The partnership between a startup and a corporation is all about balance. Startups harness their agility to identify new market opportunities but often struggle to scale. On the other hand, corporations have successfully scaled but can miss new market opportunities. This is not to say that either can't do the other successfully – they can and have – but there's a benefit to partnering up.

There's a reason 94 percent of tech executives think innovation partnerships are an essential component of their strategy. Partnerships offer access to new markets and customers. They can lower development costs, provide valuable insights into experimental technologies and the talent required to build them, and, importantly, accelerate innovation. The problem is that these partnerships are anything but a sure thing.

Let's dive into what corporates look for in a partner and how startups can increase the chances of a successful collaboration.

Corporates offer more than funding

While many corporates ask for equity in startups, entering the partnership with a no-equity stake goes a long way in establishing clear parameters and trust for both parties. Although seemingly counterintuitive, financing is not among the top three reasons startups engage in corporate partnerships.

Startups are primarily interested in access to the corporate's customers and market. In exchange, startups help solve a broader range of customer problems and expand a corporation's product offerings. More partners also mean a more extensive ecosystem and the chance to offer customers a curated selection of startup solutions.

Understand what makes you unique

Startups should acknowledge that there is often a chasm in work cultures and styles. Corporates plan, budget, and approach risk differently. They also have different types of customers.

Mark Osborn, GVP Business Development & Strategy, SAP Consumer Industries, advises startups approaching corporate customers should find others with a similar mindset. "It helps when you can identify the innovators in those organizations – people who are willing to take some risk on new products in exchange for innovation," says Osborn. “Startups need to understand that the value they bring to a corporate customer is the opportunity to innovate and get ahead of the competition, even if it means taking a risk.”

The importance of collaboration

Corporations are customer-focused organizations. Startups must have the same focus. "When we see startups coming to the table just asking for leads, the conversation generally doesn't go very far," says Paul White, VP Business Development, SAP.iO. "We need to see startups come in with a mindset of mutual value creation and collaboration, and importantly a plan on how you will provide value to our customers."

If that value is not immediately apparent to customers, startups must differentiate themselves in terms the customer will understand. "Customers won't always understand the level of innovation you're bringing, so you must phrase it meaningfully. Make it resonate in the context of the business problems they're trying to solve," says Osborn.

Show how we are different together

The best partnerships strengthen both parties. Combining new perspectives and skills should create something distinct. "This is a case of one plus one equals three," says Osborn. "We need to understand not only the value you're bringing to the market but the value that we can derive together and how that is unique."

Startups and corporates need to be able to clearly articulate why they are stronger together.

"There has to be something that we deliver together that we cannot individually," says Osborn. "You must think about how the partnership expands our capabilities and how they're complementary. This way, we can craft a story for our account teams."

Approach every opportunity as a chance to scale

There's no metric in sales with as much impact as a successful proof of concept or go live. "When we can demonstrate some success together, that's going to snowball, and that's what's going to help you," says Osborn.

Getting that first success means approaching every opportunity as a potential to scale.

"Account executives have multiple accounts, so as long as you demonstrated credibility, you have earned the right to ask if there are other customers or account executives you could introduce me to,” says White.

Not all partnerships work out

The stakes will always be higher for startups than for corporations. Most startups don't succeed, and more than two-thirds of them never deliver a positive return to investors. So having access to a corporate partner's market and customers while sending a positive signal to investors can help. Despite the benefits, not all partnerships work out. For example, an integration won't strengthen anyone's value proposition if the startup's ideal customer doesn’t use the corporation’s products.

To partner or not to partner

Take the coffee corporation Melitta and the traceability startup, Scantrust. Coffee consumers increasingly want transparency into where the beans are farmed and roasted. Scantrust provides Melitta traceability through a packaging-based QR code to meet demands. Scanning the QR code provides the farmer's story and the coffee’s processing method.

For Melitta and Scantrust, the ROI from working together comes from much more than equity. It can transform their business. From garnering insight into best practices and working styles to unlocking new technologies to meet consumer demands, partnering up has many benefits.

Share this article

Explore related content