There are many reasons large and established enterprises may want to work with smaller, agile technology startups. Among the potential benefits is access to innovation, the ability to try out cheaper ways of doing business and rolling out new products.
However, I've found that very few larger enterprises are set up to work with startups, and as a result, the B2B collaboration experience often becomes less than ideal for both parties. In this article, in the form of commandments of what not to do, I'd like to review some major concerns a larger enterprise should consider when working with startups.
1. Thou Shalt Not Ask For Exclusivity (Even if You Are Willing To Pay For It)
I understand it; you want to be the only one with access to a unique technology. Yet, consider for a moment what that means for the startup. An exclusive contract with your organization has the potential to become the single point of failure for the company. Startups sometimes agree to these terms, particularly if you are their early customers. But in the long run, it is your unique product rollout strategy and marketing that will help you overcome barriers to entry rather than an exclusivity clause.
2. Thou Shalt Not Take Months To Say No to a Startup
Even if you personally do not like to say no, it's always best to let the startup know early on whether they have a good chance of working with you. I had an experience recently with a pharmaceutical company that dragged my company through 18 months of meetings, hundreds of pages of document provision, and hundreds of hours of work. Each week they said they were hopeful to get a positive answer within the organization to move forward with our project.
At the end, the answer we got was that the organization was not yet ready for our solution. Don't do that to startups. They go and tell their board and their investors that they are in promising talks and spend otherwise scarce resources to keep you happy. If your organization is not ready, do your homework before engaging the startup further or making promises.
3. Thou Shalt Not Put All the Risk on the Startup.
Startups have strengths such as new solutions and technologies, but they often lack significant resources. This means if there is a collaboration, they are not likely to be able to bear 80% of the risk of the collaboration. Your organization has to have a culture that understands that the distribution of risk has to be proportional to organizational capacity.
4. Thou Shalt Not Covet a Startup's IP
You would think this would be too low for an established enterprise to do, but you'd be surprised how many organizations I've encountered in the past five years that feign interest in my company's technology and ask for due diligence documents only to try to go and recreate the intellectual property themselves.
Most often they are unable to do it as well, but this is really low for any enterprise that deems itself professional (let alone ethical). We had this issue with a major supplement company that sent our confidential papers to our competition. Luckily, the competition had the decency to tell us about it. I've also had a stealth fitness startup that after having us provide significant resources and ideas, decided to do everything in-house. This was after the C-level team had assured us they wanted a strategic partner. Counting on the fact that startups often don't have the resources to go to court for NDA and IP confidentiality violations is not a good enough reason.
5. Thou Shalt Not Set up a Corporate Accelerator in Vain
Many startups that enter into an accelerator program sponsored by a major corporation expect that upon successful completion of the program, there will be opportunities for collaboration with the enterprise. Often, however, the innovation part of the enterprise is not fully aligned with the rest of the business and only received a budget for an innovation accelerator in order to fulfill some PR needs. If you do create an accelerator or incubator for your organization, make sure to involve all the business units and chart the path for collaborations before launching the project. Participation in accelerators takes time and energy, so having that plan is only logical. Out of four accelerator experiences my company has had, three had no plans but a recent one stood out for having a commercial roadmap. Be the latter, and not the former.
There are many other considerations when working with startups, but even paying attention to the above will help improve startup-corporate relationships from the get-go.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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