We just completed the second Demo Day for the Techstars IoT Program in New York. One of the corporate partners of this program was the global professional services firm, PwC. In this post, Dave Drach, VP Corporate Strategy at Techstars and Niko Pipaloff, Emerging Tech and Startup Engagement at PwC, share their experiences on the most effective ways to approach startup/corporate engagement.
How can corporations and startups best collaborate to prepare for the digital age?
Startups must be very tactical when engaging with a corporation and be willing to be open during mentor interaction, but then specific in what goals they would like to achieve. Corporations have deep domain experience from years in a particular industry, as well as an extensive network of connections. Both can help founders understand business markets and how ecosystems currently work.
Through partnerships, startups can leverage PR and marketing, as well as channel and distribution access, especially in heavily regulated industries. For example, DoPay, who completed the Barclays Accelerator, Powered by Techstars, was able to leverage a Barclays bank in Egypt to create merchant accounts for their easy payroll platform. These kind of partnerships and strategic relationships are the result of open and collaborative communications that are fostered through the mentoring process.
Corporations should consider the startup ecosystem as a critical component of their innovation/R&D function. Surprisingly, we found that just 7% of companies rank “working with the startup ecosystem” as one of their top sources for innovation in PwC’s Global Digital IQ Survey. In order to get the most from their investments, corporations should look to engage across the startup lifecycle, tailoring their strategy for each stage.
Early stage engagement (pre-revenue) can focus on establishing broad relationships and awareness building. Sponsorship of co-working spaces or incubators are a great way to get a pulse into the ecosystem. Corporations can also offer pro bono services to build a positive reputation in the community. For example, PwC has offered workshops in data analytics, corporate structuring, tax law, and sales tactics.
As startups mature and grow, more direct business relationships become more likely. Focus on providing funding, domain expertise and relationships but be careful not to overwhelm the startup with your demands. Realize that the startup will need to serve a market beyond the single corporate partner and give it the space to make the best product and market decisions.
What are the most productive outcomes of a collaboration between a corporation and startup founders?
The most productive for founders, and I would say the corporations as well, are some form of cross licensing and promotion. When both parties stand to benefit from the deal, then both parties will invest in making it successful. The collaboration usually focused on a new, innovative technology, perhaps a technology that the corporation has not been successful with or has been challenged in engaging.
A great example is the collaboration between Disney and Sphero where the two companies were deeply engaged in the Disney Accelerator, powered by Techstars and then the two partnered to create the BB-8 connected toy. The collaboration included content and media promotion, content licensing and even investment from the corporation in the startup. The results were outstanding and the two entities have since collaborated on many additional connected toys.
The most productive collaborations allow each party to focus on their strengths. For startups, I think that strength is effective “exploration”. That means testing new ideas and markets, customer discovery, finding product/market fit and setting the direction. For corporates, their strength is in effective “exploitation”. That means bringing massive resources to bear and scaling an idea through funding, domain expertise and relationships. It means taking a model that was proven out in small scale and putting behind it the power of global salesforce, manufacturing or distribution capabilities.
As one of the largest professional services firms, PwC has the capacity to provide a startup unprecedented access to customers and partners. The real challenge is to identify complimentary go to market strategies and identify startups that are at the right stage of maturity.
What are the differences in how a corporation handles disruption and how a startup handles disruption?
For a startup, there really is no such thing as disruption. A founder sees a problem, harnesses the resources to solve the problem and delivers a monetizable solution. The focus of the founder is solving the customer’s problem and likely ignoring the existing business ecosystem in the process. That is what the Techstars company Everledger has done with diamonds and blockchain.
Everledger records the provenance of diamonds from mine to ring leveraging a digital registry built on blockchain. It completely changes how you insure a diamond. And obsoletes most of the legacy criminal behavior around stealing and fencing diamonds.
Founders just do their thing and if it makes the existing infrastructure obsolete, the disruption, that is a side effect of their solution and their effective execution.
For a startup disruption in the market is almost always an opportunity. A changing landscape makes established players more vulnerable and gives nimble new entrants a fighting chance to provide something better fit to the new paradigm. An established corporation could also view disruption as an opportunity but it’s often saddled with the “Innovator’s Dilemma”…change often threatens established corporate functions who resist the loss of their eroding position. This is why large corporations are rarely the instigators of disruption but so often the victims of it.
To counter this, corporations need to develop a mindset of constant change where it is normal and expected to reinvent oneself every few years. Part of that is cultural (changing the norms and expectations so that employees feel safe and encouraged to try new things) and part of it is operational (providing the tools to facilitate a free flow of ideas and the environments to effectively prototype them). In my experience, neither of these is possible without a visionary leader in the c-suite willing to champion the cause.
What are some of the technologies that are emerging from the startup ecosystem that are having an impact on large corporations?
I work every day in helping connect our portfolio of early stage companies with corporations to help both parties. I pay attention to deals that close fast between corporations and startups because it demonstrates technology areas that are being adopted rapidly.
First would be drones and drone deployments. Skyward, a Techstars investment which was acquired by Verizon, was the right solution at the right time. Skyward focuses on systems that simplify drone operations into task oriented solutions. Hensel Phelps, a 3,000 employee construction firm, moved from experimentation with drones to offering an operating infrastructure for drones by becoming a Skyward customer.
AI is being embedded into task specific solutions, mostly with improved development platforms that are emerging, like Seldon. Adoption is not moving as fast in the area of blockchain, but the demonstrated solutions are truly breakthrough.
One example is the blockchain startup Wave, who completed the first global trade transaction leveraging blockchain between Ornua (the Irish Dairy Board) and Seychelles Trading Company. This was a global trade transaction for butter and cheese between Ireland and the East African Country of Seychelles, completed digitally, in blockchain.
Based on our research, PwC has identified 8 essential technologies that are having the greatest impact on our clients, and all of them are heavily driven by innovations coming out of the startup ecosystem.
For example, in the IoT domain, we are partnering with Sigfox to bring low cost, high bandwidth sensor solutions to many of our industrial and utilities clients. In the drone domain, we are partnering with Hangar to support hardware and flight planning for our mining and infrastructure clients. And in the Machine Learning domain we are experimenting with platforms such as Datarobot to bring advanced machine learning capabilities to the masses. PwC works with these and many other startups to provide deep technical expertise and push the limit of what is possible. Ultimately, we are stronger together.
How does the incentive structure for innovation differ between corporations and startups?
The primary incentive structure for a startup is survival. If you do not find product-market fit, then you die. If you do not find a scalable monetization model, then you die. Time is your enemy. Innovation is your friend. You have no infrastructure, few to no customers, and no legacy, so you can focus purely on the potential of the future. And if you survive, the payoff can be significant. You are able to control your own destiny within the opportunity which you are pursuing.
Every conversation, every meeting, every transaction has tremendous urgency. You must #domorefaster, to use one of the key training points we leverage here at Techstars.
A startup is a high risk, high reward venture where the incentives for the founders are directly mapped to the market success of the company. It’s a “succeed or die” environment which forces a clarity of purpose and an efficiency of action. Startup founders are constantly pushed to work on the most important aspects of the business and their decisions are pressure tested at each step.
Traditionally, corporations have been less effective in innovation because their internal structures rarely allow for such single minded clarity of purpose. Employees are ultimately incentivized with bonuses and titles, but because of the diffusion of responsibilities it can sometimes be easier to obtain these rewards by effectively managing perceptions rather than solving hard problems.
Ultimately, corporations should look to map internal incentives more directly to innovations and their success in the market. That means giving intrepreneurs the time and space for dedicated work and a bigger piece of the upside when innovation efforts are successful.
Are there structures that help corporations and startups innovate together?
The collaboration between startups and corporations has grown significantly over the last 10 years and is replacing elements of the R&D infrastructure of many corporations. The original approach was primarily focused around acquisitions. One of the most effective approaches I have seen recently is support for startup partnership integration, either through a third party, or an internal “black ops” team that is given executive support to quickly drive through integrations and partnerships.
Both the startup and the corporation benefit from rapid deployment and integration. We call this “Startup Speed” and it’s a game changer for our partners who get there.
In many ways, corporations and startups inhabit two different worlds and speak two different languages. Incubators like Techstars are vital in bringing the two parties together, but it can still be hard to bridge the gap and work together effectively. Ultimately, a corporation needs an integration point with the startup ecosystem, teams within the company that speak the same language and work in similar ways. PwC has several.
Our Emerging Tech and Analytics Labs provides a sandboxed environment for the testing and prototyping of new technologies and tools. Our New Ventures group, provides the financial backing for the development of new products and businesses. And our Digital Services team provide expertise in human centered design and customer engagement. These teams are familiar with PwC’s core businesses and operations but also bring a wealth of experience from tech, startups, venture capital and digital agencies.
Ultimately, it is through these functions, that PwC is able to effectively collaborate with the startup ecosystem.
We’d love to hear from you. As a startup, what have you found to be the keys to successful collaboration with corporate partners? As a corporate executive, how have you bridged the gap to effectively engage with the startup community?
I was on a panel recently sponsored by the NACD, the National Association of Corporate Directors. I was joined by Diego Rodriquez, Global Managing Director of IDEO, Barbara Mowry, board member of the NACD and curated by Catharine Merigold, independent board member and board member of NACD.
It forced me to reflect on the Techstars corporate programs we have run and how our programs, and more specifically our founders, have influenced the corporations they work with and how the board was involved.
The primary impact of our programs on our corporate partners is a disruptive transformation of those entities, usually in ways they did not imagine. I like to think of it as entrepreneur driven pragmatic disruption.
We see the greatest impact when our programs are led by the CEO and direct report CXO staff and even more so by the chairman of the board and board members. This has been the case in our programs with Barclays, Nike, Microsoft, Ford, Target, METRO, COX and Disney.
So, how can a board member influence innovation? Here are a few suggestions:
- Build specific objectives, such as implementing and running innovation programs, into the objectives of the CEO and executive staff members. Make sure these objectives have measurable outcomes.
- Do not base these engagements on venture investments, but on new products or offerings either through partnerships or trials.
- Make the CEO’s pay tied to progress against these objectives.
- Innovation cannot come from within your existing management and operating infrastructure (the innovator’s dilemma clearly defines these challenges).
- To support business sustainability, you must encourage testing of products and services that are disruptive and potentially cannibalistic to your existing offerings.
Build opportunities for partnerships with entrepreneurs. You can do this effectively without disrupting your current operations and then deepen your partnership with those startups that prove effective.
Encourage Transactions with Startups
- The most effective ways you can transform your company is to hand over some of your company operations to a startup operator. For example, digital account planning, AI analysis of logistics, drone inspections, robotic audits, or improved employee health.
- Work through your procurement process to ensure effective vetting of startup services, but simplify the procurement and contracting process for them. You want to encourage procurement for innovative services.
- Define a target volume of business that the executive team must transition to an external startup entity.
- #givefirst is the Techstars mantra. It seems very egalitarian at first, but in today’s world it is essential.
Some of the most disruptive ideas and subsequent solutions have come from serendipitous conversations with complete strangers. Open your door to those who really want to engage.
- Encourage your executives to allocate time to mentor, to discuss concepts on panels, to judge presentations and to contribute their domain knowledge to those building the new companies of the future. Encourage, but do not require mentorship. Not everybody is cut out to be a mentor.
- Define targets for each senior executive around engagement. It might include mentorship, blogging, developing a new initiative, or a board seat on an entrepreneur focused non-profit. The personal learning as well as the open reputation you develop will result in the kind of engagement that can lead to success for all parties.
Lastly, demand agility. When I hear the corporations I work with say we just need to be more agile, my response is, you can’t, because it’s hopeless. There is simply no way that a large organization can move like a small, nimble startup. It is cognitive dissonance.
I have been on both sides of this innovation transformation for 10 years, let the startups be agile. Build in agile processes in procurement, product evaluation, implementation and legal to support engagement at a startup pace. Leave your existing, price, efficiency, and risk mitigation procurement processes in place for your standing vendors.
Managing externally driven innovation and disruption is a discipline that must be developed. The primary fiduciary responsibility of a corporate board is the sustainability of that corporation as a going concern. Maximizing rents is a noble goal but certainly not achievable when it’s not feasible even to survive.
Today’s corporate board must hold the executive team accountable to the pragmatic disruption of their business. Disrupt or be disrupted.
I just completed my seventh Patriot Boot Camp, presented by Techstars. PBC is a non-profit backed by the Techstars Foundation that my wife Amy and I have volunteered with for the past 5 years. While she is part of planning events, I focus on speaking and mentorship. Business development is the topic I speak on and, whatever the stage of company, the veterans are always full of gratitude for the exposure and information they get from the weekend. By the end, I feel I should be thanking THEM. We always get so much more out of the event than we put into it.
A friend of mine asked me once why I invested so much time and energy to support Patriot Boot Camp and the veteran initiatives surrounding it. I answered: Even though I am not a veteran, I do it because veterans make great entrepreneurs. At the most recent PBC in San Antonio I reflected on some of the key competencies of successful entrepreneurs we see here at Techstars and how veterans bring these competencies from their service to their new endeavors as entrepreneurs:
Fortitude to Drive Through Adversity
Building a company is tough and it requires tireless leadership. Do veterans have this fortitude to drive through adversity? Here is one great example. While speaking with Colin Supko, a former Navy SEAL Commander, I realized that his tours in Iraq and Yemen in conjunction with his intense training more than equipped him with the tools to drive through adversity. He is building a peer to peer marketplace (Patriot List) where safety is crucial. Identities are verified as part of a trusted personal network of buyers and sellers.
Ability to Find Product-market Fit
Finding product-market fit is the first critical first step in building a successful company. Executing against an idea and finding product market fit will be no problem for Matt Lembright, a former Army Signals Intelligence officer at the NSA. He is currently building a platform (Enabld Security) for us to protect our online identities across all of the solutions we use.
Building a Large Organization Around New Technologies
Ali Ahmadi is the co-founder at AirZaar Inc. I met him and was instantly convinced that he has what it takes to build a large organization with a strong operating discipline. His company has created a platform for managing data acquired by drones for surveying in the mining industry. Ali served over 8 years in the US Navy as a Drone Pilot with 650+ successful flights under his belt, and he managed multiple drone surveillance programs within the Department of Defense. This experience has led him to build technology infrastructure to manage drone data intelligence at a scale only done in the US Military. Now he is taking his experience and translating it to support industries like mining and construction.
The next Patriot Boot Camp is in Denver, Colorado on September 22-24. If you are a veteran entrepreneur, apply here. If you would like to learn more about helping out with this cause, you can find more info here.
At CES 2017, I hosted a panel with Amazon, Ford, and Motorola as well as founders from LISNR and HERO to discuss how to engage and leverage big brands. I have worked with well over 100 corporations developing deals with founders, and this panel had some great recommendations to get a deal moving, get it closed and make sure you are successful in the engagement.
Find a Champion and then Make a Friend
Rodney Williams, co-founder, and CEO of LISNR emphasized that you will need multiple contacts at each big brand you want to work with. Find contacts who are willing to make the extra effort and build relationships with them. Then, keep those relationships active, even as that champion moves throughout the corporation and even into other organizations.
Rodney says, “We follow our champions,” as they move to other companies and then leverage that relationship to extend our network with someone we already trust.
Figure Out Where You Fit and Make Your Role Obvious
Every time you get traction with a big brand, they are engaging with you for a purpose. It may be aligned with a new PR initiative, a new client, an internal initiative or even government regulation.
Alex Crosby, CEO, and Co-Founder of HERO highlighted that for him, “The brands are the connective tissue,” he needs to be successful. HERO delivers a solution to help those who have had a bit too much to drink get home safely. Since brands want to demonstrate they are helping reduce drinking related issues, they are very interested in working with authorities. HERO facilitates these connections and has a clear and measurable plan for the brands to work with local officials, such as a Mayor or Governor. Then the conversation shifts to focus on planning and execution, and not on why they should work with HERO.
Be Ready — But Don’t Move Too Early
Everybody wants that big deal or to launch their latest product on Amazon. But, Jenny Hagemann, Business Development Manager at Amazon, and the individual at Amazon who is responsible for helping startups get launched on their site, says it’s best to test elsewhere, before launching on Amazon.
Amazon has tools on LaunchPad, such as pages to help tell your product story, and contribute to get that first pool of reviews. But, once you go live, and people start consuming the product, then the reviews start coming in. It is very hard to recover from poor reviews, so best to pilot on Indiegogo or Kickstarter and be prepared for that big launch.
Plan, Then Execute with Your Big Brand Partner
Before pursuing and engaging with a big brand partner, make sure you understand what the opportunities are to work together. Engaging a big brand is different than just finding a customer and filling the pipeline. Many have clearly defined startup programs and these programs describe how they want to work with startups.
Motorola recently launched the Motorola Moto Mods, a platform for startups to build hardware add-ons to their phones. Stephen McDonnell is the Director of the program, and they have developed a program in partnership with Indiegogo to give founders an easy platform to work with and a way get the solution to users to test it. Stephen emphasized how important it is to have a plan when engaging a big brand and know what you want. Jessica Robinson from Ford stressed being open and honest with the corporate brand and be willing to work together to create a plan that starts slow and scales as your startup scales.
More big brands than ever are willing and ready to work with your startup. To be successful, you need a plan that makes sense for all of you and you need to develop strong and trusted relationships with multiple champions at your target corporation before you can be successful.
In the end, successful execution can launch your company into a new level of visibility and success.
Watch the full recording of the panel here.
We’re excited to announce that Techstars is partnering with Twitter to provide Twitter data product access to Techstars’ companies.
This partnership provides startups (going through a Techstars accelerator program) access to Twitter’s enterprise-ready APIs for social data. In addition, Twitter will provide consulting services to help Techstars’ founders effectively apply social intelligence to products and services that they are creating – for example, social media monitoring tools, business analytics, ad targeting and e-commerce.
Starting with Techstars’ spring sessions in 2016, startups in program will have access to Twitter data to create new, innovative, data-driven solutions within their products.
This preferred access to Twitter data is another perk available to Techstars founders. As part of the Techstars network, companies and founders have access to over 300 perks valued at more than $1 million. These perks come from corporate partners and sponsors, mentor companies, Techstars’ companies, and others across our network. Yet another benefit of being part of the best global ecosystem for entrepreneurs!
We’re excited about the possibilities that our Twitter partnership will bring to our companies and look forward to great things to come!
Today, Techstars is announcing Techstars Mobility, driven by Detroit with our partners Ford Motor Company, Magna International and Verizon Telematics. Mobility and transportation are changing and we want to help the next generation of companies make it happen. Techstars is also committed to operating this program in Detroit, the center of the global mobility and transportation ecosystem.
Techstars Mobility, driven by Detroit will give 10 selected companies deep connections with our partners, $120,000 in funding and three months engaged with our extensive mentor network. Each of our program partners brings an important piece of the mobility industry into this Techstars accelerator:
- Ford, one of the leading innovators in the industry since its inception who continues to lead with a focus on mobility and transportation under the direction of Bill Ford;
- Magna International, one of the largest automotive suppliers in the world with connections and distribution channels to virtually all auto producers and into other transportation industries;
- Verizon Telematics, who puts the connected in connected car with their terrestrial and satellite based communication solutions.
The Techstars program will be located in the growing entrepreneurial district of Detroit. There has been a recent renaissance in Detroit with many startups moving to the downtown area and venture capital becoming very active in the region. Throughout the development of the Techstars Mobility program, Techstars worked with Detroit based venture capital firms Fontinalis Partners, Detroit Venture Partners and Renaissance Venture Capital to recruit mentors and ensure capital was ready to deploy in the region. Many other venture firms have also contacted Techstars communicating their interest in bringing capital to Detroit.
Techstars will be bringing their proven accelerator model and extensive network of mentors, founders and corporations to Detroit to support this program. Techstars will also coordinate efforts across the Detroit entrepreneurial ecosystem as a member of the Detroit Technology Exchange (DTX), ensuring that Techstars can have a positive impact across the entire community. Techstars Mobility, driven by Detroit will run for three years with a new class of 10 startups each year.
The program kicks off June 9, 2015, and concludes with a Demo Day on September 10, 2015 where each team will present to investors, industry leaders, and the community at large. Ted Serbinski, formerly with Detroit Venture Partners, has been named as the Managing Director of Techstars Mobility, driven by Detroit. Ted and his team are full-time Techstars staff and will live and work in the Detroit area. Applications are being accepted through March 15, 2015.
Today we announce the latest Techstars vertical program with the Qualcomm Robotics Accelerator, powered by Techstars. Qualcomm will host approximately ten companies on their campus for a four month Techstars program building the next generation of robots and intelligent machines. Techstars will be running the program with a full Techstars staff as with all of our other vertical programs. Techstars has seen plenty of success in the past with robotics companies like Sphero and Romotive. We are excited to work with Qualcomm to provide the kinds of resources required to truly innovate into the next generation of intelligent machines. We expect to see smart machines that combine mechanisms, computer vision, sensors, autonomous navigation, and wireless communication. We expect a diverse selection of product opportunities from toys to appliances and new drone solutions.
As with all Techstars programs, we will engage the Techstars mentor network including Matt Grob, CTO of Qualcomm; Ian Bernstein and Paul Berberian from Sphero (formerly Orbotix); Brad Feld, Managing Director, Foundry Group; Nagraj Kashyap and Patrick Eggen from Qualcomm Ventures; Bre Pettis, CEO of MakerBot; Mark Solon, Managing Partner at Techstars; Peter Seid, founder of Romotive; Tim McConnell, the Head of Hardware Engineering at 3D Robotics; Kwindla Kramer, Co-Founder of Oblong; and Vitas SunSprial from the NASA Dynamic Tensegrity Robotics Lab. We will continue to add mentors as the program develops. Many Qualcomm executives and technicians will also be engaged in the program.
The Qualcomm Robotics Accelerator, powered by Techstars is the first Techstars program that Techstars has operated in San Diego and we look forward to engaging with the San Diego startup ecosystem. Each company will receive $120,000 in funding and connections into investors, corporations, experienced entrepreneurs and hundreds of other Techstars founders. In addition, the program will provide access to 3D printers, CAD systems, a FabLab, and electronics hardware.
Details on the program are at QualcommAccelerator.com. The final application deadline is February 22nd, 2015. Selected companies will be contacted by the end of April and the program will begin the end of May. Apply Now!