The most important issue to focus on when corporates and startups interact is goal alignment. Too often, the fact that goals are not aligned can be discovered far too late.
Startups are usually looking for capital, distribution, expertise and possibly additional capacity e.g. staff. Corporates may be attracted to a specific concept that they can see has identified a niche that may give them a new, high-growth service line. However, they can also be motivated by things that are far more nebulous. These include; wanting to understand how startups work, a desire to make their brand appear cooler than it really is, as an attractor and incentive for their own young talent, or perhaps, a hope that they may just latch on to the next unicorn.
While no doubt the majority of startups also aspire to become unicorns, most are not motivated by that and know how low the chances are in reality. They are passionate and focussed.
While many corporates profess to be agile and able to fail fast, it doesn’t compare with founders who aren’t drawing a salary and have their house on the line. This means there is no time for anything that is not directly aligned to their critical path. They certainly won’t want to spend time presenting internally at a corporate on startup culture, agility, innovation etc.
Clearly the easiest contribution for a corporate to make is an injection of capital. However, unless it is the final exit for the founders, this too may be difficult. Unless a corporate is a mature startup investor, which is likely to mean it has established a separate investment fund such as Westpac’s Reinventure with its own specialist team, governance and processes, it is a risky source of capital for startups.
The level of expectation and intervention are likely to be far higher than from a venture capital fund that has already applied a highly rigorous evaluation process that has rejected 99 per cent of the prospects it sees such that it trusts its investees to a higher extent than the typical, inexperienced corporate investor.
Distribution and expertise (appropriately dispensed) are the areas where the parties are most likely to find alignment. The marriage of a mature business that has a well-established customer base, brand credibility and desire to grow yet a realistic understand of its own limitations, with a high quality, innovative new offering, makes sense. Similarly, a robust dynamic between hungry founders who want to run at full throttle all the time and wise heads who have seen many cycles, successes and failures in their industry, can also be very beneficial to both sides.
Certainly, there are benefits to be gained from corporates and start-ups interacting with clearly understood, mutually aligned goals. The key is in both sides being able to understand those goals from the other party’s perspective, be ruthlessly objective in assessing them against their own goals and modus operandi and then establishing ground rules to realise those goals together.