Collaborating to Compete
How big is the trend toward strategic alliances between large and small companies? One sign: there are start-ups today whose main goal in life is to find strategic partners. Just ask Ed Payne, president of Gateway Technologies, in Boulder, Colo. He has spent the past 44 months holding discussions with 130 U.S. and 40 European and Japanese companies about setting up strategic alliances to commercialize a technology -- one Gateway didn't even develop. Instead, Gateway licensed the technology -- which the company says improves textiles' insulating capacity by as much as 1,000% -- from Triangle Research and Development, a small research-and-development company in Raleigh, N.C.
Payne and two partners started Gateway in 1990 with no experience in either the chemical or the textile industries. A trip to the University of Colorado business-school library yielded the names of 200 potential strategic partners. After sending letters to the 200 companies, the trio planned to wait two weeks to make follow-up calls. After the seventh day, however, the phone started ringing off the hook, says Payne, and Gateway was in business.
According to Payne, the letter campaign yielded a 17% response rate within the first three months; that rate continues to climb. As of the beginning of this year, he says, Gateway had received 100 letters of interest from companies around the world, had executed 15 development agreements, and had signed one license agreement and was in the process of finalizing two more. The company's alliance-heavy strategy is influenced by Jana Matthews, one of Gateway's advisers, who is a senior fellow at the Kauffman Foundation's Center for Entrepreneurial Leadership, in Kansas City, Mo. Matthews says that partnerships between start-ups and large companies are on the rise, but that the "biggest hurdle remains getting the large companies to take the small ones seriously."* * *