startups, treating them as supplicants in collaborations or potential “IP Thieves” rather than eye-level partners. With this “the startup needs us” mindset, comes a variety of challenges:
- Corporates don’t adapt their processes and working style to the speed of startups, which leads to protracted legal processes and waiting times for pilot projects.
- Corporates refrain from transparently sharing and communicating their internal decision status, business unit needs and measures to onboard key internal stakeholders making it tough for startups to navigate the company.
- Startups are not provided with direct access to the corporate resources and experts needed to successfully deliver pilots.
Which metrics would you suggest a startup adopt to evaluate any potential collaboration?
It really depends on what you’re offering and how the partnership is structured. In general, it’s important to set some OKRs (Objective and Key Results) which are common and shared between the startup and the corporation, and define in general the success or failure of the partnership itself. Besides this, you can set some internal OKRs to evaluate the collaboration - if your current objective is maximizing revenue, you can set as a Key Result a target revenue you aim to reach by selling to that corporate after (or during) the partnership. You can get creative here.
I would adopt hard and soft KPIs. Possible hard KPIs could be the number of started vs. successful pilots, customer satisfaction and feedback from pilot projects or the potential revenue generated from long-term collaborations. The last one in particular can be done through simple business case calculations performed together with the startup. Soft KPIs include the engagement of top management, the collaborative mindset of key stakeholders or the attendance of stakeholders at meetings with startups. These show if internal stakeholders take startup collaboration seriously or need to be further onboarded to ensure the success of collaborations.
What is your advice for startups/corporates to make the most out of these collaborations?
Make sure you understand in detail what influences the decision of the corporate to continue collaborating with you - at the end of the day, that’s what you want. A small collaboration can lead to a partnership, a bigger deal, an investment or an acqui-hire, for instance. The reasons may vary considerably: from revenue to company reputation, to the willingness of specific functions to market themselves internally, or maybe a specific feature of your product. In this last case, do your best to understand if and how your offering can be improved.
In my view, startup collaboration can serve several strategic purposes. As Pioneers, we always start innovation projects by defining the key areas or fields in which a company aims to innovate. Startup collaborations play a particularly important role in two types of areas:
- In new innovation areas where there is no real market or solutions yet. Working jointly with startups can give a corporate the edge over the competition and lead to a faster speed-to-market.
- In market areas or technology fields which are already far developed but in which the company has no know-how yet (e.g., Artificial Intelligence). Here, collaboration with startups can strongly increase the company’s learning curve and faster adoption of existing technologies into their own portfolio.
Thank you, Ilan and Michael, for this amazing interview. Until the next time.
ABOUT THE AUTHORS
InnovEcos is CRIF's Global Open Innovation Hub. Our mission is to guide the discovery of future business models and technological trends to innovate services, products and processes through research, experimentation and collaboration with startups. Since its launch in 2020, we have scouted +610 startups and run +18 PoCs and +7 pilots through our Venture Client Lab.
ABOUT ILAN MISANO
Ilan Misano is the Program Manager of Startup Growth Lab, Google Israel’s startup accelerator. Startup Growth Lab accelerates 8-10 Israeli startups every six months through a 4-month program, and it has just launched its 6th batch. The Startup Growth Lab framework was established by Google Israel and has now been adopted by Google in 16 countries.
In addition, Ilan works as a Technology and Innovation Transfer consultant, liaising between the Israeli and European startup ecosystems, especially in the MedTech field.
ABOUT MICHAEL WLASCHITZ
Michael Wlaschitz is the Manager and Head of Venture Design at Pioneers (pioneers.io), a strategic corporate venture builder based in Vienna. He oversees corporate innovation projects with the goal of developing early-stage business ideas into solutions that have an impact on people, the planet and company profits. Throughout these journeys, collaboration with external startups often plays a role in increasing speed-to-market or integrating existing technologies into the solution.
In the last 5 years, he has guided +20 corporates in developing and validating innovative ideas and identified +100 potential startup partners.
() Capgemini, MIT Digital, MIT Invent Report, 05/12/2022