How young businesses can develop relationships with companies such as Nike and Pepsi.
Earlier this year, Kathryn Sheaffer made her daily commute to the Palo Alto, California, offices of Waze, a start-up that makes a social-navigation app. From her seat at a long communal table next to Waze CEO Noam Bardin, she made phone calls, reviewed mockups of the app, and participated in marathon brainstorming sessions.
Sheaffer, however, isn't an employee of Waze. She is senior associate brand manager at Stride Gum, which is owned by Mondelez International, the company formerly known as Kraft Foods. She was one of more than two dozen Mondelez managers from brands such as Trident and Oreo who spent a week embedded inside select mobile-technology start-ups as part of Mobile Futures, Mondelez's three-month accelerator program.
Mondelez's goal was to impart some entrepreneurial thinking to executives while at the same time getting to know promising tech companies that could further Mondelez's efforts to amp up its mobile marketing campaigns.
For young companies like Waze, the program represents a big shift in how early-stage start-ups interact and deal with big corporations. No more stiff and awkward meetings, communicating through ad agencies, or trying to guess what big brands might actually want before building products for them.
Mondelez's managers gave the start-ups involved in the program input and feedback on their technology and promised to be an early customer. "Having direct access, we were able to get in their head about what they would like to see in a perfect world," says Bardin. "That's been very powerful for us."
Mondelez is among a number of corporations--including Nike, Microsoft, American Express, and PepsiCo--that have created accelerators, investment funds, and other programs aimed at start-ups. For small companies, it's a chance to receive funding while building a relationship with a potential major client. Most of these programs are run through an open application process, links to which can usually be found through the corporation's website.
Big companies see these programs as an opportunity to find new ideas early and perhaps partner with, invest in, or learn from today's most innovative entrepreneurs.
"It's either disrupt or be disrupted," says David Kidder, CEO of Bionic, a New York City-based start-up that teaches corporate executives how to think more like entrepreneurs. "Big companies need organic growth, and they are going back to their start-up roots to get it."
Corporations aren't looking just for app developers. Johnson & Johnson and GlaxoSmithKline each put $50 million last year into a $200 million venture fund to support early-stage biotech firms. In addition, J&J is creating four innovation centers--in Boston, London, Shanghai, and San Francisco--to fund early-stage life-science research and help push products forward faster. Roughly 70 J&J scientists and research and development executives at the centers will mentor entrepreneurs and provide industry introductions. The company also created a biotech incubator at its Janssen Labs in San Diego, where early-stage companies can rent office and lab space without having to commit any of their research to J&J.
One of the incubator's 18 tenants is Amplyx Pharmaceuticals, a nine-employee start-up that is developing ways to fight lethal fungal infections. Amplyx now has access to expensive laboratory equipment and machines that have helped it attract top scientists and sped up the business's productivity. In the past, Amplyx had to send samples to outside companies for testing. Now those testing machines are located next door--and they are free. "The amount of work we have achieved in the last eight or nine months is as much as we achieved in the previous four years," says Dinu Sen, CEO of Amplyx.
Sen also appreciated J&J's no-strings-attached policy. He said he would not have moved his company to the incubator if J&J had required any sort of contractual rights to Amplyx's research. "They know what we're doing," says Sen. "But by and large, they leave us alone."
PepsiCo has two initiatives designed to tap into exciting new companies. PepsiCo10 is an incubator program, started in 2010, that invests in 10 promising start-ups each year. Pepsi Digital Labs takes a less formal approach to start-ups by focusing on mentoring, networking, and partnerships.
As part of Digital Labs, Andrea Harrison, PepsiCo's director of digital engagement, works two days a week among tech entrepreneurs at a New York City co-working space called WeWork Labs. It was there that she met Josh Emert and Austin Evarts, co-founders of GoChime, a company that serves targeted ads to Internet users based on the material in their social-media pages. She tapped GoChime to work on an ad campaign aimed at fans of the television show X Factor.
It took only six weeks for GoChime to launch a campaign. Emert says that is the same amount of time it would normally take him to track down and contact the right person at a typical large corporation and set up a meeting. The only drawback for GoChime has been the stress of working with such a large client. "There is much more pressure," Emert says. "You never want to fail on such a large stage."
There are other, more serious, risks involved with working with a big corporation. If your business is reliant on a relationship with one company, then you are subject to any sudden change in priorities, budgets, or personnel. Such changes can quickly end a partnership or even put an end to your business.
Those issues did not concern Noam Bardin of Waze, which has long worked with retailers such as Dunkin' Donuts and Taco Bell. From Sheaffer, Waze learned how to work with packaged-goods companies like Mondelez. It's knowledge that can help Waze sign up more advertisers. "Seeing how they think and what moves the needle for them has been fascinating," Bardin says.
This Way In
Large corporations are eager to tap into the expertise of innovative entrepreneurs. To do so, many have established incubators or funds aimed at start-ups. Here's a quick look at a few of those opportunities.
Nike teamed up with TechStars for a three-month program that mentors 10 start-ups that are building technologies for Nike's activity-tracking devices, like its FuelBand.
What it offers: Each start-up gets a $20,000 investment from TechStars and the chance to pitch investors and Nike at the session's end.
Microsoft also joined with TechStars to create a three-month incubator in Seattle for companies that are designing products for Microsoft Kinect and Windows Azure.
What it offers: Start-ups get mentorship, technical training and support, and the chance to pitch to angel investors and venture capitalists at the end of the program.
Pepsi's PepsiCo10 is a digital incubator program that selects 10 tech start-ups in entertainment, mobile, retail, and sustainability.
What it offers: In addition to receiving funding, companies are matched with PepsiCo brands, such as Gatorade or Frito-Lay, for mentoring and pilot campaigns.
J&J is creating four innovation centers--in Boston, London, Shanghai, and San Francisco--to fund early-stage life-science companies. It also created a biotech incubator in San Diego that houses 18 start-ups.
What it offers: Companies that rent at the San Diego incubator have access to office space, lab equipment, and mentoring.