Balancing the Big with the Small: Established Companies and Start-ups Coming Together
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Most large businesses these days are finding it attractive to partner with startups. Why? Because both are constantly chasing after the next edge of innovation in their own ways. They also bring different things to the table; startups are more agile and can take risks that their more established counterparts can’t, while larger businesses have greater access to the market, business networks, distribution channels, customers, and capital in a way that relatively-newer ventures don’t.
One provides the technology, the other provides access to growth.
But, even though such collaborations are on the rise, there is usually a distinct lack of clarity in terms of the end-goals on both sides. Addressing this challenge is essential, particularly for large corporations, for inopportune decision-making on their part can burden their startup partners and spell the untimely end of a promising partnership.
One of the best ways that big companies can have a smooth relationship with their startup partners is by explaining their expectations to them well in advance, rather than smothering them later on with multiple demands. This can defeat the entire purpose of the association from the standpoint of a large corporate business, as the disruptors and innovators at the startup will be too busy with meetings and presentations to focus on their endeavours.
Corporate businesses investing in startup equity also need to assess their risk appetite because, once an investment is made, the risk gets distributed equally. Only through in-depth analysis can they synergize their needs and objectives with the startups’ requirements.
Things to Share
Apart from limiting insurance and legal liability, large organizations can also support their startup partners by offering to share office space and IT capabilities, as well as undertaking joint advertising/PR/marketing campaigns. Through their access to a richer business ecosystem, they can also assist startups with vendor selection and share consumer bases to explore cross-selling opportunities. These measures can enable better cost control and management for startups and help them keep their operating expenses to a minimum.
There is also a need for larger organizations to understand and outline the most appropriate timeframe for their startup association. Senior leaders at large companies often make business decisions from a long-term perspective. Startups, on the other hand, are more focused on the here and now. Finding common ground with regards to the association’s timeframe can help ensure that start-ups don’t get overshadowed by their larger business partners in the long run, and are able to create their own market niche.
Terms of Agreement
To create mutually beneficial partnerships, it is crucial to establish terms of agreements between both parties for shorter durations; these T&Cs can be reassessed on a regular basis to renew the contract. Short-term agreements also enable both sides to constantly review the association’s performance and learn how to better drive value through collaborations.
It is also common for startup partners to bear the impossible conditions stipulated by one-sided, homogenized contracts that larger corporate houses enforce. This is unrealistic and unfair; every startup is different, as is the risk of an association with it. Large enterprises must ponder over the risks on a case-to-case basis. This is why, when crafting agreements and contracts, both sides must have a detailed discussion about potential risks and ways to alleviate them in different scenarios through best practices. Identifying the risk and opportunity also allows both parties to define the full scope of their partnership, thus increasing its chances of success.
Business partnerships between startups and large corporate businesses can never be successful without thoughtful attention to the relationship’s sustainability. At its best, it can be an open union of two like-minded businesses looking to capture a lucrative market opportunity. Both should be open to learning from each other’s success and failures. Cultivating a great relationship built on such a solid foundation can only result in a better, more innovative company.