Big corporate are seen investing in startups in many areas lately. In fact many platforms help innovative startups and Angel investors to connect in their local ecosystems and that paves way to create investable companies that VC firms can start funding and help to create viable businesses. But there is a gap in the size of deals yet to get the market attention. This is where the large corporates come in to fill the gap- because at this stage, the startups have validated their business models and tend to have a decent management team. By tapping into the resources and infrastructure of these corporations startups can grow and scale their products much faster and efficiently.
But the belief in the tech world is that corporations and startups cannot form a mutually beneficial relationship without one ultimately buying out the other. Here the matter of startups losing their identity is of primacy concern and that’s the main reason for reluctance to such partnerships. It is also because startups feel like they are “selling out” by teaming up with bigger companies, and corporations mostly feel wary of startup culture not living with company ethos.
There are numerous reasons for the startups to actually forgo their fear of acquisition – if that indeed exists – and look at the brighter side from such collaborations. To start with, a corporation typically has plenty of capital; it provides access to needed resources, as well as branding and PR expertise that does not come at an additional cost. At the same time, visibility and credibility are increased, which usually takes years for a startup to build effectively.
But how can a corporation benefit from a partnership with a budding startup?
The question is: What can an already established corporation, one with the existing capabilities and resources to develop their technology needs, gain from opening the communication line and forming a partnership with a startup?
Considering the strength of startups, what stands out is their innovative skills which are lacking in large corporate whereas they are good at execution, which happens to be the weakness in startups. It is a time the two embrace each other by leveraging the strength and the need for collaboration has never been greater than it is today.
Most of the large companies take a long time for decisions. Between conference calls, rounds of approvals, and the view points and weigh-in different people with different goals and agendas etc. But if the corporation can nab up the group of risk-taking innovators and let them hit the ground running with the project, since they don’t usually go through extensive protocol to get the ball rolling they get moving quickly, take risks, experiment and get the job done for the corporation more faster.
Also, the alpha product made by the startups does not risk the corporation’s financial security either. They haven’t had to implement a new department, acquire new resources, or onboard any new employees since they all already exist in the corporation.
Such a partnership gives freedom to both parties. Corporations have the freedom to pursue their market opportunities quickly, and startups have the freedom to execute on innovative ideas with endless resources. It just doesn’t stop with the product itself, larger companies benefit culturally from bringing a startup in the mix with fresh ideas being stirred up, perspectives are shifted, and innovation abounds.
What we see here is the technologies developed rapidly by startups are relatively inexpensive. And with the large distribution channels of the corporations and the lookout for innovative technologies to enhance their business quickly without adding to their overheads is fulfilled here. As partnerships between big companies and startups bud, the opportunity for acquisition can make sense for both sides. Combining the deft and nimbleness of startups with the resources and distribution channels of large companies can lead to profitable partnerships.
And that is the truly incredible aspect of the changing business model in today’s information technology arena…..!!