Better Together: Making Magic Between Big Companies and Startups

Why should big companies and startups collaborate?

When rising startups and big companies combine resources, they can experience the best of both worlds — in terms of innovation and clout. This helps complement each other’s strengths and weaknesses.

Here are some enterprise strengths and weaknesses:

• Enterprise strengths:Large companies boast immense firepower in terms of clout, brand recognition, brand reputation, resources and funding access. They have the financial resources to fund projects, staff and infrastructure to scale if required. Enterprises also have extensive industry connections and experience that can help startups leap regulatory hurdles on the path to growth.
• Enterprise weaknesses: Many large organizations struggle with innovation, associating it with bottlenecks, uncertainty and shifts in market perception. They may be reluctant to pivot away from core products and services. Additionally, their accounting and finance teams are likely numbers-driven and reluctant to invest in unproven ventures without clear ROI validation and other metrics. And, while innovation is key to industry survival, approval processes can be slow and mired in red tape.

Paul Robson, a serial entrepreneur, investor and business consultant, says enterprises have much to gain from a startup’s fresh, innovative perspective and approach. “Startups are inherently more nimble, so they’re faster and more efficient at improving existing products or services,” Robson explained. “They often spot pain points corporations take longer to spot and can create a new product or service to address them.”

In contrast to the enterprise experience, startups typically bring the following strengths and weaknesses to the table:

• Startup strengths:New businesses are often full of cutting-edge talent and best-of-breed expertise. Workplaces tend to be agile, with less bureaucracy and faster time-to-market than their corporate counterparts. Their goal-oriented innovation pace is usually unencumbered by red tape.
• Startup weaknesses:Understandably, startups are often focused on the challenges of starting a business. They’re seeking credibility in their industries as they work to increase cash flow. Their financial, marketing and administrative resources are often stretched thin.

When they form partnerships, Robson says, big companies can benefit from giving startup partners a direct line to the boardroom. “[Great] ideas within big companies often get bogged down in corporate bureaucracy,” Robson explained. “They have to filter up sometimes through multiple layers of management, and they may end up being diluted or discarded before they reach the CEO.”

However, a startup partner with a fresh perspective often has a direct line to the top. “If [an enterprise’s] startup partner has a great idea and shares it directly with the CEO, it’s more likely to be acted upon quickly and decisively,” Robson noted.

How can big companies and startups collaborate?

When on the lookout for collaborative relationships, startups and enterprises should consider attending industry events. This can include conferences, hackathons, or competitions centered on a particular solution or market theme. Both sides can use these events to identify companies that share their philosophies and passion for ideas, innovation and partnership.

After forming a startup-enterprise partnership, the entities must spend quality time together — far beyond emails and phone calls; this will help establish a trusting, genuine partnership. Consider the following ways to collaborate and strengthen the relationship:

• Get involved in local communities:Stepping into local technology and innovation communities will keep everyone up to speed on necessary processes and protocols while uncovering new ways to solve business problems.
• Work together to meet potential customers: Small and large companies can join together to offer challenges, events and opportunities to meet potential customers.
• Establish innovation accelerators:The larger company might consider establishing or engaging with innovation accelerators to give their startup partners access to additional expertise and allow them to further their solutions.
• Establish clear communication channels:Both sides must emphasize open, two-way communication throughout the partnership — both externally and internally. Big companies don’t want to appear foreboding, and startups want to be heard. Success happens when both sides are open and respectful in their interactions.
• Create mentorship opportunities: Katie Manasse stresses that mentorships are a particularly effective way to share knowledge, create feedback loops and advance shared projects. Mentorships are particularly vital for startup CEOs, helping them learn how to weather challenging stretches and manage growth. “They get a crash course into corporate governance, managing shareholder expectations, mergers and acquisitions, dealing with regulators at a high level, and seeking out more complex commercial financing models,” said Manasse, director and executive coach at Sea and Sky Coaching and Consulting. “It’s also a great introduction into aspects of leadership they may need to rely on later in their own company’s growth story.”

Startup-enterprise partnerships can be game-changing. “Startups and big companies have a lot to bring each other,” Manasse emphasized.

What are the challenges of startup-enterprise collaboration?

Startups aren’t strangers to collaboration. They collaborate with business investors, customers, contractors and more to ensure operations run smoothly. Similarly, enterprises collaborate internally and externally to fuel business growth.

However, startup-enterprise collaboration isn’t always smooth sailing. Here are a few common challenges these partnerships face.

• Startups are protective of their ideas. Smaller companies sometimes fear that an enterprise partner is out to steal their intellectual property. They are reluctant to share innovations, even if their collaborator has the resources to help them succeed. In reality, big companies are likely not interested in stealinga new idea. Corporations tend to put their muscle behind 
  
• Startups fear being taken advantage of.Small business owners may be reluctant to be transparent with their big business partners. This reticence can make it challenging for the enterprise to accurately assess a product or service’s viability. When a startup holds its cards too close to its chest, it becomes harder for larger corporations to determine whether or not the startup is the right investment fit.
• Enterprises may be wary of a startup’s lack of experience. Startups obviously have little in the way of a track record. This lack of experience and credibility makes the enterprise-startup partnership a risky proposition.

These barriers — some real, some based on misperceptions and fears — have kept too many potential partnerships at bay. To forge a successful collaboration, both sides must take the risk and dive into the relationship — trusting that the other party is working toward a mutually beneficial goal.

What are examples of big companies and startups collaborating?

Here are a few real-world examples of startup and enterprise partnerships.

Cisco and smart-FOA

Cisco partnered with the Japanese Internet of Things (IoT) firm smart-FOA. Both parties recognized that the partnership’s value far outweighed the risks. smart-FOA, which stands for Flow Oriented Approach software, provides an information-sharing platform that can resolve problems and enable real-time decision-making. Because Japan is known for its ability to use data from manufacturing plants, FOA was a natural evolution.

Cisco knew investing in smart-FOA would generate new value by bringing together goods, people, processes and data while significantly expanding Japan’s IoT solutions across global markets. However, to unearth this value, Cisco had to maintain open lines of clear communication, exhibit mutual respect and trust, and relish the quick and nimble pace of innovation that comes almost naturally to a startup.

Pfizer and BioNTech

During the COVID-19 pandemic, there was a mad rush to find a vaccine that would reduce the virus’s impact. In response, Pfizer collaborated with BioNTech to create a vaccine capable of fighting the highly contagious Delta variant.

This partnership actually started in 2018 when Pfizer wanted to access BioNTech’s research and development regarding mRNA flu-fighting vaccines. BioNTech had the technical knowledge, while Pfizer brought its experience in development and vaccine rollouts to make the partnership successful.

Toyota and Aurora

Toyota partnered with Aurora to delve into the self-driving car market. The two partnered with a third company, parts supplier Denso, to create a robotaxi. It hit the roads in 2021. This collaboration has led to a more extensive partnership; Toyota has tapped Aurora to help automate Toyota’s fleet of consumer vehicles, starting with the Sienna minivan.

In this partnership, Toyota gets the innovation to add amazing new technology to its vehicles. Aurora, in turn, gets to tap into the largest vehicle manufacturer to grow its business.

Taking the next step in your business’s evolution

Every relationship requires compromise, communication and a little faith. In the business realm, these elements form the basis for a trusting, mutually beneficial partnership in which each side gains confidence by investing in the other. The result is faster innovation, greater market share and, ideally, the ability to create magic together for many years to come.

Alex Goryachev contributed to this article.