13 Corporate Startup Engagement Tips (w/ Examples)

Here’s a real fact about corporate startup engagement:

68% of the top 100 Forbes Global 500 companies are engaging with startups in some form [1].

But that’s not all:

Annual corporate investment in startups has actually grown nearly 300% since 2010 [2].

In this article, we’ll share 13 specific strategies (illustrated with models, resources and examples) on how corporates can leverage their resources to better engage with startups.

Whether you are an executive, a strategy leader or a corporate innovator, you will learn actionable strategies that will help facilitate the engagement process with startups, and ultimately help drive more value for your organization.

13 Corporate Startup Engagement Tips (With Examples)

Table of Contents

1. Determine your goals, strategy and resources

Before jumping into corporate startup engagement initiatives, you need to have the foundations right. 

First, make sure your plan to engage with startups is aligned with the business goals and priorities of your organization:

Is your goal to increase profitability?
Grow  market share?

Then, you need to ensure you’ve developed a clear innovation strategy to help you achieve these goals.

An innovation strategy is “a commitment to a set of coherent, mutually reinforcing policies or behaviors aimed at achieving a specific competitive goal”[4].

Now, let’s take a quick look at the different types of innovation strategies you can develop:

In “The Management of Technological Innovation,” Mark Dodgson speaks of four different types of innovation strategies: proactive, active, reactive, and passive [5].

  • Proactive innovation strategies can be either radical with breakthrough changes, or incremental, using constant changes to improve product performance. According to Dodgson, companies with proactive strategies such as Apple tend to be technology market leaders, have strong research orientation, and can benefit from the first-mover advantage.

  • Active innovation strategies, such as those employed by Microsoft and Dell work to defend existing technologies, responding quickly to markets. Companies with active innovation strategies typically use incremental innovation tactics, relying on in-house applied research and development.

  • Reactive innovation strategies are used by companies that focus on operations and primarily consider low-risk opportunities for innovation. Companies, such as Ryanair are known to take reactive approaches to innovation, making only incremental changes based on a wait-and-see approach.

  • Passive innovation strategies do not innovate until customers demand changes to their products or services. These companies take no measures to innovate and do not move without significant impetus to appease rather than impress customers.

Finally, once you’ve determined your goals and developed a strategy to help you reach them, identify (or create) the resources you’ll be allocating to properly execute your strategy.

For instance: marketing, R&D, operations, finance, etc.

2. Determine your specific objectives for partnering with a startup

Corporates choose to engage with startups for a variety of reasons.

These reasons are usually driven by a company’s global business objectives and the resources available to them.  The most common drivers for working with a startup include:

Image credits: 500 Startups. Unlocking Innovation Through Startup Engagement. Best Practices from Leading Global Corporations [3].

Other motivations include:

  • Gaining information on evolving markets

  • Mitigating competition

  • Getting cultural inspiration from fast-paced startups

A good place to start is to identify which specific pain points you are having in your organization:

What problems are you hoping to solve when engaging with startups?

Once you have answered that question, you should assess if the purpose of engagement is to fulfill short term or long term business goals.

For short term business goals, the best approach is to involve pilots, PoCs (proof of concept engagements), or partnerships. These models will help you to quickly identify how startups can solve your specific pain points (more of these models later in this article).

However, for longer-term business goals (such as investing in the future of your industry or even shifting the business entirely), indirect approaches tend to be more relevant.

For instance:

You could partner and support relevant early stage startups in order to gain insights on companies that could potentially disrupt the whole market.

Plus, indirect engagement with startups can have cultural benefits that enable the flow of different perspectives, access to new talent, and a collaborative environment that encourages innovation.

3. Actively engage with startup at events and conferences to gain knowledge and contacts

Corporates can engage with startups through a wide variety of mediums. Selecting the ones that work for you will depend on a few important factors:

  • Availability of resources (such as physical, human, intellectual or financial)

  • Time available

  • Your specific business needs

Events tend to be a great channel, as they allow corporate companies to access a large quantity of startups in a short period of time.

The most relevant events usually include conferences, hackathons, and startup pitch events. Due to COVID, many of these events have successfully been shifting online, enabling startups to maintain their visibility even in the absence of physical gathering spaces.

At Runway, one of our partners, PitchForce, regularly hosts virtual competitions, giving the opportunity for promising tech startup founders to deliver 4-minute pitches to a panel of seasoned investors.

As a corporation looking to identify startups, events like these allow you to increase your knowledge of dozens of emerging startups that may one day directly impact your business.

Another way to leverage events is to sponsor them in order generate awareness and increase your visibility in the startup ecosystem.

Now, as an attendee, here are two simple steps you can use for making the most of events:

  • Short-list the events you would like to attend and identify what you are hoping to achieve by going there

  • Develop a clear action plan of how you intend to make the most of each event

Tech Conference Resources

Here are some of our top picks for worldwide tech conferences:

Industry Conference Resources

If you’re looking for specific conferences related to your industry, you can check out these great resources:

 

4. Run Hackathons

Born out of Silicon Valley, hackathons have been rising in popularity.

Hackathons are events, typically hosted by tech companies or organizations, that encourage programmers and developers to collaborate on a project for a short period of time.

They typically last between 24 hours to a full weekend, and participants work to create prototypes or innovate upon existing products or services.

In 2018, 5,636 public and internal hackathons were organized globally, an approximate 40% increase since 2016 [6].

Hackathons can be held for either internal purposes (such as exploring a new technology or fostering organizational culture) or external purposes (accelerating a specific product development – think Facebook like button).

The visual below demonstrates common organizational motivations for hosting hackathons:

Image Credit: Mercer. State of Hackathons. [7]

Running or sponsoring hackathons are a great way to boost corporate startup engagement as they offer large organizations the opportunity to:

  • Ideate innovative solutions for their pain points

  • Rapidly prototype new technology solutions

  • Expand their network within the startup ecosystem

  • Increase their recognition in the industry

  • Finding top talent in a technical setting

However, this model also has a few limitations you should be aware of.

Despite their ability to quickly crowdsource innovation, ideas generated can sometimes lack the practical elements needed to function in a real-world environment and necessary structures to be integrated into organizations.

With that being said, and to ensure you make the best of it, it’s important to ensure your hackathon has a clear value proposition that will generate a positive ROI.

At Runway, we encourage our corporate clients to plan beyond the hackathon. Specifically, we advise them to plan for what they will do with the ideas generated and/or how they will engage with the hackathon participants going forward.

For instance:

Hackathons can be an effective way to select candidates for internship positions. Be sure to plan and develop the related mechanisms and communications and integrate these into the hackathon communications plan prior to launching the promotions campaign for the hackathon.

Famous Hackathons & Corporate-Sponsored Events

Here are some notable ones:

Did you know that Runway Innovation Hub provides strategic guidance to global companies like Fujitsu, Lenovo or IBM? 
 
If you are looking to navigate the trends affecting your business, identify growth opportunities, and generate tangible results for your organization, learn more about how we can help you here.
 

5. Experiment with cohorts

Cohorts are startup engagement programs, typically taking place over the course of 3-6 months, that emphasize peer engagement among startups.

Accelerators are one of the most common examples of cohorts, in which early-stage startups are given access to education, mentorship, work space and financing resources that would otherwise be difficult to attain with their smaller budgets.

Selected startups will enter accelerators for a predetermined period of time as part of a cohort of companies during which they are laser focused on accelerating their company’s growth.

While gaining entry into a cohort may be competitive, once selected, participating startups are generally sufficiently supported to successfully complete the program.

A great way to benefit from the collective ability to experiment and brainstorm through cohorts is to sponsor accelerators or create in-house accelerators of your own.

Here’s an example:

Image Credit: Transparent Path. Microsoft for Startups Accepts Transparent Path Into Accelerator Program [8].

Microsoft for Startups offers perks such as free office space for startups, 1:1 mentorship, a curated curriculum with industry leaders, and most importantly, access to Microsoft’s ecosystem and investor community.

While many accelerators often take equity from startups in their cohort, Microsoft’s Accelerator neither asks for equity nor expects startups to build on Microsoft’s tech, which can be highly beneficial for early-stage startups looking to scale.

6. Create startup funnels

Unlike cohorts, funnels are programs that selectively weed out startups, ending the program with fewer startups than began it.

Often unaware that they are competing with other startups, startups engage in a competition for a corporates’ limited resources.

Let’s take a look at an example:

SAP Startup Focus Program focuses on more mature startups with enterprise solutions that can be offered to SAP’s established enterprise customers looking for disruptive innovation to power their own businesses.

Funnels like SAP Startup Focus not only helps startups identify stage-gates or milestones by enabling them to test their solutions at scale, but also offer startups the opportunity to build upon SAP HANA or the SAP Cloud Platform to create SAP-certified solutions that can be piloted offered to SAP’s enterprise partners.

Meanwhile, SAP benefits from access to top startups that can offer validated solutions to its global customers.

Identifying the right approach will depend on your underlying short term and long term goals and business needs. Funnels can directly generate tangible solutions to corporate pain-points, making them a superior option for corporates with highly specific goals.

7. Have a clear point of contact for startups

A recurring issue among corporations looking to engage startups is the lack of a clear point of contact.

In an interview with Forbes, CEO of Innovation Leader, Scott Kirsner, noted that in his research on Fortune 500 companies, more than 50% of surveyed respondents said “I’m not sure,” or “we don’t yet have one,” or “we don’t have a clear point of contact for interacting with the startup ecosystem” [9].

Without a clear point of contact, communication between startups and corporates can become muddled, creating unnecessary inefficiencies.

Having a designated startup ambassador who serves as the liaison between your organization and startups can significantly facilitate the flow of communication and create a more positive experience for both parties.

Similarly, it is important for corporates to have an internal point of contact with the decision-making power to authorize activities with startups. Corporates often cite a wide range of C-suite executives from CEO to CTO to CSO and CMO as the primary decision maker, demonstrating a lack of consensus on who is in charge of leading the company’s innovation efforts.

Having an internal delegate with oversight and authority over innovation efforts is a necessary step for any corporation that is serious about startup engagement.

8. Align around expectations risks and challenges early on

Before engaging in a partnership, corporates and startups should have a reciprocal understanding of expectations, risks and challenges.

One way to ensure this is happening is to establish specific standards on key factors.

Ken Matsumoto, the VP of Information Technology Research at the Nomura Research Institute (NRI) IT Solutions, notes a couple of key expectations NRI expects to see from startups:

  1. R&D Stage: at the R&D stage of engagement, corporates expect earlier stage startups to be flexible to explore concepts and possible business cases alongside the corporate to ensure that underlying assumptions are aligned and business goals are clearly understood.

  2. Critical Business: in the case of critical business, typically involving later stage startups, corporates need startups to provide stable, high quality hardware or software  services and maintenance.

  3. Budget: in the ideal case, costs will be within a business unit’s budget, so that the division leader can manage by him/herself. When costs exceed a business unit’s budget, it can delay the startup engagement process or stop it completely, as it involves securing additional funding from another business unit or further authorization from management.

Corporates and startups often have very different cultural contexts, so aligning on expectations and budgets early on is key to avoiding communication mishaps down the line.

9. De-risk your startup engagement by adopting a diversified portfolio approach

Here’s a fact:

81% percent of corporations see fewer than 25% of their pilots turn into commercial deals that can be taken to market [3].

This can result from a variety of factors such as technology failure or a blatant misalignment of business objectives.

The same report found that the most effective companies run upwards of 50 pilots a year, which enables them to hedge risk and cross-reference numerous ideas that can push forward business goals.

Rather than focusing attention on a few startups, you should adopt a diversified portfolio approach, working with a wide-range of startups to hedge their bets.

Ultimately, a combination of technology, consumer preferences, and the direction of society as a whole can impact a startup’s success.

Which means increasing the number of engagements is an effective strategy to de-risk your innovation efforts and cross-check innovative ideas from different perspectives.

 

10. Leverage POCs

Startup collaboration is a notably difficult feat.

For that reason, corporations should be prepared to conduct a lot of trial and error experiments.

This is where PoCs (proof-of-concept) engagements can be relevant. They allow corporates to identify if there’s a practical business use case that can serve the needs of the broader organization or a target market.

Moreover, companies may experiment with implementing the new technology across various business units, which can offset the costs associated with launching the pilot.

According to Harvard Business School professor Clayton Christensen, 95% of the 30,000 new consumer products launched every year fail [10].

Corporates should understand the reality that most of their startup pilots may never reach the market. However, each failed experiment provides a great opportunity to learn from past mistakes and prevent their recurrence.

Startup engagement is often a numbers game. Which means rather than letting a failed PoC or project get in the way of future engagement, corporates shall identify key issues to improve their startup selection and engagement process, and try again.

11. Conduct internal surveys

Another way corporates can avoid repeating mistakes is to conduct internal surveys to accumulate feedback on how the startup can improve its solutions.

A couple of good starting questions include:

  • What are the most exciting startups or new technologies you have discovered about recently? Why?

  • What has your experience working with startups been like so far?

  • What are some of your hopes and fears about engaging with startups?

  • What metrics do you use to determine the success of your startup engagement?

These surveys can equip corporates with the constructive feedback needed to improve their products and services, which can then be used internally or offered to the corporation’s larger base of clients and partners.

Plus, this flow of communication can develop a streamlined system of feedback and improvement, establishing more trust and communication between the startup and corporate.

 

12. Create a streamlined process

Research shows that 20% of companies lack a streamlined startup engagement process, putting them at a tremendous disadvantage to teams that have aligned their resources and established developed systems to facilitate their engagement efforts [3].

Streamlining your startup engagement process has two main advantages:

First, it facilitates and accelerates the process of identifying and engaging startups.

Second, it improves the startup’s experience. Which contributes to improve the reputation of your company (and helps you attract better startups into your pipeline, improving the overall quality of your PoCs and partnerships).

Here are 4 practical ways to streamline your engagement process with startups:

  • Delegate a key point of contact and appropriate roles internally in your company

  • Create a standard NDA template or a purchasing template

  • Establish a framework and specific criteria for selecting startups

  • Develop a budget for startup projects

Now, let’s take a look at an example:

TD Ameritrade is a company that offers a trading platform for financial assets. They’ve established a highly structured process that serves as a model template for companies looking to streamline their innovation process.

According to the company’s CIO, Vijay Sankaran, TD Ameritrade takes on an innovative approach that first starts by adopting a customer-centric view to identify market opportunities.

They use a “test-and-learn” approach to experiment with different ways to address the market need.

The company has also created a board that directs resources and funds to enable experimentations that can be continuously iterated.

“We’re still thinking big and involving teams from across the firm, but we’re strategically pursuing areas of opportunity where we are uniquely qualified to develop innovative solutions.” – Vijay Sankaran, CIO, TD Ameritrade [11].

With established innovation leaders equipped with the ability to effectively allocate the business’s available resources, the company has created a highly efficient system that aligns its innovation efforts with its overall business needs.

The process of continuously testing and making necessary adjustments further allows the company to learn from its past mistakes and make the necessary changes to ensure that its next innovation experiments can effectively respond to the changing consumer preferences it predicts.

13. Remember that startup engagement should be a mutually beneficial process

Corporates can gain a wide-range of benefits from working with startups.

From gaining knowledge of a technological niche, industry, or specific application, startups can provide valuable insights and solutions to major corporate pain-points.

Plus, working with startups also enables large companies to benefit from the startup culture centered around speed and the urgency to innovate and execute.

The startup notion that being done is better than being perfect is a glaring contrast to the risk-averse, KPI -driven nature or large organizations.

Equally as important, corporations can add tremendous value to startups.

The best corporate-startup collaborations are mutually beneficial, where each party is working to assist the other with areas outside of their expertise. Having a corporate partner not only gives startups credibility, but also gives them access to an abundance of corporate resources that can help them with branding and PR, distribution, suppliers, and funding.

As a corporation, understand where you can add value to startups and support those areas accordingly. If you are a corporate looking to identify the right startups for your business needs, we can help.  

Conclusion

Corporate startup engagement is not an easy thing.

It’s a notably challenging journey that will consistently require adaptation, calibration, and numerous iterations.

But if you follow these tips, your organization will be equipped to develop an engagement process that positively impacts your business.

Develop clear engagement goals that align with the specific goals, strategy and resources of your organization.

And most importantly, don’t overlook communication. Exchange on your strengths and weaknesses. Identify clear points of contacts in both organizations. Proactively addressing the issues that may arise.

Those are best practices that will help you develop a mutually beneficial relationship. And pave the way for successful collaboration that fuels the growth of both parties.

Written by Erika Hull, Innovation Analyst
Runway Innovation Hub

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