When startups say strategic fit
Startups overwhelmingly expressed a desire to work with corporates in our survey. Some startups think that instead of trying to disrupt a whole industry, working with incumbents could help them gain access to markets faster than doing it by themselves, or learning from them could help lead to greater success, and mutual benefit, for both. Its also not just for an eventual acquisition – they are looking to build value in the short-term.
But not all startups are the same, so strategic fit can have a huge variety of meanings. B2B versus B2C companies, or startups at different lifecycle stages, have different needs. But through the research and our work with startups, we grouped their ideas of how corporates can be a strategic partner into three main groups.
Corporates as customers: B2B startups tend to see corporates as potential customers. However, it can be much more than just money in the bank. Many are looking to tailor their products to potential customers to make sure their needs are met. This can work really well for a corporate who is willing to put in the time to give feedback and work on co-development. Its an easy way for corporates to get exactly what they need, without a huge budget being spent on specially designed software, and to be able to feed into what could be new industry standards.
Corporates as marketing channels: In contrast to the above, B2C startups tend to see corporations as established marketing channels for gaining presence in new markets. Corporates have huge marketing teams, networks, and established brands that startups know they either cant compete with, or would find it more difficult than to just work with a corporate for a win-win. Opening up marketing and distribution channels to startups can be an easy way for a corporate to launch a new innovative product or offering with very little cost, while at the same time being a huge help to a startup who has the offering but no way yet to sell it. These relationships can be structured in a variety of ways: licensing, co-branding, investment, or partnership agreements.
Corporates as strategic partners: Strategic partnerships, mentioned as important by 65% of startup respondents. This can be anything from co-development of a product to leveraging established distribution channels in new markets. According to MassChallenge alum Sandro Kunz, CEO at startup Pingen GmbH: A strategic partnership is where you as a startup can leverage resources from the corporation, like having access to their marketing, research, and managers who can support you. For this reason, the best startups also tend to concentrate time and attention on corporations where the human intangibles line up well. As CEO Moshe Shlisel at GuardKnox Cyber, another startup, explained, Its very important…to pick your partners based on product fit, company, and culture.
Corporate takeaway: Strategic fit should work for both parties. Startups are looking to build value in the short-term and find creative ways to cut costs and reach consumers. The best corporate partners will help them to achieve those goals, while at the same time gaining access to innovation they would not have had otherwise. Startups value time the most, and is one of the biggest challenges for corporates, so be open to new approaches and try to make the process as quick as possible.
To learn more, download our report on startup/corporate collaboration.