Startups have long seen corporations as the enemy. The big companies have the resources, capital, and legal teams to make breaking into a new industry seem nearly impossible. However, those corporations envy the agility and disruptive ideas that make startups so dangerous. When a small company starts offering a new service, the big companies have to offer the same thing or risk losing customers to the young upstart.
Both sides have something the other wants. Rather than waste time and resources fighting, startups and corporations should create mutually beneficial partnerships. Not only will this allow both parties to boost their bottom lines, but it will also turn competitive disadvantages into unique market opportunities.
Why Can't We Be Friends?
Corporations no longer see startups as annoyances, but as serious threats. In the digital age, small companies can scale quickly, cutting into big markets before corporations have time to react.
To get ahead of this obstacle, corporations are starting to treat small companies with more respect. According to one study, 82 percent of corporations see collaboration with startups as "somewhat important" or more so, with 23 percent calling these partnerships "mission critical."
Why do corporations suddenly want to play nice? Startups like Uber and Airbnb have demonstrated to large companies that their markets are not as unassailable as they once believed. By the time these startups achieve recognition, they are usually too expensive to acquire outright. That means corporations can either work with startups, yielding gains for each party, or set themselves on opposing sides -- and hope the upstart doesn't come out the victor.
For startups, the benefits of corporate partnership are obvious. Access to more resources, increased market reach, and network connections (with none of the rules that come with corporate ownership) are always appealing. As the battle between these two types of companies heats up, businesses that play both sides will have a distinct advantage over the rest of the competition.
The best partnerships are not one-off projects, but long-term relationships that allow companies to offset their weaknesses with the strengths of the other. Just as General Motors invested $500 million in Lyft, corporate leaders should look at market trends and identify opportunities to partner with disruptors -- before those disruptors steal the show. On the other side, startup founders should welcome the opportunity to work alongside people running the current market leaders. Considering 90 percent of startups fail, the ones with the strongest relationships stand the best chance to succeed.
Opportunities to Collaborate
Startups and corporations can cooperate a little or a lot, depending on the type of partnership each side desires. Here are three types of partnerships, along with examples of companies that are making the most of their arrangements.
1. Strategic Philanthropy
Philanthropic partnerships let corporations show off their human side, while startups get the resources and help they need to expand their impact. UNICEF, which works to protect child rights and welfare across the globe, frequently partners with business organizations both large and small to maximize the impact of its efforts. As UNICEF furthers its mission, partner companies improve employee morale and company PR by working for a good cause.
2. Resale and Vendor Relationships
By cooperating and sharing limited resources, companies of all sizes can help one another succeed, creating a network of assistance that benefits all parties. Microsoft, for example, saw that its vendors and retailers often struggled to do marketing on their own, and thus created an entire program designed to help them extend their reach. The program includes marketing recommendations, premade materials, and sales engines designed by the Microsoft team that are specifically created to assist these partners. This not only helps these smaller companies bring in more customers and boost sales, but it also benefits Microsoft as more Windows machines permeate the market.
Accelerators help startup founders turn their dreams into reality. Corporations can get involved with these initiatives to stimulate growth and create valuable long-term relationships. Ameren Accelerator, which is powered by the University of Missouri System, UMSL Accelerate, and Capital Innovators, provides an environment for entrepreneurs and corporations to work toward shared goals. By bringing new tech businesses to St. Louis and stimulating energy initiatives, this accelerator combines the advantages of multiple companies, driving results greater than the sum of their parts.
Startups and corporations are not natural enemies: they are two sides of the same coin. By forming mutually beneficial partnerships, each side can see things from the other's perspective and take advantage of benefits only available through cooperation.