13 Corporate Startup Engagement Tips

Here’s a real fact about corporation startup engagement:

Annual corporate investment in startups has grown nearly 300% since 2010.

In this article, we’ll share 13 specific strategies (illustrated with models, resources and examples) on how corporates can leverage their resources to better engage with startups.

Whether you are an executive, a strategy leader or a corporate innovator, you will learn actionable strategies that will help facilitate the engagement process with startups, and ultimately help drive more value for your organization.

Table of Contents

1. Determine your goals, strategy and resources

2. Determine your specific objectives for partnering with a startup

3. Actively engage with startups at events and conferences to gain knowledge and contacts.

4. Run Hackathons and Innovation Challenges

5. Experiment with cohorts

6. Create startup funnels

7. Have a clear point of contact for startups

8. Align around expectations, risks and challenges early

9. De-risk your startup engagement by adopting a diversified portfolio approach

10. Leverage POCs

11. Conduct internal surveys

12. Create a streamlined process

13. Remember that startup engagement should be a mutually beneficial process
    

1. Determine your goals, strategy and resources

Before jumping into corporate startup engagement initiatives, you must establish a solid foundation.

First, make sure your plan to engage with startups is aligned with the business goals and priorities of your organization:

Is your goal to increase profitability?

Grow market share?

Then you can ensure you have developed a clear innovation strategy to help you achieve these goals.

An innovation strategy is “a commitment to a set of coherent, mutually reinforcing policies or behaviors aimed at achieving a specific competitive goal”[2].

Now, let’s briefly review the different types of innovation strategies you can develop:

In “The Management of Technological Innovation,” Mark Dodgson speaks of four different types of innovation strategies: proactive, active, reactive and passive.

• Proactive innovation strategies can be either radical with breakthrough changes, or incremental, using constant changes to improve product performance. According to Dodgson, companies with proactive strategies, such as Apple, tend to be technology market leaders, have strong research orientation, and can benefit from the first-mover advantage.

• Active innovation strategies, such as those employed by Microsoft and Dell work to defend existing technologies, responding quickly to markets. Companies with active innovation strategies typically use incremental innovation tactics, relying on in-house applied research and development.

• Reactive innovation strategies are used by companies that focus on operations and primarily consider low-risk opportunities for innovation. Companies, such as Ryanair are known to take reactive approaches to innovation, making only incremental changes based on a wait-and-see approach.

• Passive innovation strategies do not innovate until customers demand changes to their products or services. These companies take no measures to innovate and do not move without significant impetus to appease rather than impress customers.

Once you have determined your goals and developed a strategy to help you reach them, identify (or create) the resources you will be allocating to properly execute your strategy. For example: marketing, R&D, operations, finance, etc.

2. Determine your specific objectives for partnering with a startup

Corporates choose to engage with startups for a variety of reasons.

These reasons are usually driven by a company’s global business objectives and the resources available to them. The most common drivers for working with a startup include:

Image credit: 500 Startups report: “Unlocking Innovation Through Startup Engagement. Best Practices from Leading Global Corporations”.

Other motivations include:

• Gaining information on evolving markets

• Mitigating competition

• Getting cultural inspiration from fast-paced startups

A good place to start is to identify which specific pain points you are having in your organization. What problems are you hoping to solve when engaging with startups?

Once you have answered that question, you should assess if the purpose of engagement is to fulfill short-term or long-term business goals.

For short-term business goals, the best approach is to involve pilots, PoCs (proof of concept engagements), or partnerships. These models will help you to quickly identify how startups can solve your specific pain points (we’ll have more on these models later in this article).

However, for longer-term business goals (such as investing in the future of your industry or shifting the business entirely), indirect approaches tend to be more relevant.

For instance:

You could partner and support relevant early-stage startups to gain insights on companies and technologies that could potentially disrupt the whole market.  We’re living that reality now as we experience applications of generative AI.

Plus, indirect engagement with startups can have cultural benefits that enable the flow of different perspectives, access to new talent, and a collaborative environment that encourages innovation.

3. Actively engage with startups at events and conferences to gain knowledge and contacts

Corporates can engage with startups through a wide variety of mediums. Selecting those that work for you will depend on a a few important factors:

• Availability of resources (such as physical, human, intellectual or financial)

• Time available

• Your specific business needs

Events tend to be a great channel, as they allow corporate companies to access a large number of startups in a short period.

The most relevant events usually include conferences, hackathons and startup pitch events, such as accelerator Demo Day events. In our post-COVID reality, these events could be held online, in-person or hybrid.

At Foundry 415, one of our partners, PitchForce, regularly hosts virtual competitions, giving the opportunity for promising tech startup founders to deliver 4-minute pitches to a panel of seasoned investors.

As a corporation looking to identify startups, events like these allow you to increase your knowledge of dozens of emerging startups that may one day directly impact your business.

Another way to leverage events is to sponsor them in order to generate awareness and increase your company’s visibility in the startup ecosystem.

While attending these events, there are two simple approaches you can use to make the most of events:

• Short-list the events you would like to attend and identify what you are hoping to achieve.
  

• Develop a clear action plan of how you intend to make the most of each event. 

Don’t be wary of sharing your business card or connecting on LinkedIn. This is just the start of a relationship. It’s fine to be clear about your priorities and focus. If it’s a startup you could be interested in learning more about what they’re doing when they reach a certain point - say that. Tell them to share progress on key points of interest to you every few months or so and ask them to do that in a very concise way (just a few bullet points, or not more than 2 paragraphs).

These periodic updates provide you with insights into the startup’s ability to de-risk the technology and execute on development and delivery of their service or solution.

If you’ve been clear and you feel the startup has not heard your focus, criteria and priorities, then that’s a good sign that they will be difficult to work with and you can rule them out. Startups need to listen to potential customers and manage their communications effectively and professionally. Many of the entrepreneurs you encounter will be technical founders. Business development and sales are not natural activities for the majority of them. Many find doing that kind of outreach quite uncomfortable. That said, entrepreneurs are laser-focused and good entrepreneurs should not be shy about reaching out to you and following up. Remember they live and breathe their startup from the moment they wake up in the morning and are operating under extreme pressure (i.e. if their company doesn’t make sales, they may not be able to cover rent or mortgage in the next few months!). Have some empathy and cut the more annoying and aggressive entrepreneurs a bit of slack, within reason.

Tech Conference Resources

Here are some of our top picks for worldwide tech conferences

• CES Las Vegas

• Startup Grind Global Conference

• Saastr Annual

• SLUSH

• SXSW (South by Southwest)

• Canadian Dream Summit

• Growth Hackers Conference

• Tech Crunch Disrupt

Industry Conference Resources

If you’re looking for specific conferences related to your industry, you can check out these great resources:

• RSA Conference (Cybersecurity)

• HIMSS20 (Healthcare)

• Adobe Summit (digital advertising, analytics, and data management)

• Google Cloud Next (Cloud-based businesses)

• Microsoft Ignite (Cloud and hybrid infrastructure)

• AWS re: Inforce (Cloud security, identity, and compliance)

4. Run Hackathons

Born out of Silicon Valley, hackathons have been rising in popularity.

Hackathons are events, typically hosted by tech companies or organizations, that encourage developers and UX designers to collaborate on a project for a short period.

They typically last between 24 hours to a full weekend, and participants work to create prototypes or innovate upon existing products or services.

In 2018, 5,636 public and internal hackathons were organized globally, an increase of nearly 40% since 2016 [3].

Hackathons can be held for either internal purposes (such as exploring a new technology or fostering organizational culture) or for external purposes to accelerate the development of a specific product or to cultivate a relevant ecosystem of experts, startups, and developers in high-priority technology areas. 

The visual below demonstrates common organizational motivations for hosting hackathons:

Image Credit: HackerEarth. Global Hackathon Report: Trends & Insights. https://www.hackerearth.com/community-hackathons/resources/whitepapers/global-hackathon-report-trends-insights/

Running or sponsoring hackathons are a great way to boost corporate startup engagement, as they offer large organizations the opportunity to:

• Ideate innovative solutions for their pain points

• Rapidly prototype new technology solutions

• Expand their network within the startup ecosystem

• Increase their recognition in the industry

• Finding top talent in a technical setting

However, the hackathon approach also has limitations you should be aware of.

Despite their ability to quickly crowdsource innovation, ideas generated can sometimes lack the practical elements needed to function in a real-world environment and the necessary structures to be integrated into organizations.

It’s important to ensure that your hackathon has a clear value proposition that will generate a positive ROI.

At Foundry 415, we encourage our corporate clients to plan beyond the hackathon. Specifically, we advise them to plan for what they will do with the ideas generated and/or how they will engage with the hackathon participants going forward. Be sure to plan and develop the related mechanisms and communications and integrate these into the hackathon communications plan prior to launching the promotions campaign for the hackathon.

Well-Known Hackathons & Corporate-Sponsored Events:

• Facebook Hackathons

• Microsoft Open Hack

• IBM Watson Hackathon

• Nessie by Capital One

5. Experiment with cohorts

Cohorts are startup engagement programs, typically taking place over 3-6 months, that emphasize peer engagement among startups.

Accelerator programs are one of the most common examples of cohorts, in which early-stage startups are given access to education, mentorship, workspace and financing resources that would otherwise be difficult to attain with their smaller budgets.

Selected startups will enter accelerators for a predetermined period as part of a cohort of companies, during which they are laser-focused on accelerating their company’s growth.

While gaining entry into a cohort may be competitive, once selected, participating startups are generally sufficiently supported to complete the program. A great way to benefit from the collective ability to experiment and brainstorm through cohorts is to sponsor accelerators or create in-house accelerators of your own. 

Here’s an example: 

Microsoft for Startups (previously known as Microsoft BizSpark) offers perks such as free office space for startups, 1:1 mentorship, a curated curriculum with industry leaders, and most importantly, access to Microsoft’s ecosystem and investor community. 

While many accelerators take equity from startups who join their cohort, Microsoft’s Accelerator neither asks for equity nor expects startups to build on Microsoft’s tech platforms, which can be highly beneficial for early-stage startups looking to scale.

6. Create startup funnels

Unlike cohorts, funnels are programs that selectively weed out startups, ending the program with fewer startups than at the program’s commencement.

Often unaware that they are competing with other startups, startups engage in a competition for a corporate’s limited resources.

For example, the SAP Startup Focus Program focuses on more mature startups with enterprise solutions that can be offered to SAP’s established enterprise customers looking for disruptive innovation to power their own businesses.

Funnels like these help startups identify stage-gates or milestones by enabling them to test their solutions at scale, but also offer startups the opportunity to build upon SAP HANA or the SAP Cloud Platform to create SAP-certified solutions that can be offered as pilot projects to SAP’s enterprise partners.

Meanwhile, SAP benefits from access to top startups that can offer validated solutions to its global customers.

Identifying the right approach will depend on your underlying short term and long terms goals and business needs. Funnels can directly generate tangible solutions to corporate pain points, making them a superior option for corporates with highly specific goals.

Foundry 415 startup engagement funnel example for corporate clients

7. Have a clear point of contact for startups

A recurring issue among corporations looking to engage startups is the lack of a clear point of contact. In an interview with Forbes, CEO of InnoLead, Scott Kirsner, noted that in his research on Fortune 500 companies, more than 50% of surveyed respondents answered “I’m not sure,” or “we don’t yet have one,” or “we don’t have a clear point of contact for interacting with the startup ecosystem.” [4]

Without a clear point of contact, communication between startups and corporates can become muddled, creating unnecessary inefficiencies.

Have a designated startup ambassador who serves as the liaison between your organization and startups can significantly facilitate the flow of communication and create a more positive experience for both parties.

Similarly, it is important for corporates to have an internal point of contact with the decision-making power to authorize activities with startups. Corporates often cite a wide range of C-suite executives from CEO to CTO to CSO and CMO as the primary decision makers, demonstrating a lack of consensus on who is in charge of leading the company’s innovation efforts.

Having an internal delegate with oversight and authority over innovation efforts is a necessary step for any corporation that is serious about startup engagement.

8. Align around expectation risks and challenges early on

Before engaging in a partnership, corporates and startups should have a reciprocal understanding of expectations, risks and challenges.

One way to ensure this is happening is to establish specific standards on key factors.

Ken Matsumoto, the VP of Information Technology Research at the Nomura Research Institute (NRI) it solutions, notes a couple of key expectations NRI expects to see from startups:

1. R&D Stage: At the R&D stage of engagement, corporates expect earlier stage startups to be flexible to explore concepts and possible business cases alongside the corporate to ensure that underlying assumptions are aligned and business goals are clearly understood.

2. Critical Business: In the case of critical business, typically involving later stage startups, corporates need startups to provide stable, high quality hardware or software services and maintenance.

3. Budget: In the ideal case, costs will be within a business unit’s budget, so that the division or group leader can manage by herself. When costs exceed a business unit’s budget, it can delay the startup engagement process or stop it completely, as it involves securing additional funding from another business unit or further authorization from management.

Corporates and startups often have very different cultural contexts, so aligning on expectations and budgets early on is key to avoiding communication mishaps down the line.

9. De-risk your startup engagement by adopting a diversified portfolio approach

Here’s a fact:

This can result from a variety of factors such as technology failure or a blatant misalignment of business objectives.

The same report found that the most effective companies run upwards of 50 pilots a year, which enables them to hedge risk and cross-reference numerous ideas that can push forward business goals. 

Rather than focusing attention on a few startups, you should adopt a diversified portfolio approach, working with a wide-range of startups to hedge their bets.

Ultimately, a combination of technology, consumer preferences, and the direction of society as a whole can impact a startup’s success.

This means that increasing the number of engagements is an effective strategy to de-risk your innovation efforts and cross-check innovative ideas from different perspectives.

10. Leverage POCs

Startup collaboration can be challenging.

Corporations should be prepared to conduct many experiments.

This is where PoCs (proof of concept) engagements can be beneficial. They allow corporates to identify if there is a practical business use case that can serve the needs of the broader organization or a target market.

Moreover, companies may experiment with implementing the new technology across various business units, which can offset the costs associated with launching the PoC.

A quote that is attributed to Harvard Business School professor Clayton Christensen, 95% of the 30,000 new consumer products launched every year fail. To be fair this is a misquote and it has been updated to read "many fail". [6]

Corporate should understand the reality that most of their startup pilots may never reach to market. However, each failed experiment provides a great opportunity to learn from past mistakes and prevent their recurrence. There is much value in validating (or invalidating) hypotheses you may have about how customers and users will behave.

Startup engagement is often a numbers game. Which means rather than letting a failed PoC or project in the the way of future engagements, corporates should identify key issues to improve their startup selection and engagement process, and try again. 

11. Conduct internal surveys

Another way corporates can avoid repeating mistakes is to conduct internal surveys to accumulate feedback on the startup can improve its solutions.

Examples of good survey questions include:

• What are the most exciting startups or new technologies you have discovered recently? Why?

• What has your experience working with startups been like so far?

• What are some of your hopes and fears about engaging with startups?

• What metrics do you use to determine the success of your startup engagement?

These surveys can equip corporates with the constructive feedback needed to improve their products and services, which can then be used internally or offered to the corporation’s largest base of clients and partners.

Further, this flow of communication can develop a streamlined system of feedback and improvement, establishing more trust and communication between the and corporation.

12. Create a streamlined process

Research shows that 20% of companies lack a streamlined startup engagement process, putting them at a tremendous disadvantage to teams that have aligned their resources and established systems to facilitate their engagement efforts. [7]

Streamlining your startup engagement process has two main advantages:

First, it facilitates and accelerates the process of identifying and engaging startups.

Second, it improves the startup’s experience. This contributes to improving the reputation of your corporation (and helps you attract better startups into your pipeline, improving the overall quality of your PoCs and partnerships).

Here are 4 practical steps to streamline your engagement process with startups:

• Delegate a key point of contact and appropriate roles internally in your organization

• Create a standard NDA template or a purchasing template

• Establish a framework and specific criteria for selecting startups

• Develop and obtain approval for dedicated budget for startup projects

Let’s consider an example:

TD Ameritrade is a company that offers a trading platform for financial assets. They’ve established a highly structured process that serves as a model template for companies looking to streamline their innovation process.

According to the company’s CIO, Vijay Sankaran, TD Ameritrade takes an innovative approach that begins by adopting a customer-centric view to identify market opportunities.

They use a “test-and-learn” approach to experiment with different ways to address the market need.

The company has also created a board that directs resources and funds to enable experimentations that can be continuously iterated.

“We’re still thinking big and involving teams from across the firm, but we’re strategically pursuing areas of opportunity where we are uniquely qualified to develop innovative innovation solutions,” said Mr. Sankaran. [8]

With established innovation leaders equipped with the ability to effectively allocate the business’ available resources, the company has created a highly efficient system that aligns its innovation efforts with its overall business needs. 

The process of continuously testing and making necessary adjustments further allows the company to learn from its experimentation activities and make the necessary changes to ensure that its next innovation experiments can effectively respond to the changing consumer preferences it predics.

13. Remember that startup engagement should be a mutually beneficial process

Corporates can gain a wide-range of benefits from working with startups.

From gaining knowledge of a technological niche, industry, or specific application, startups can provide valuable insights and solutions to major corporate pain-points.

Plus, working with startups also enables large companies to benefit from the startup culture centered around speed and the urgency to innovate and execute.

The startup notion that being done is better than being perfect is a glaring contrast to the risk-averse, KPI-driven nature of large organizations.

Equally as important, corporations can add tremendous value to startups.

The best corporate-startup collaborations are mutually beneficial, where each party is working to assist the other with areas outside of their expertise. Having a corporate partner not only gives startups credibility, but also give them access to an abundance of corporate resources that can help them with branding and PR, distribution, suppliers, and funding.

As a corporation, understand where you can add value to startups and support those areas accordingly. If you are a corporate looking to identify the right startups for your business needs, we can help.

Sources

1. INSEAD. "INSEAD & 500 startups partner to uncover how the world's biggest companies deal with the startup revolution". May 2016. https://www.insead.edu/news/insead-500-startups-partner-uncover-how-worlds-biggest-companies-deal-startup-revolution#:~:text=To%20the%20world%2C%20established%20corporations,engage%20startups%20for%20business%20excellence.&text=68%25%20of%20the%20top%20100,500%20are%20engaging%20with%20startups

2. Harvard Business Review. “You Need to Have an Innovation Strategy” by Gary P. Pisano. June 2015. https://hbr.org/2015/06/you-need-an-innovation-strategy#:~:text=A%20strategy%20is%20nothing%20more,help%20focus%20efforts%20around%20them

3. BeMyApp. "Infographic: Worldwide Hackathon Figures in 2018 and trends to expect in 2019" by Pierre-Jean (PJ) Quenardel. January 2019. https://www.bemyapp.com/insights/infographic-worldwide-hackathon-figures-in-2018-and-trends-to-expect-in-2019.html#:~:text=Large%20corporations%20are%20increasingly%20turning,largest%20online%20hackathon%20community%20worldwide.

4. Forbes. "The Surprising Thing The Fortune 500 Misses In Startup Engagement" by Dave Knox. July 2019. https://www.forbes.com/sites/daveknox/2019/07/18/the-surprising-thing-the-fortune-500-misses-in-startup-engagement/?sh=6670531356c0

5. Fortune. "Why Are Corporations So Bad At Working With Startups?" by Erin Griffith. June 2017. https://fortune.com/2017/06/22/corporate-innovation-programs/

6. Harvard Business School. “Clay Christensen’s Milkshake Marketing” by Carmen Nobel. February 2011. https://hbswk.hbs.edu/item/clay-christensens-milkshake-marketing

7. 500 Startups. "Unlocking Innovation Through Startup Engagement". https://media.rbcdn.ru/media/reports/UnlockingInnovation500StartupsReport.pdf

8. Medium. "This Is Why Hackathons Are Essentially Useless" by Vijay Sankaran. November 2019. https://medium.com/fast-company/this-is-why-hackathons-are-essentially-useless-c0d97da37ae8