By Chris Heivly, Entrepreneur in Residence at Techstars
Great startup communities have meaningful connections from every actor in the ecosystem. Corporations are one of those critical actors. Why? It’s actually simpler than you think. There is something in it for everyone. The perfect win-win.
For an effective win-win, you must have two motivated parties each of whom get obvious value from the connection.
The problem with the corporation–startup community connection, or lack thereof, is that the value for each actor is many times not obvious.
I liken this relationship to the idea of two old college roommates who haven’t spoken for 10 years. We like each other but we have no idea what is going on in each other’s lives. In the void of information, I just don’t care as much.
But once we reconnect, our motivation to support each other seems to accelerate and all of those little nuggets of each other’s lives feel important again.
For mid to large size corporations, the two most common challenges to maintaining or growing their business are:
- Staying innovative, and
- Talent recruitment.
For startups, the challenges are simple:
- Stay alive,
- Introduce and validate their product idea, and
- Find real customers.
Unless you are Apple, Amazon, or Google (and a few others), corporations struggle to say current. Every corporation I am engaged with has doubts as to how innovative they are and have some level of fear that a new company will come along and take their customers. In addition, finding and recruiting new talent to address their innovation needs is next to impossible.
But they have customers, deep industry and product knowledge, and money.
Unless you are one of the very few startups that have raised more than enough capital to meet your long-term needs, you wake up every single day worried about whether you can find a customer to use your product.
Can you see the basis for a healthy relationship? There are so many win-win connect points and opportunities if each actor just tries a little harder.
I will go out on a limb and say to my corporate friends that the onus falls a little more on you than the startup. You are the pretty girl/boy at the high school dance. Can you make it a little easier for us dorky startups over on the wall?
How do you do this? It’s really quite simple. Show up. Every reasonably-sized startup community has formal and informal networking events. Show up. Share who you are and what you care about. The rest will quickly take care of itself.
Looking for another way to connect? Both corporations and startups benefit from Techstars corporate partner accelerators:
- Corporations, learn how Techstars can connect you with the most promising startups to future-proof your business;
- Startups, apply now to Techstars mentorship-driven accelerator programs.
A quick New Year’s shoutout to everyone with love and care for early-stage acceleration. 2018 marks year four of our METRO Accelerator powered by Techstars. Since the 2015 launch of our first Techstars program, we are (proudly) looking back across three years of building and running a bona-fide startup development system – a first for METRO, a first for our customers, and a first for the hospitality industry. Not bad!
Since program inception, our joint METRO Techstars team has attracted 40 formidable founders to trust us with their business building. On the way, METRO learned to become a dedicated early-stage investor, a passionate corporate mentor, and a powerful source for commercialization opportunity helping our startups grow.
For the 50+ year old multinational corporation that METRO is, three years of successful early-stage startup development support has been a rather transformative experience. With that – lessons learned, lessons shared – here’s what I believe is key to look out for if you are a founder looking to apply for our (or another) corporate program:
Build Relationships That are More than Transactional
Most corporate mentors you encounter during the program are likely individuals tied to a myriad of internal realities, complexities, and constant change. Tempting as it may be to assume s/he possesses a magic wand, at times it’s not as easy as it seems to unlock the large(r) organization. During the program, better you connect with your corporate mentors beyond your most ad-hoc request (say, to proof-of-concept your solution ‘today’), to create relationships made to get your emails answered, even months post Demo Day.
Learning Goes Both Ways
You may want us to – but no, we don’t always know the answer to all your questions. To best deal with that, what good corporate programs (should) do is to help create a ‘safe space’ for mutual learning. As we work jointly through your company’s opportunities and complexities one issue at the time, we found outcomes prove best if everyone comes out smarter than going in. So, do keep challenging us as we will do the same. Let’s be honest. Often, both sides are in uncharted territory. So, let’s get jiggy with it, creating spaces for plenty a-ha and eureka moments enabled equally on both sides.
Ask, Does the Corporate Provide Robust Post-Demo Day Commercialization?
I firmly believe the difference between a good program and a great program is the corporation’s ability to provide commercialization opportunities beyond core 12-week acceleration. Think program-as-a-service versus program-as-a-lab. The former seeks to afford you a more permanent path to new customer acquisitions, following to the biz dev support during the actual program. To be sure – ‘free market’ forces in full swing – no corporate program will actually guarantee you new customer opportunities all the time. Hence, back to my point above, this is why establishing long-term corporate–mentor relationships is such an important thing.
Be Sure You’re Ready to Run with It
How much ‘homework’ is enough before approaching a corporate about piloting your product or service? Hard to say or measure, but we tend to know it when we see it. Above all, be comfortable asking uncomfortable questions in sometimes tricky corporate meetings. Having sat in many pitch sessions, don’t short-sell yet don’t over-hype. No matter what you are building, it’ll likely always be added to or otherwise be ‘under construction’. That is perfectly fine as long as you are honest about your offering’s strengths and weaknesses (to the degree you know of them). In other words, corporates or otherwise, it’s your audience’s trust in your judgement that is equally as important as promoting your product’s intrinsic genius.
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.