Match-Maker Ventures was proud to co-host the first of two Scale Up Now webinar events with Arthur D. Little this week. The event, including panels curated by Match-Maker Ventures to offer the most leading-edge perspectives, helped generate discussion and share valuable insights surrounding one of the most attractive topics in business today: collaborations between innovative scaleups and large corporates. With our lineup of expert speakers, Match-Maker Ventures and ADL compared insights on the value, challenges, and different approaches to these collaborations.
What did we talk about?
The topic of our first webinar session this week was the bottom line impact of scaleup-corporate collaboration. Panelists discussed the best ways to generate meaningful impact on bottom-line operations and efficiency through the products, services, and solutions of scaleups, as well as the key challenges and necessary steps to be taken by corporates to prepare for these partnerships. The content of the session was especially meaningful for corporate leaders looking for an effective way to innovate using scaleups, scaleups who may be frustrated or mystified by the collaboration process, and industry experts looking to better understand the value that scaleups bring to their sectors.
Keep reading to learn more about our expert panelists and the key learnings they shared with our audience!
Who did we talk to?
What did we learn?
Below are our top five key takeaways:
1. There is a big difference between startup and scaleup
“Scaleup” is more than just a trendy turn of phrase – it’s a title that separates mature innovations from earlier-stage prototypes. But where exactly to draw that line has not been universally agreed. Is it a funding threshold? A time limit? Or is it something more subjective?
Our expert panelists had differing perspectives on the exact delineation between startups and scaleups.
Some expressed that funding was a key metric to consider. Others emphasized that even well-funded scaleups can lack the requisite maturity to enter the scaleup leagues. Still others chose to hit on yet another indicator of scaleup status, perhaps the most important of all: the readiness and capability to scale. Without the preparedness to bring a solution to a very large customer base, corporate partnership possibilities for startups will remain slim.
Ultimately, all of these factors are important considerations for potential partners. A corporate seeking an innovation collaboration will only tolerate so much risk from under-funded or unstable earlier-stage companies, and furthermore, a more layered and complex corporate structure will not always be capable of productively interacting with a very immature or underdeveloped startup.
But what all of our speakers did agree on was that, while earlier stage startups can still bring promising and valuable innovation to a corporate, the additional risk and effort involved requires careful offsetting and greater resource commitment, and consequently, scaleups can make more reliable collaboration partners. Especially with regards to protecting a corporate’s bottom line, it is often more sensible to take a safer and less complicated bet on a scaleup rather than a startup.
Even so, collaborations with earlier-stage startups should not be completely discounted: panelists emphasized that unique startup solutions can still be invaluable in solving corporate problems.
2. Both the scaleup and the corporate have to be ready to partner
Scaleup and corporate readers alike may be familiar with the roadblocks and challenges that can arise in the process of collaboration. While the problem and solution can sometimes be crystal clear, getting to a point of affecting a solution can be a drawn-out and frustrating process if both parties are not adequately prepared to collaborate.
Our corporate panelists highlighted the ways in which internal challenges can hamstring even the most well-intentioned corporate innovation teams. They mentioned challenges like: uncooperative internal business units, internal and external misalignment on goals and intentions of collaboration, process delays, and the potential of overwhelming scaleups with pressure/questions – all of which can potentially result in the collaboration never having its intended effect or, worse still, the startup dying off from lack of resources while awaiting concrete collaboration.
Our scaleup panelist Andrew Campbell, representing Match-Maker Ventures portfolio scaleup Apiax, echoed the corporate frustration and concerns about how difficult it can be to interact with an unprepared corporate. In the end, scaleups like Apiax can have a hard time making it to a mature stage of development if they are not familiar enough with corporate environments to navigate these challenges. They should learn to discern between a prepared and an unprepared potential corporate partner.
And of course, as with any collaboration, partnerships between scaleups and corporates are a two-way street: scaleups themselves have to be prepared for partnerships as well. They should be familiar with the structures of the corporates they are approaching and be able to anticipate the common problems that corporates can face when setting up this kind of collaboration.
3. Not all collaborations are created equal
For large corporates partnering with scaleups, there is a common decision to be made: whether to acquire a scaleup, or simply partner with it. From the discussion of our panelists, it can be deduced that this decision can be motivated by a variety of factors, including the size of the scaleup, the sensitivity of the project, the competitive environment surrounding the scaleup solution, and the desired direction of innovation (whether it should be focused from the outside-in, or from the inside-out).
While some corporate innovation functions did show a clear preference for acquisition, which allows for the scaleup to work and grow within and alongside the “parent” company, other corporate representatives emphasized the difference in dynamic between partnership and subordination. To solve some of the issues of non-acquisition collaboration while maintaining scaleup independence and a spirit of equal partnership, one panelist suggested the possibility of more specific contract clauses, which can protect the corporate from competitive encroachment, among other things.
Furthermore, different collaboration styles can be utilized to achieve different results, so there is no one-size-fits-all answer to this classic dilemma.
4. Relevant use cases and secure funding go a long way
The availability of relevant use cases is such an important differentiating factor between startups and scaleups that it deserves its own place in this list. Our panelists agreed that scaleups which can prove their stability and scalability via previous success stories have a distinct advantage in corporate collaborations, as this collaboration history means that these scaleups have essentially been pre-vetted by other qualified entities.
Getting to a point where those use cases have been established can be an arduous process for earlier-stage startups, but for our expert panelists from both scaleup and corporate backgrounds, the advantage that the use cases bring cannot be overstated.
A further validation of collaboration readiness that these corporate innovation representatives take into consideration is the availability of secure funding. Just as with previous use cases, a successful round of funding can be a clear sign of trust from other qualified entities, enabling a scaleup to demonstrate its maturity and scalability to potential future partners.
5. The COVID crisis has been both a challenge and a blessing
Perhaps most pressing with regards to the question of bottom line impact was the discussion of the impact that the COVID crisis – and other internal and external crises, for that matter – can have on the necessity and accessibility of innovation for large corporates, as well as the impact these crises can have on the workings of the collaboration.
Without a doubt, the COVID crisis has hit the bottom lines of corporates pretty hard. While some corporates have shrunk down their operations in order to conserve resources, others have used the crisis as a means to reinvent themselves and embrace innovation – a fact which has opened the door for some very productive innovation opportunities and collaboration styles. Yet, for scaleups, the crisis has also raised the bar for collaboration with the now risk-averse corporate landscape, making it all the more necessary to offer solutions that protect the corporate’s bottom line without incurring additional risk.
As a result, one panelist suggested, more risk-intensive means of collaboration like startup accelerators and incubators may be heading the way of the dodo, paving the way for different, more sustainable, and more partnership-based collaboration styles.
Interested in learning more? Check this out!
If you have made it this far and you are interested in learning more about scaleup-corporate collaboration, we highly recommend reading the Age of Collaboration, a joint study between Match-Maker Ventures and Arthur D. Little which gives valuable empirical insight into this collaborative phenomenon.
To learn more about our portfolio of innovative scaleups who are making these kinds of collaboration a reality every day, head over to our LinkedIn or check out the rest of our blog to see all of our latest portfolio success stories.
Finally, if you have any questions or would like to learn more, feel free to contact us here.