Making Startup-Corporate Partnerships Succeed: The How-To
The time of startups being seen as competition for corporates is coming to an end, with both parties understanding there are synergies to disrupt together for the end benefit of the consumer.
With fragmented collaborations and misaligned timeline expectations, cultural differences are a prevalent reality in any startup-corporate partnership. Having said that, the time of startups being seen as competition for corporates is coming to an end, with both parties understanding that there are benefits and synergies to work and disrupt together for the end benefit of the consumer, especially in fintech.
According to a McKinsey study, since 2013, there has been over 30% year-on-year growth in corporate venture capital investment. Additionally, an EY study showed that more than half of the corporates identify with the statement that "startup-corporate partnerships are vital for fintech innovation, but too difficult in practice." The biggest challenge cited is the fact that corporate culture doesn't meet startup culture, followed by a failure to understand each other's needs.So, how did we at Purpl tackle this, and what have been the key lessons learnt?
By way of background, Purpl is a newly established remittance and cash-out aggregator, combined with a digital wallet, on a mission to democratize cross-border money transfer flows and enable financial inclusion. The first market we have launched in is Lebanon, given the dire situation the country and its population is in. The 15 million strong Lebanese diaspora sends over US$7 billion of remittances a year to support their families back home. But the Lebanese banking sector has collapsed, the Lebanese pound has lost more than 90% of its value, and more than 80% of the population now live under the poverty line. It's thus needless to say how important it is to power these remittances back to Lebanon at a lower cost, and with a more efficient and transparent user experience.
First things first, before moving ahead with a potential partnership, it is important for both parties to lay out the benefits of the said tie-up, and what each player will get out of it. Most often than not it is your role, as the startup, to lay these out for you and your potential partner. In our case, Purpl being in partnership with an incumbent corporate would lead to:
Access to the corporate partner's markets
Make said partner a potential customer
Access to the corporate's data on customers
Access to the corporate's brick and mortar infrastructure and network
Positive signal to investors
Meanwhile, the incumbent corporate we would partner with would see the following benefits:
Access to faster innovation, and gaining early insights into new technologies
Transform the way they work, and become more agile
Revamp their brand, and increase brand equity with customers
Move beyond their core business
Access to top talent, and motivating their own employees as well
Potential return on investment if they invest in the startup
Now that I have laid out the benefits for each partner, listed below are the lessons I would like to share with you to increase your chances for a successful partnership. Culture, governance, technical expertise, and mutual buy-in are the main themes I will address in the following five pointers:
1. Get the strategic buy-in from both the C-level and executive teams One of the biggest mistakes and reasons for failure in a startup-corporate partnership is assuming that getting the buy-in from the CEO is enough to go ahead and build a successful partnership. Lack of internal sponsorship and commitment from the full executive team will categorize you as a "side project," with low resourcing, making your task even more challenging. Keeping this in mind, after getting the buy in from the C-level, we asked to meet and present our project to the whole executive team representing the multiple departments such as IT, compliance, marketing, communication, operations, in order to get them onboard and excited about the mission we are embarking on.
This paid off, as it has made our collaboration and decision-making so much smoother, with limited push back. This also permitted us to avoid the pitfall of the lack of strategic clarity and why we are doing what we are doing, as well as the "death by slow processes" that you would more often than not experience in incumbent corporates. Compromising is key, and it can only be done if you have the buy-in from the top all the way to the bottom, and the people actually doing the work with you.
2. Embrace cultural differences from day 1 Whether you like it or not, and more often than not, cultures at your startup and your potential corporate partner will differ widely. Corporations and startups sometimes partner just because they find a project cool, and then in the middle of the partnership, things stall, priorities change, and no one knows where to go, and whether to continue.
To accommodate these inherent cultural differences, you must establish a mutually aligned timeline, and emphasize on the importance of mutual persistency, because along the road, both you and your corporate partner might want to pause, or even give up on this project. Openly acknowledge with your counterpart that there may be problems in working together, and commit to work these out.
3. Bring your A-team to the collaboration This goes for both the startup and the corporate- you want to both feel you are 110% committed. From day 1, we asked if we could utilize some office space at the corporate a few days a week, and we showed up and worked from there consistently, and built relationships with every team member. We brought our energy and doer attitude in their offices, which in turn had the effect to revive and get their teams excited about this new project, disrupting their routines.
Some of their team members even asked to allocate most of their time to this project (especially their IT team who could work on new technology trends, instead of just doing maintenance on their legacy systems). At the end of the day, partnerships are about people and not just companies, so make sure to partner with people you like. Also, as a startup, and given your limited resources, be selective in your partnerships, and make your corporate partner feel special.
4. Set success metrics early on Knowing where you are headed, and having clear goals and key performance indicators (KPIs) for your partnership is primordial, and they hold everyone accountable. These might differ widely between you as a startup and the corporate- for example, revenues count more than users for a corporate. Agreeing on commercials early on is healthy, provided it is complemented with soft metrics that you as a startup might put emphasis on, and for the corporate to also commit to.
5. Arm yourself with patience Last but not the least, knowing from day 1 that things will not go as planned will help you navigate around all the uncertainties, and also manage your resources and expectations better. Moving fast and breaking things along the way is fine in a startup, but that does not really work for a corporate that more often than not is heavily regulated, and has much more to lose. Embrace this and learn from it, because the day you become a scale-up, you will need to have strong processes and compliance in place.