Why Established Corporations Should Work with Startups

Overview

Startup companies are mushrooming across the globe. Many industrial giants are taking a key interest in these startups to add value to their portfolio by acquiring or investing in these ventures either through capital means or partnerships. Corporations want to work with these startups since a startup is more agile in tailoring the needs of their customers and delivering value at a quicker pace compared to large multinationals. It is a strategic move for corporations to identify new ideas at an early stage so they can partner with entrepreneurs, ensuring that both parties bring their best team for this process and purpose of collaboration. This arrangement would harness and streamline appropriate strategies and processes.

The Modus Operandi

Accelerators, incubators, funding, mentoring, and acquisitions are examples of the modus operandi of corporations to tap the potential of technology startups. Typically, it is not easy for a startup to partner with a large corporation since they might have to go through rigorous procedures and vetting before they are finally accepted. Large corporations are most likely to only establish a partnership with successful and strategic startups that would help them achieve their objectives and win against their competitors.

The best way for a startup would be to research and study the portfolio of the company they are trying to establish ties with and understand the competitive dynamics, such as strengths and weaknesses of that company. This would be beneficial for the startups, and they would be able to offer services or products that would facilitate that company to become more competitive in the overall market.

Disrupt or Be Disrupted

As the saying goes “disrupt or be disrupted.” In the modern age of technology, the sensible option in a pandemic-affected world, would be to digitally transform operations and methods or risk losing market share. Numerous startups are entering the market that offer digital solutions to overcome hurdles that lie on the path of digital transformation. However, startups need to offer a substantial advantage to large companies, and to do that they must ensure that they have solidified the business idea by defining what they are looking for in a business partner and increasing their online presence. Also, they should draft a partnership agreement that includes business ideas and goals, roles and responsibilities, equity breakdown, salaries and compensation, intellectual property, how the disputes would be settled, and exit strategies.

These are essential elements that the startup should consider so that these agreements are legally binding and cover all the points. The main goal for the startup and its partner should be to have mutual objectives they wish to achieve through compatibility. In theory, the partnership should create a win-win outcome by combining the strengths of both; corporations have the legitimacy and resources that startups aspire to achieve, and startups can provide value through their novel ideas and agility that corporations are seeking.

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Keywords: Industry, Startups, Corporations, Digital Transformation, Synergies and Partnership, ARC Advisory Group.