5 ways corporations and startups can collaborate (beyond vendor relationships)
When it comes to startup/corporate collaborations, most people think of vendor relationships. But what happens when the startup’s product doesn’t fill an obvious need for the corporation?
Purchasing a startup’s products or services is only one of many ways for enterprises to engage with startups. So why is it the path we look to first?
By ignoring less obvious opportunities for collaboration, startups and enterprises are leaving a lot on the table.
Here are 5 other ways to engage in win-win collaborations:
1. Shared data, assets, technologies, and capabilities
Sometimes, a startup’s product isn’t a good fit for internal use for a corporation. This doesn’t mean the startup’s data, technical capabilities, tools, or other assets won’t benefit the corporation in some other way.
Take Wattpad, a startup that powers an online platform where anyone can author stories. At first glance, it isn’t obvious how they could serve a TV network. And yet in 2015, Wattpad’s data and stories helped Kapatid Network in the Philippines launch a hit television show. This was a win for both companies: Wattpad’s data allowed them to identify stories that were already a hit, while Kapatid was able to bring the words to the screen. Because of this partnership, Wattpad unlocked a new business model, and are now providing insights and stories to partners like Hulu, and Paramount through Wattpad Studios.
2. Shape new products through “Beta” or “MVP” agreements
Sometimes, both companies stand to benefit when an enterprise uses the first version of a startup’s product – sometimes before it is even ready for launch. These agreements give enterprises early access to promising new technologies without taking on the costs and risk associated with in-house R&D.
CPG giant Unilever piloted Discuss.io to conduct market research before the product was even completed, and provided ongoing feedback. Unilever not only got early access to the platform but provided input that shaped the product. Discuss.io has since gone on to raise over $7M.
Through their Startup Garage program, BMW agrees to buy the first unit of technology a company produces. BMW gets to be the first user of cutting edge technologies, while startups have the chance to prove the value of their solution by integrating it with a BMW vehicle, factory or system.
3. Distribution Partnerships
Getting a partner’s product in the hands of new customers is one of the best – and most often overlooked – ways to create a win-win partnership. Distribution partnerships can go both ways, helping both enterprises and startups fill gaps in their product portfolios and increase stickiness with existing customers.
Sometimes, a corporation will open their customer base up to a startup – like when Swedish telecom Telia partnered with Spotify to provide music streaming on their set-top boxes. Spotify grew their user base, while Telia reduced turnover and attracted new, younger subscribers. This relationship eventually grew into a larger strategic partnership, complete with an investment and a joint team focused on advertising and media distribution.
Sometimes, there is an opportunity for a startup to distribute a corporation’s existing products. This is especially common when enterprises have products or capabilities that regulation or time constraints make it impractical for a startup to attempt.
Take Egyptian payroll company dopay. In 2014, they saw the opportunity to augment their payroll services by opening bank accounts for some of the country’s 200 million unbanked adults. There was just one problem: a new banking license hasn’t been issued in Egypt since 1979. Barclay’s Egypt stepped in to provide the bank accounts for these dopay users, acquiring net new customers.
4. Co-innovation: launch a new product or business line
To capture value from frontier opportunities, enterprises can work with a startup to build something new they can take to market together. This is an opportunity for both startups and corporations to build new revenue streams and leverage new business models.
For example, heavy equipment sharing marketplace DOZRcollaborated with Federated Insurance to create a new insurance product to cover both lenders of heavy equipment. The new product is sold directly through DOZR’s platform. This not only gives DOZR an edge in the market by becoming the first equipment marketplaceto offer insurance, but gives Federated Insurance a captive audience to build, test, and sell a new product.
5. Co-creation: launch a net new company
Sometimes, a partnership with a startup or entrepreneur will result in an idea that it will make more sense to spin out as a new startup. One or both of the partners may retain an equity stake in the company or invest further once the company it is spun out.
While Roku began as a startup that created and sold internet radio products, the company ultimately found its legs through a collaboration with Netflix. Founder Anthony Wood joined Netflix to lead “Project Griffin”. The team was charged with creating a “Netflix Player” that would connect to televisions and stream movies and TV.
In 2007, that team spun out as Roku as a new company. Today, Roku is worth over $4B, and its users have streamed over 7 billion hours of music and video. A third of that video is still Netflix content.
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