The Ultimate Guide to Startup Scouting and Engagement

Packed with practical strategies, examples, and insights from experts. Learn how to work with startups so you can access new technologies, reach new customers, and ultimately solve business problems.

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This is the ultimate guide to startup scouting and engagement.

Inside, you will get access to practical advice on how large organizations can effectively engage with startups, including:

  • 21 specific strategies on how corporates can better work with startups (with models, best practices, and examples)
  • Actionable insights from enterprise, startup, and VC ecosystem experts
  • A 52-point checklist to help you optimize the process of identifying and engaging the right startups, aligning your teams, and attracting better candidates so you can improve the quality of your PoCs and partnerships. 

A Quick Introduction to Startup Scouting and Engagement​

What is startup scouting and startup engagement?

Startup scouting is the process of searching, identifying, evaluating, and selecting the best startups to work with. 

Startup engagement is how corporates actually work with emerging and established startups. Examples of engagement can include forming a partnership, becoming a customer of a startup, or even building a joint venture. 

Why scout and engage startups?

Scouting and engaging startups offers large companies a chance to boost their chances at success – whether it’s to drive innovation in their core business or expand within adjacent opportunities – by leveraging the capabilities of outside companies.

McKinsey recently wrote that “through partnerships, corporates have the possibility to explore and shape the development of technologies and services in a very cost-effective and time-efficient manner, which would hardly be possible in their existing structures.”

Now, let’s take a look at the main motivations for large and small companies to team up…

Benefits for corporates

  • Gain early insights into new and potentially disruptive technologies
  • Stay ahead of competitors, diversify product ranges and revenue streams
  • Access additional talent through acquisition or collaboration

Benefits for startups

  • Positive brand association that tends to send a positive signal to investors and customers
  • Get access to the larger partner’s market or turn the partner into a customer
  • Access to corporates’ resources and capabilities (i.e. customer data, legal, marketing, or logistics)

Part. 1 Get Your Foundations in Place

Before starting to develop startup engagement strategies and programs, you need to get your foundations in place.

Here are 5 actionable steps you can take to pave the way toward success.

1. Start with your innovation goals

Skip this section if your organization has already defined its innovation goals.

Before looking outside your company for solutions to your most pressing challenges, start by looking internally. No startup engagement program will be successful if it’s not built in alignment with the innovation goals and strategy of your organization.

Recommendation

To determine your innovation goals, start with answering the following questions:

  • What are the most important things you need to accomplish?
  • What are the strategic priorities for the company (e.g. diversify revenue streams, launch new products, decrease operating costs)
  • What are your business objectives?

Here are concrete examples of innovation goals:

“Diversify revenue streams by building a new business model within 2 years.”
“Decrease operating costs by 15% next year.”
“Launch 3 new products within the next 5 years.”

Once you clearly – and specifically – articulate the priorities for your organization, it will be much easier to identify how working with startups can help you impact the bottom line.

2. Define why you want to work with startups

With clear-cut innovation goals, it’s time to define why you actually want to work with startups:

Why are you doing it?

According to a recent 500 Startups survey (Unlocking Innovation Through Startup Engagement), here are the most common reasons why corporations engage with startups:

  • 92% of corporations are looking to gain access to new technology
  • 56% want startup partners to help execute a pivot or transformation
  • 46% desire access to talent through acquisition or joint R&D
  • 45% are trying to reach new customers
  • 45% use startup engagement to collect market information
  • 34% engage with startups to reduce costs

When it comes to defining your “why”, here is a piece of advice from Martyn Eeles, founder at Monoceros Consulting:

“Get different stakeholders around the same table. To effectively identify the needs of departments and how they are interlinked it’s imperative that people from seemingly unrelated departments exchange, share insight, and collaborate.”

“Think deeply about what your firm wants to gain through this endeavor. What are the target “success outcomes” from the engagement with the startup? Is this primarily about business results like finding a technical solution that can achieve a revenue target? Or is this primarily about developing and fostering new ways of working across boundaries?”

Martin Daffner, Founder and President at Innobrix and Senior Vice President – Strategy & Business Practices at Fung Group.

3. Perform an objective self-assessment

Look at your goals and resources to objectively understand what – and how – you can invest in your engagement activities.

Recommendation

Here are three helpful questions across timing, resources, and risk taking your organization should answer:

  • How quickly does your management expect to see ROI from your innovation efforts?
  • Have you allocated human and capital resources for executing partnerships and/or investments with startups?
  • What’s the risk of missing this trend, technology, or working with a specific startup?

4. Establish key performance indicators

“If you can’t measure it, you can’t improve it.”

When it comes to working with startups, here are a few metrics you can track:

  • The number of initiatives and percent of initiatives successfully implemented (e.g. in the form on pilot or proof of concept)
  • Media publicity gained
  • Penetration into new markets
  • Sales and revenue growth
  • Cost saving

The bottom line?

Measure the impact of your initiatives by tracking metrics that take into consideration the profile of the startup you are working with (i.e. early-stage) and the type of engagement you’re building (i.e. joint R&D).

For instance, if you are doing a commercial pilot, you should be tracking the number of customers you have taken your offering to. 

5. Develop a powerful “innovation statement”

Now, apply your innovation and startup engagement goals (point 1 and 2), and self-assessment findings (point 3) to develop your own innovation statement.

An innovation statement will help you…

  • Breakdown and describe your innovation strategy
  • Use it as your innovation “North Star” as you engage with key stakeholders at different levels across your organization
  • Build clarity and achieve alignment

Recommendation

Develop an innovation statement that includes at least the following three components:

1. Your innovation goal
2. The resources you will leverage to achieve that goal
3. How you will measure your progress toward that goal

Side note: our team at Runway has pulled together a detailed framework to help you build a powerful innovation statement (and have it fit on one single page), along with concrete examples to guide you along the way. To get the framework, just let us know where to send it below.

Part. 2 Build an Effective Startup Scouting and Engagement Strategy

In this section, we will cover frameworks and strategies you can leverage to develop an effective startup scouting and engagement program from the ground up.

We will go over different startup scouting approaches, and how to select the right engagement or partnership model for your organization.

6. Determine your business focus

When developing your engagement strategy, make sure to identify your business focus.

Here are the two major directions you can consider:

When it comes to financial ROI, you will usually be looking at lagging metrics, such as revenue. 

For strategic ROI outcomes, your organization shall be considering leading metrics that are tied to value-added activities, such as the number of projects in your pipeline.

7. Select your scouting approach

Once you know what you want to get out of your startup engagement program, it’s time to determine your scouting approach.

Let’s take a look at how active scouting and passive scouting work.

Because of their differences in focus and method, active and passive scouting approaches can work in tandem to deliver a startup sourcing approach that balances short-term priorities with long-term vision. 

As your engagement program matures, your business can work to develop a balanced overall approach that matches your innovation goals.

8. Identify which startup engagement model you will leverage

There are a lot of different ways to work with startups.

Here are the most common ones:

  • Partnerships. Corporations and startups work together without investment. This typically takes the form of a vendor relationship or a shared risk-reward model that involves co-branding products, co-developing technology, or a marketing partnership.
  • Investments. Corporates make direct investments in exchange for equity ownership of a startup. This can take the form of a balance sheet direct investment, CVC fund, or accelerator LP relationship.
  • Acquisitions. Corporations acquire startups for their technology, business model, unique insights or talented team through full buyouts.
  • Buying. Utilize the startups solutions in a normal vendor agreement where you buy the product, licenses or services from the startup to solve your needs.

Should you invest, partner, or buy?

“Many corporations struggle with how they should begin to engage with startups. If your organization is early in its experience with startup scouting and engagement, you may wish to consider starting by working with more mature startups on pilot or proof-of-concept studies with clearly defined milestones. This can be a relatively faster path to realize tangible outcomes with bottom-line benefit potential. 

It also allows your organization to leverage the investment that professional venture capital investors have already made into the startups with whom you have chosen to partner. CVC (corporate venture capital) and acquisition activities can happen later – and it takes time to develop the team, infrastructure and alignment to be truly effective. In the meantime, partner with and/or become a customer of carefully selected startups to achieve your innovation goals.” 

Sandra Miller, CEO at Runway Innovation Hub.

“A well-prepared corporate partner will be able to articulate in the form of a problem or opportunity statement for what they are trying to achieve. The engagement may be as simple as a one-time PoC in the form of an NRE (non recurring engineering) to experiment with new technologies; it may be a collaboration to develop new features that address a customer’s needs; or perhaps a joint effort to explore new markets. 

Whatever the motivation for engagement may be, discussing the expected outcome, having a budget allocation, and a negotiable milestone-based timeline will increase the chances of building a strong relationship and a successful outcome.”

Jay Onda, Former Director of corporate ventures and strategic innovation.

 

9. Determine your partnership model

Both startups and corporates seem to benefit more from individual, topic-specific partnerships rather than institutional programs like accelerators and incubators.

In fact84% of startups with individual partnerships are somewhat or completely satisfied with their partnerships compared to only 57% of startups with institutional partnerships.

Let’s take a look at the different business models you can leverage when doing a partnership with a startup.

  • Product co-development. Building a new product together using each of your core competencies.
  • Revenue-share partnership. For instance, a corporate fund.
  • Technology licensing. Corporate gets the right to use the startup tech, and for the startup, launch intellectual property into the market and generate revenue through licensing royalties.
  • Channel/geographic partnership. The corporate gets to sell a product on behalf of the startup.
  • Joint venture. Two entities benefit on each other’s competences and resources.

“Make sure you have clearly outlined what the goals of a potential startup partnership are and narrow your search to those parameters.

For instance, investment opportunities, M&A opportunities, and business development opportunities. You may be searching for a “social payments app for BizDev opportunities”. Definitely filter your search for the startups that are actively looking for BizDev partnerships from institutions such as yours and at the right stage of their development. Some startups may look perfect but may be distracted by fundraising (or vice versa if you are looking to invest.)”

Stephen Forte, Managing Partner at Fresco Capital.

“To partner with a startup, a corporate shall accept that once the milestones have been set and agreed upon, the startup runs the show. If startups have new requests beyond the scope of original agreement, they will pitch them to the corporate as if they had no special partnership”.

Wody Keita, Co-founder at IZIVAT and country representative at Africa Tech Summit.

10. Practice a portfolio approach

Here are a few things you can do to practice a portfolio approach.

  • Increase the number of engagements (so you can increase the probability that some of these will be successful)
  • Diversify (based on use cases, startup stages, industries, and outcomes)
  • Venture outside of your core competencies
  • Learn from your failures

Recommendation

1. “Make sure your corporate strategic fit and desired innovation portfolio balance (explore vs exploit) is fully understood and aligned with your startup selection criteria. Be ready to answer specifically: how will this startup partnership directly contribute to your strategic goals?

2. When selecting your startup candidates, look slightly outside your organizational comfort zone to explore new competencies, capabilities, cultures and/or technologies. Use the experience to absorb new ways in understanding your customer needs and problems from different perspectives.”

Mike Pinder, Innovation Expert, Author & Consultant.

Part. 3 Develop an Iterative, Streamlined Process and Execute Flawlessly

Streamlining your startup engagement process has two main advantages:

First, it facilitates and accelerates the process of identifying and engaging startups, and second, it improves the startup’s experience. Which will contribute to strengthening the reputation of your company (while helping attract better startups into your pipeline).

In this section, we are going to cover 4 practical ways to streamline your engagement process with startups.

11. Identify startup criteria of interest

Why should you develop specific startup selection criteria?

First, it will help you focus your scouting efforts, making it easier to narrow the field of eligible startups. 

Second, it will provide your search with high potential candidates that align with your end goals (the “why” you want to work with startups, remember?)

Consider the following aspects to help direct your search for the ideal partner:

  • Technology. Analyze your market and utilize your internal experience to outline the types of tech most relevant to your business needs and technical requirements.
  • Location. Define a target geographic region for scouting to narrow the pool of eligible startups. If in-person collaboration is a must for achieving your business unit’s goals, limit your search to local organizations—or assess your ability to cover travel costs.
  • Language. Double check what language requirements you have for a technology solution and confirm that the startup is able to provide what you need.
  • Funding stage. The ideal startup stage will vary according to your innovation goals. Early-stage, pre-seed startups can deliver alluring new concepts and bring fresh perspectives to the table. However, it may take these earlier-stage companies longer to deliver potential solutions. Meanwhile, later-stage startups will be more capable of implementing solutions quickly – and have greater capacity to deliver at scale.

The startup scouting and engagement checklist


Inside, you will discover… 

  • 52 critical points to look at when evaluating startups (so you can drastically improve the quality of your engagements)
  • The 5-step process we use to build robust corporate startup engagement programs for our clients at Runway

If what you’re looking for is a solution, then target a very late stage startup or even well established company and license or buy their solution.

“Keep it transactional. If what you want is to see and feel a different way of working to create a launch solution, then target an earlier stage startup and focus on fostering the relationship and finding the right collaboration. The target solution will change and that’s good. Resist the temptation to try and do both at the same time. That’s perhaps the most common pitfall I see in corporate/startup collaborations.”

Martin Daffner, Founder and President at Innobrix and Senior Vice President – Strategy & Business Practices at Fung Group.

How Suntory America assesses engagement opportunities with startups

Yoshio Kinoshita

“During discussions with startups, I usually try to understand two parameters. 

1. Their competitive advantages. With the marketing 3Cs analysis model in mind, I ask questions such as: how does your company differentiate itself from similar providers? What kind of customer needs are your solutions targeting? What makes you unique? 

2. The startup’s growth strategy. How do they acquire new customers? Can they share concrete use cases with existing customers? How are they growing the business sustainably? 

Of course, we adapt these questions depending on the specifics of the solution(s) offered by the startup, but these initial questions are really helpful for us to assess engagement opportunities.

Finally, I believe providing detailed feedback of our decision making process is one of the most important components of the discussion. For instance: specific functionalities we are expecting to use, if we are already using a similar solution, and if the startup’s technology outshines it. This process has proven to be helpful in making our technology needs clearer, and also in helping startups fine-tuning their growth strategy.”

Yoshio Kinoshita, General Manager, Strategy Business Planning at Suntory America.

12. Be crystal-clear about the benefits you’re bringing to the table

Startup engagement isn’t a one-way street.

Startups need to know what they will get out of their relationship with your organization, especially as they will be interested in different benefits based on their stage of development. 

Here are a few examples of benefits your organization can provide to startups:

  • Pilot project funding
  • Network access and connections
  • Mentoring and guidance
  • Product/service sales
  • Infrastructure access

“Develop your own unique value proposition to founders and market yourself as an organization who can help them in areas like distribution, scaling, and access to data.”

Vijay Rajendran, Head of Global Corporate Growth at 500 Startups Ecosystems.

Here’s a great example from the Unilever Foundry. 

Their innovation platform clearly communicates program benefits, partnership opportunities and expectations to startups:

13. Commit, delegate roles internally and establish clear points of contact

In a recent survey, McKinsey found out that startups’ satisfaction rose by 93% when they felt their corporate partner was highly committed and by 86% if top management was involved in the partnership. 

The bottom line?

Don’t treat startup engagement as a side project. Instead, make sure that you have strategic buy-in and commitment from the full executive team.

Also, having a clear point of contact in your organization (such as a designated startup ambassador who serves as the liaison between your company and startups) can significantly facilitate the flow of communication and create a more positive experience for both parties.

14. Build a standardized onboarding process

Here are four actions you can take to create a flawless startup onboarding process:

  • Develop an inbound application process (to weed out the non-qualified candidates)
  • Create a standard NDA template to reduce friction when sharing sensitive IP
  • Make a short purchasing template to outline the terms and conditions of an agreement
  • Create a customizable outreach template to share with potential startups with whom you’d like to work

Recommendation

Here’s an email template you can use and customize when contacting potential startups.

Subject: [Partnership type]: [startup name] + [your company name]

Hi [name],

My name is [name] and I work as a [title] at [company name]. Our company [insert a short, concise description of what products or services you offer and for whom].

We are currently on a mission to [define the problem you are looking to solve] and we are looking to partner with startups like yours in order to [benefit]. It seems like [startup name] could bring [benefit] and we would like to discuss a potential [partnership type]. The benefits of partnering with [your company name] includes [benefit 1], [benefit 2], and [benefit 3].

Is this something you would be interested in? 

All the best,

[Your name + contact info]

“Make sure that your corporation has created an infrastructure that invites for a fast implementation / integration of commercial or technological startup solutions into your business. 

One of the main reasons why corporate-startup collaborations fail is because there is a misalignment in the sense of speed, values, and KPIs. This misalignment, unfortunately, often results in the delay or failure of partnerships. Make sure you leave no room for these mistakes by involving key stakeholders, building clearly defined roadmaps, and ensuring board-level commitment.”

Ajda Sever, Community and Ecosystem Lead at Startupbootcamp.

Part. 4 Actionable Strategies For Attracting Startups

 

You have clearly established what’s behind your willingness to work with startups.

You have explored potential engagement models and approaches to scouting. And you have developed a profile of the sort of startup best positioned to meet those needs.

Great!

Now, it’s time to take action.

But where do you turn to scout startups within the wider ecosystem?

Here are a few ways to do it.

15. Partner with innovation consultancies

Innovation agencies can help you scout and engage with the right startups to accelerate the growth of your organization.

Side note: leaders from companies like Fujitsu, IBM and Emirates work with Runway to identify, select and engage with advanced technology startups. If you are looking to scout, partner, or invest in startups to fuel your growth, see how we can help or directly contact us here. 

16. Leverage startup rating platforms and scouting databases

Platforms and databases seek to analyze and evaluate startups within different areas of specialization while helping companies find a useful match. 

Using artificial intelligence and other means, rating platforms like Early Metrics help guide corporates to relevant startups based on proprietary rating systems.

“It’s no secret that bankruptcy rates are high among startups. So when choosing a startup to partner with, you not only have to make sure they fit your needs but you also have to assess their viability as a business. For instance, make sure the startup’s management team has the right commercial and technical skills to deliver their solution at scale. You can reduce your risks by working with specialized third-parties, such as Early Metrics, who have experience in assessing the growth potential of startups.”

Sébastien Paillet, Founder at Early Metrics.

Also, manually scouring the internet and prominent startup and venture capital databases like Crunchbase and AngelList for relevant startups and market insights is a common practice.

While these practices can yield results at a low cost of entry, they come with two drawbacks.

First, using these databases can be time-intensive for your team. And second, while you might find a number of startups that fit a relevant profile during your search, there’s no guarantee that these startups will actually be open to engagement. 

So, you might have to reach out to a high number of organizations to get results.

17. Launch hackathons and challenge events

Hackathons are design sprint-like events that encourage collaboration between developers and programmers, typically toward creating prototypes or innovating upon existing products or services. 

They can be held for either internal purposes (such as exploring a new technology) or external purposes (accelerating a specific product development) and usually last between 24 hours to a full weekend.

For example, Microsoft hosts an annual event called OpenHack that brings developers together with employees and organizations from across its network:

18. Attend or sponsor industry events and conferences

Ongoing scouting and engagement efforts can be supported by attending relevant conferences and events that either showcase or target the type of startups your organization is looking for.

And while that may not always lead to immediate impact, events usually offer access to a large number of startups in a short span of time.

Another option to consider is sponsoring events. You will not only build your company’s awareness of emerging innovations, but expand your presence and visibility in the startup ecosystem. 

Recommendation

As an attendee, here are two simple tips you can use for making the most of events and conferences:

1. Short-list the events you would like to attend and identify what you are hoping to achieve by going there. Here are some of our top picks for worldwide tech conferences: CESStartup Grind Global ConferenceSaaStr AnnualSLUSHSXSW (South by Southwest), and TechCrunch Disrupt.

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

19. Experiment with your inbound funnel

Give startups an opportunity to come to you. 

Develop an effective landing page on your website and make sure it breaks down:

  • What your organization does
  • How startups can work with you (e.g. partnerships, brand licensing, joint ventures, etc) 
  • Your achievements and unique differentiators. Think: why would startups want to work with your organization?

Here is an example from BBVA’s Open Marketplace, the digital platform that gives innovative startups the chance to offer their products and services to BBVA:

Final Thoughts And Conclusion

20. Test, iterate, and accelerate

Create a sandbox environment to test the startup’s technology.

The goal here is to build a safe exploratory environment to test, demo or develop a service without disrupting existing systems. 

Here’s how to do it:

  • Design the environment. Making decisions regarding length of the experiment, paid-unpaid, relevant product team/service line.
  • Align internally. Delegate the appropriate platform, develop KPIs.
  • Test the technology. Learn, demo, develop to determine the viability of the tech
  • Analyze the success based on your KPIs.
  • Report. What worked, what didn’t? What did you learn from this experiment? Use this report to share key information internally and revisit for future experiments.

“Have startups do webinars and demos for your teams as part of innovation discovery to learn more about the value of what they can bring to you. Seeing the product in action can spur more conversations and partnerships, and can help evangelize the product.

Empower your P&L’s and innovation teams with people and budgets to do experiments with new companies. When both parties invest people, time and $, the results and learnings can be amazing. Only through experiments can teams learn and innovate on both sides.”

Ajay Bam, Founder at Vyrill.

21. Commit to building long-term relationships

“Corporates need to understand startups have completely different set up and working with them is simply not that easy. Getting to know them does not translate into immediate success.”

Wei Zhou, Founder & CEO at XNode, a startup and corporate accelerator based in Shanghai.

That’s why adopting the right mindset is crucial to developing sustainable relationships with startups.

  • Establish trust by being transparent: be upfront about your motivations
  • Seek to add value: always put yourself int the founder’s shoes
  • Focus on building long-term relationships 

“Partnering with startups is not a transactional exercise. 

In fact, it is best to think of creating a long-term relationship with the startup ecosystem in which you are interested (as opposed to focusing on one or two startups). This is not a matter of months, but a commitment of years – through bad years (especially), not just the good years.

It is critical to remember that startups are not small versions of a large corporation – they are a completely different species. They think differently, they act (and react) more quickly to markets, competitors, opportunities, etc. And another thing that is often forgotten by larger companies when dealing with startups – they do not have a huge team to manage their partnership with you. Please don’t overwhelm them by having ten, twenty people come to a meeting!”

Steve Adelman, Managing Director at Nexus Partners.

Conclusion

We have gone through a variety of strategies, best practices, and insights you can use to develop and execute an effective startup scouting and engagement program.

To wrap this guide up, here are a few important points to keep in mind:

Always start with establishing a strong foundation to build from. Define and break down your most important business and innovation objectives, and make sure your expectations for working with startups align with these goals. 

When it comes to developing your startup scouting and engagement strategy, consider the following aspects: your scouting approach and criteria, the engagement model(s) you will leverage, and the tangible benefits your organization will bring to the table.

Finally, when executing your strategy, keep two approaches in mind. First, be experiment-driven. Methodically identify, prioritize, and test engagement approaches and channels to achieve your scouting program objectives. Some initiatives will work, some other won’t. And that’s okay. Document everything. Second, don’t rush. Focus on building sustainable, long term relationships by being upfront and transparent about your motivations so you can raise the odds of lasting mutual benefits.

Dive Deeper With This Actionable Checklist

If you want to get better results from your engagement initiatives, you need to build strong evaluation criteria, clearly communicate your organization’s priorities, and manage startup expectations along the way.

But how do you do it? Download our Startup Scouting & Engagement Checklist and find out…

  • How to get your teams on the same page
  • 52 critical points to look at when evaluating startups (so you can drastically improve the quality of your engagements)
  • How we build corporate startup engagement programs at Runway: we’ll walk you through the 5 steps our clients go through when looking at startups to help accelerate their innovation initiatives.

To get this checklist, just let us know where to send it below.