Why corporate-startup collaboration could be just the cure for London’s business ails
London is an obvious home for many companies, big and small, benefitting from high standards of corporate governance, investor confidence and pro-business regulations.
Vast numbers of established corporates pick London as their European headquarters because of its ease of doing business, market opportunity and access to skilled labour from the capital’s many leading universities. In 2015, London also topped Nesta’s list of the best EU cities for digital entrepreneurs, beating its competitors on the grounds of better access to capital, entrepreneurial culture, knowledge spill overs, and market size.
But with a ‘hard Brexit’ looming, market uncertainty has left corporates fearful that they could lose access to a common marketplace of nearly 500 million customers, while start-ups now worry about attracting future growth capital, among other issues.
Given current conditions and shared business concerns, collaboration between corporates and start-ups should be an obvious coping mechanism. One that can continue to drive business innovation and economic growth. Moreover, the referendum outcome will inevitably mean change, and change often means opportunity for those who have both – the entrepreneurial resolve and the nimbleness to react.
There are three key benefits of collaboration for big business:
- The first is solving business-specific problems quicker or at lower risk than a corporate might do otherwise by co-developing products with, or procuring services from, start-ups. Car manufacturer BMW’s Startup Garage, for example, offers a no-strings attached, co-development partnership, as well as a network of top automotive engineers and managers to selected start-ups like Moovit, which has gone on to develop a global transit and navigation app now integrated into many of BMW’s vehicles.
- Second, large firms looking to innovate their brands, including attracting new customers, partners and talent, while also perhaps trying to rejuvenate a lagging corporate culture, now have a number of attractive options. For instance, to reinvigorate corporate culture and bringing on board potential new talent with an entrepreneurial mindset, professional services company Accenture host enthusiastic young programmers at hackathon competitions. They provide 15 start-ups with 30 desks over three months at the organisation’s Fintech Innovation Lab accelerator, along with mentorship from senior in-house executives and banking professionals in order to take advantage of ‘innovation by osmosis’.
- Finally, bullish companies may want to expand into future markets by accessing new capabilities or new channels which are usually executed through spending corporate venture capital and/or via mergers and acquisitions. Global telecom provider Orange, for example, supports start-ups in over seven countries and four continents to access their distribution channels, markets and executive expertise via Orange Digital Ventures, which invests and acquires in the technology, telecom and fintech sectors.
More corporates than ever are choosing to collaborate with early stage businesses as part of their innovation strategy because they realise that their own inner working makes internal innovation difficult. These success stories notwithstanding, Nesta’s research has uncovered significant barriers to corporate-start-up collaboration stemming from their obvious differences in terms of size, speed and culture.
The reality is that successful collaboration is difficult.
In order to be a successful venture for both parties, it is critical that corporates secure senior support, monitor progress and seek to simplify processes for start-ups. Start-ups can also improve in a number of areas. These include brushing up on corporates’ news and moves in order to understand the real goals and pain points of the organisation, and how the start-up’s offer may fit with these – rather than presuming that novel technology will sell itself. Using plain talk instead of industry jargon helps. Over-promising can also come back to haunt many.
It also serves start-ups to remember not to put all their eggs in one basket: too many small firms pin their hopes on a single deal. But by the same token, spreading oneself too thinly by pursuing every opportunity on offer will dilute and weaken performance. Be strategic in your choices and know when to cut your losses and move on to the next project.
No early stage company has it easy when setting out on its entrepreneurial journey, but the prospect of a new relationship with the EU stands to make the road to sustainable growth that bit more complex to navigate. The ushering in of new and improved working relationships between corporates and start-ups might just mean that the dark cloud of Brexit has a silver lining.
Nesta is the UK’s innovation foundation. You can read more about Nesta’s work on corporate-start-up collaboration at www.nesta.org.uk/corpsandstartups
You can search the European Digital City Index at www.digitalcityindex.eu