Should technology founders co-innovate with corporate organisations? What are the advantages and disadvantages of doing so?
We gathered a panel of experts to deep-dive into the topic of co-innovation in a bid to decipher what entrepreneurs should bear in mind before establishing a relationship with a corporate partner, and to find out more about how corporates approach these kind of agreements.
The panel featured Shetal Edwards, head of innovation partnerships at EDF Energy; Devrim Celal, chief executive officer at Upside Energy; David Barlow, business development at Gestoos; and Matthew Bradley, an investor at Forward Partners.
The pros and cons
By definition, co-innovation describes the relationship between partners which purposively manage the sharing of knowledge through joint invention and commercialisation. Startups and scaleups typically want to partner with larger organisations to gain expertise, resource and legitimacy. In turn, corporates are keen to work with new tech companies to develop innovative solutions and keep abreast of what is happening in-market.
“If you find the right partnerships you can be very powerful in a short period of time, if you find the right people to work with,” Barlow said.
Bradley agreed: “Corporates accelerate the process of innovation of startups just by virtue of doing business with them.”
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These kind of relationships also come with a set of challenges that both parties need to consider.
“It’s important for startups to do their due diligence when it comes to co-innovating with corporates. There are some corporates that use small technology companies to make themselves look good, whereas others are in it for the long-run,” Barlow continued.
‘People who work in startups are mission driven,” Celal weighed in. “You work hard for a startup because you believe in the solution you’re developing.
“People in corporates are process driven, so, this creates a discrepancy. Startups are agile, corporates are not. As a startup you’re one bad decision from going bankrupt, whereas corporates have a lot more time,” he warned, while noting that understanding these basic differences would provide an adequate framework for meaningful relationships.
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For Upside Energy, a relatively new tech company which is currently working with EDF Energy, raising brand awareness is key. This will not only guarantee that your competitors are aware of who you are and what you do, but it should also help you gain traction. Additionally, Celal spoke about how data-rich corporate firms were – yet another incentive for tech startups and scaleups to work with large companies.
Bradley, who used to work on the trading floors at Lloyds and BarCap before doing an MBA at SDA Bocconi and joining Forward Partners, was quick to highlight the associated risks of co-innovation.
“Partnering with a corporate could kill a business,” he said. “When corporates approach startups or scaleups, there’s an inherent element of validation, but tech entrepreneurs shouldn’t be surprised that corporates want to work with them because they have something to offer them.”
Bradley encouraged founders to feel confident that they created something of value which could be potentially useful to a corporate, but noted that working alongside such vast companies was a time consuming process.
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He shared a key piece of advice: “If you’re a B2B startup, know that interacting with corporates is a skill. EDF Energy, for example, knows how to work with big businesses better than you ever will.”
As much as startups and scaleups need to be acutely aware of the issues they might face if they enter into a partnership with a corporate, large businesses also need to consider specifics before offering their time, expertise and resource to a smaller company.
Edwards commented on how successful co-innovating often relied on people within the corporate to be committed to working with the startups and scaleups.
“It’s also trial and error. We [at EDF Energy] are making judgements on startups in a very short time. It’s a learning curve for us, too.
“Corporates often have to adapt as much as startups,” she added, noting how big firms such as EDF Energy are used to working with other corporates.
“It’s taken quite a culture shift to adjust to working with startups. We’ve realised, for example, that we can’t issue 40 page contracts.”
Barlow agreed, explaining how big corporations are often made up of smaller, insular groups. As challenging as this may prove for time-poor entrepreneurs, it also presents a unique opportunity if it’s leveraged appropriately.
“It’s about finding a person that really wants to champion what you do.
“They also re-organise very often so don’t rely on individuals, build relationships,” Celal advised.
“Do your homework or you will get dragged through mud,” Barlow added.
Awards: are they worth it?
The technology industry is awash with competitions and award ceremonies seemingly wanting to highlight successful founders and their businesses. But, to what extent can an award prove useful when it comes to long-term business success?
Barlow said winning awards from established businesses such as EDF Energy can help a startup launch and cement a long-term relationship with a corporate.
Celal told entrepreneurs to avoid entering competitions or awards unless they offered real-value.
‘Don’t get stuck into the glory of winning awards, unless they have commercial benefit,” he said.
Edwards spoke about EDF Energy’s own programme, the ‘EDF Energy Pulse Awards’, which so far has received over 250 applications demonstrating a real desire from start-ups to access this type of collaboration, and noted how they had resulted in positive exposure for some otherwise relatively unknown companies.
“We have seen startups benefit from the publicity and profile and go on to win subsequent funding. Awards open up opportunities.”
“We are a major employer in the UK and part of this is giving back and supporting the ecosystem. The companies who participated in our awards programme in France have seen significant investment in their business. We see real value from running awards, both for the startup and back into the organisation.”
As the session drew to a close, the panelists pondered what key pieces of advice to share with attendees.
Celal said: “Have a clear exit criteria and ensure you have a common objective with the corporate.”
Bradley gave a candid overview of how investors may perceive the relationship between a prospective portfolio company and a corporate.
“If you are an early-stage startup that wants to raise money, the likelihood is that if you get into bed with a corporate, you will likely build a product for them. No investor will be impressed with that.
“Keep generalised solutions across a market of clients. Be aware of not falling into the trap of becoming a product division of that corporate,” he warned.
Barlow added: ‘It’s important to understand the ‘why’ of your business. Believe you have a product that you can take to market. Go back and work on that if you haven’t got it. Work with the corporate as a platform for accelerated growth.”
Co-innovation offers a unique set of opportunities for corporates and startups, but it’s important for both parties to consider the associated risks and prior to collaborating on a project. While there are potential challenges that come with co-innovation, if done properly, a good relationship between a startup and a corporate organisation can prove beneficial for both. Young companies will gain access to market and expertise, while corporates will be able to explore endless opportunities afforded by the agility of startups.