High Alpha Innovation was created with the assertion that the success of the world’s leading corporations will be determined by the quality and quantity of their engagement with startups. As corporations have grown in their desire to partner with startups, Corporate Innovation teams have focused on competencies that increase the quantity of those relationships – via functions such as external innovation scouts, CVCs, and venture builders. Many corporations who have increased their capacity for startup partnerships still struggle to extract value from those relationships. So how can corporations better execute on startup partnerships? We assert that Innovation teams need to be placing a greater emphasis on the quality of those partnerships, and share the five roles needed to increase the likelihood of successful startup-corporate partnership outcomes.
While Building Quantity of Startup Relationships…
Corporations are looking to enable transformative growth through startup partnership. This is a trend we’ve been witnessing for a while, and it shows no signs of stopping.
In a recent survey by InnoLead, nearly 70% of corporate respondents said they expect their level of startup engagement to increase in 2023, compared with 2022.
As a result of this emerging exuberance for startup engagement, Corporate Innovation teams’ have been focused on exponentially increasing the quantity of startup relationships by establishing internal functions with the explicit objectives of partner, invest, and/or build:
- Partner: Business Units dedicate external innovation scouts to identify partnership opportunities with existing startups that could be directly accretive to the business through channel partnerships, co-branding, or co-selling.
- Invest: Corporate Venture Capitalists invest in existing startups in the hopes of forging strategic relationships that could lead to new channel partnerships, future acquisitions, or venture-scale financial outcomes. Between 2013 to 2019, there was a 32% YOY growth in CVC Investment; three-fourths of Fortune 100 Companies currently have venture divisions (McKinsey).
- Build: Increasingly, Corporate Venture Builders are designing and launching net-new startups for similar strategic reasons as CVCs, but with the explicit intent of building to address market gaps. High Alpha Innovation partners with the world’s leading organizations to co-create advantaged startups.
Building out the above structures to partner with startups is a worthy activity. However, the number of startups that a corporation engages with does not directly correlate with the quality of those engagements…
“According to BCG research conducted in Europe, 45% of corporates and 55% of startups are “very dissatisfied” or “somewhat dissatisfied” with their partnerships.” (BCG)
“The vast majority [of corporations engaging with startups] see less than 25% of their initial pilots with startups scale into solutions that can be taken to market.” (500 Startups)
Failed startup partnerships signal to the market that the corporation is not ready to engage with startups… and startups take notice and stay away. Thus, it is essential that corporate innovation teams focus on quality as much as quantity, by optimizing for the creation of two-way value within the relationship.
…Increase Focus on Quality Interactions
So what does “quality” of startup engagement mean? Like all relationships, value must flow in both directions. Startups enter into corporate partnerships in the hopes of being conferred some degree of advantage, such as product development support, pilot program metrics, or customer introductions. Likewise, corporations engage with startups to access a range of strategic and financial benefits, such as access to new customer groups or new technologies, or new revenue streams. Quality, then, can be defined by the degree to which the relationship unlocks desired advantages, addresses immediate business needs, and generates meaningful learnings.
As Corporate Innovation teams are responsible for the quantity of startup relationships, it only follows that they must also be responsible for the quality of those relationships. In order to do so, the Corporate Innovation team must establish the organization’s startup strategy and work cross-functionally with the business to align on the learnings, business priorities, and advantages that the business can provide. Once established, it is incumbent on the Corporate Innovation team to provide the blocking-and-tackling required to meet these objectives.
Portfolio management is the key to success
Scaled corporations are optimized for sustainably achieving the “core business’” objectives, so achieving and maintaining a successful corporate-startup partnership – which often falls into an “adjacency” – is no small feat. Thus it is essential for Corporate Innovation teams to establish a group of internal stakeholders for maintaining relationships with the same degree of care as they do for entering those relationships.
Based on our experience working with dozens of startups and corporations, we’ve compiled the five (5) stakeholders that should exist on every Corporate Innovation team to increase the quality and success of startup partnerships:
At High Alpha Innovation, we enable corporations to develop their portfolio management skills through the applied practice of venture building. As the most trusted venture partner for corporations, we pair our proven playbook with a deep understanding of what it means to innovate within the corporate structure, enabling corporate innovation teams to learn through action via “live fire” test situations with the startups we co-design.
If you’re interested in learning more or building with us, please reach out at firstname.lastname@example.org.