December 8th, 2020
By Esther Lim, Techstars Studio Lead for Industry Solutions
Proof of Concepts (POCs) between corporations and startups are a gateway to opportunity. These collaborative experiments work to demonstrate the feasibility of a concept or a business proposal to solve a corporate problem or accelerate their innovation goals. Despite regularly leading toward partnership, investment, or mergers and acquisitions, there are plenty of potential project pitfalls if startups are not prepared.
I’ve found that many founders often don’t know if they are ready or not before embarking on a POC. Sometimes there is no clear goal or mission, with founders simply wanting to take on any kind of POC engagement with a large corporation for the bragging rights. This can too easily become a pathway to failure, with a lack of proper expectations, especially around problem and solution fit, between startups and corporations — resulting in everyone wasting time and resources. This can be devastating for a startup that is operating with limited runway.
Before taking the plunge into any POC, it is essential founders know what you can realistically offer, know your corporate partner’s needs, know the goals of the partnership, and know exactly what you’re getting into.
Are you on the other side of the divide? Learn how to tell if your corporation is POC ready.
The first and most important step before partnering with any large organization is for founders to realistically assess where their startup stands in terms of capability and mission, in order to align with the right opportunities.
This requires you to identify the kind of POC you want to run. You need to understand your objectives, and define the margin, deadline, sector, and the type of partner. During this process, ask yourself:
Is my product ready?
How many resources can I dedicate?
What is my minimal cost?
Does it align with my company mission?
Knowing your startup and your business is integral when it comes to budget. Before kicking off any POC, you must understand how many resources can and should go into the project. This will vary with the size of the corporate partner and the size of the startup, but it is imperative that the budget allocation is agreed upon and the objective understood.
Once you’ve assessed your own needs for a POC, you can think about your ideal corporate partner. My first piece of advice here is to know what you are looking for. This can mean focusing on one sector, choosing corporations that already have processes for startups, or pinpointing specific requirements which matter to you. A POC is a little bit like a marriage: you want to pick the right partner, who will be there through thick and thin — because there will be long-term problems if you’re not realistic about the relationship.
One key element is urgency. Is everyone at the corporation on board with the urgency of this particular problem, not only within the business unit, but all the way up to the executive level? If not, will your POC get the support it needs to succeed? Are you eye to eye on the level of urgency?
Cooperation makes or breaks projects and I have seen too many failures when there is a disconnect in getting the project from start to finish. It is imperative, therefore, that you identify an internal corporate champion to help you see the project through. Ask yourself: Who can guide us through the corporate infrastructure and advocate for our project? I highly recommend that you don’t put all your eggs in one basket by depending on just one person, but rather take the time to build multiple relationships, so that there is always someone on your side.
Check out this guide for corporations that are trying to get POC ready. You can use the items it calls out as a checklist when assessing your potential partner, to ensure they’re taking the process as seriously as you are.
Now that you know what you’re looking for in a POC partner, how do you actually find one? First, make a target list of corporate customers who you suspect could make great partners for your startup.
In order to make introductions easier, I suggest making a customer-facing one-pager that explains who you are and what you do. If relevant, a demo video can also be great.
Then, start digging for warm introductions.
Both as you go into the POC and during the engagement, it’s important for you to be very clear about the value you are receiving. Go into the engagement knowing what’s in it for you, and keep an open mind about what that looks like: it might not always come in monetary form. POCs produce versatile outcomes, whether that is revenue, mentorship, referenceability, a business case study, validation of an early solution, a data set, market access.
That said, as you negotiate the terms, be ready to charge for your work. If your partner isn’t willing to invest actual resources, how serious is their buy-in? Charging for the project helps your partner fulfill their part of the deal to assure they are getting their money's worth.
I advise understanding the base amount to charge, which you can tweak each time based on variables like customization and other specific requirements for the corporation.
This is where the fun really begins. Before you started, you (hopefully) worked out a very clear scope for the engagement. As you get on with the work, return to this scope as you go, and if the project starts getting off track, check in with your corporate partner — if you’ve truly discovered a more urgent problem that your startup can solve, should you switch to that, or continue with the original plan? Keep everyone clear about what you’re aiming to accomplish, even if the goalposts move. Especially then.
Determining what success looks like, and revising this as needed, will help keep everybody on the same page. All parties should agree on the success metrics and milestones to achieve an objective result at the end of the engagement. Not least so that you can celebrate when you do meet those milestones!
Clearly, there is a lot to keep in mind when partnering with a corporation. POCs are intense and demanding projects, but they are projects which time and again deliver the spark of innovation which is so needed today — and can be your startup’s best pathway to success.
As you search for the right partner, ensure that you have the basic elements to best find success. I always suggest making a target list of corporate customers, a customer-facing one-pager, and a demo video (if relevant).
Armed with these resources — and the knowledge of who you are, what you want, and where you are going — you will be best positioned to take advantage of POCs.
Esther is a serial founder, innovation leader with a successful track record of advising Fortune 500 companies, coaching startups, developing new markets and creating innovative products and services. Esther has expertise in innovation strategy, strategic partnerships and alliances between corporates and startups, venture development, international business strategy, launching and scaling startups, business transformation, and design thinking.