500 Startups, one of the world’s leading startup accelerators, recently released a report on how large companies can best work with startups. Given their unique position in the market, 500 Startups surveyed executives at companies like General Motors, Simon Ventures, Embraer, and more to learn what they’re doing to drive collaboration with startups.
The 500 Startups Corporate report has tons of useful takeaways for both startups and corporate innovation teams. Here are their best practices for corporate innovation teams and my take below:
Build credibility by solving the short term problems of your stakeholders. As a result, your stakeholders listen when you later approach them with disruptive ideas.
This is true for life, not just for startups and corporate innovation teams. Think about it this way: when you approach someone with a “disruptive” idea, it is by definition, disruptive. You’re disturbing their system, their process, and their way of doing things. If you ask someone to change everything they’re doing, with no track record of prior success, that’s a tough sell. But if you’re consistently able to deliver results, you’ll have the capital to make a big ask.
Take a portfolio approach and derisk your innovation efforts by running many startup experiments.
While this takeaway is spot on for large companies, the idea of experimentation is still catching on in the corporate world. You’ll hear many CEOs espousing their belief in experimentation but it’s a bit more difficult to get internal teams comfortable with the idea that a relatively large percentage of their experiments will not succeed. This problem is compounded by the fact that although the CEO may be judged on the overall innovation portfolio, individual employees are judged on the results of their individual projects.
For startups, understand that at the highest level within large companies, your deal is part of a larger portfolio. The key to moving things forward is understanding the people you’re working with and specifically, how you can help them do their job better.
Set specific innovation objectives that guide the kinds of startups you look for and how you work with them.
I completely agree with this takeaway. “Innovation” is a buzzword that means different things to different people. Without setting guardrails to guide corporate innovation work, companies will find yourself running in a million different directions. The key is figuring out where startups can best help the organization – whether that’s in the R&D process, reaching new customers, streamlining operations, helping to enter new markets, or something else. Once the guardrails are set-up, it becomes a lot easier to make progress. Without guardrails, I’ve seen too many companies get caught up in “what-if land” and the optionality trap.
Likewise, when startups connect with corporate innovation folks, they should make sure to understand what the group is tasked with. This will guide the conversation and help ensure that both sides are aligned before spending too much time discussing a potential collaboration.
Remove the red tape and create a fast-track process for working with startups.
This is another takeaway that I wholeheartedly agree with. Large companies have procedures in legal, finance, procurement, and other departments that are meant for the typical vendors they work with. Typical vendors are usually midsize or large companies, not startups. Something that large companies often forget is that every time they ask a startup to have a legal conversation, the startup is often paying out of pocket for the lawyer’s time. These costs add up and become especially significant when working with super early stage startups with limited financing. Not being cognizant of this issue is an easy way to start a partnership off on a sour note.
Understand that partnerships are a two way street and figure out how to add value to your startup partners.
In my opinion, this is the most important takeaway in the entire 500 Startups Corporate report. Too often in this startup-corporate hybrid world, there’s little empathy for what the other side is going through. Big company people have trouble putting themselves in the shoes of a startup founder, who is simultaneously trying to raise a round, build product, sign customers, and recruit new employees – all on a limited budget. Likewise, startup founders often have little understanding for the challenges their corporate counterparts face – like dealing with strategy, competing priorities, corporate politics, and performance reviews. A little empathy on both sides will go a long way to improving startup-corporate interactions.