By Menno van Dijk and Sander van der Blonk
Cooperation between large corporates and young innovative ventures can have many flavors. These range from R&D collaboration, to opportunities for leveraging the corporate’s brand and customer base to find initial users. It can also be about strategic investments. The one thing in common is that cooperation between large/institutional and small/opportunistic invariably difficult and often frustrating. Focusing on making the collaboration work before jumping right into the product might feel like slowing things down, but in the long-run makes the entire collaboration more likely to succeed.
For a cooperation to work between a large corporate and a small scaling venture requires a lot, including shared purpose, people/principles fit, and a trust-building process.
When two parties collaborate without a shared purpose, a divorce looms ahead. In the case of a VCs exiting their ownership in a venture and a corporate entering – where does the management’s interest lie? Are they waiting until the end of their lock-up, or do they face a future as employees within a larger entity? When a start-up and a corporate collaborate on R&D, is the goal to quickly reap benefits and then act independently, or is it to build a long-term partnership? When a scale-up develops a corporate as a launch customer, will they give exclusivity or will the corporate’s competitors also be served? The first thing to establish a common purpose in terms of intent, targets, and time horizon. This requires scale-ups to think much more strategically.
Collaboration is between people, not companies, who genuinely enjoy working with each other. This is often based on shared principles, common culture and having the same style and background. In practice, the management of a young, innovative enterprise is often younger, opportunistic, and independent; it is also less formal, less reliable, and less experienced. It requires careful casting from the side of the corporate to create a good match. It also requires the large corporate to understand that a start-up can often not navigate the complex organization to get all the buy-in that is generally required to make an initiative work – they often do not have the resources to do so. The corporate needs to have an internal champion to do this for the scale-up. They also need to understand that timelines matter more to a scale-up – a nine-month delay can be nothing for a corporate, but can bankrupt a younger, smaller venture.
Trust building process
Trust comes by foot and leaves on horseback. This quote about trust is attributed to Johan Thorbecke, the Dutch politician who was responsible for the first constitution in the Netherlands in 1848. Trust does not happen over one dinner: it solidifies over a series of interactions of working together, making promises and delivering on these. This is the trust building process. In this respect, the “fake it until you make it” mentality of some young ventures is counterproductive. The “let’s straightjacket them” approach of some corporates is equally ineffective.
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So, where does this leave us? As usual, the soft stuff is the hard stuff. This should raise the awareness of the start-up/scale-up to think before acting. Collaborate only with corporates you admire. On the other end, corporates, with their deeper and more sophisticated competency in collaboration processes, they can take the lead to ensure it works. If the mountain does not come to Mohammed, Mohammed must go to the mountain. And in this case, the mountain, surprisingly is the start-up/scale-up, and Mohammed the corporate.
ScaleUpNation, Rockstart, and Scoutely will be hosting an event to explore these insights with corporates and start-ups/scale-ups. Interested in an invitation? Please learn more here.