Purpose (What is in it for you?)
Kodak, the company that democratized camera and disrupted an industry (at one point had 90% of market share) was left behind the digital camera revolution and is now the biggest loser in that category.
The Nokia story is similar, the one-time reigning market share holder of the mobile phone did not innovate enough to stay in business.
Startups are essential to supporting Corporates to innovate and stay ahead of the game
Take Stanbic Bank for example; they recognized the disruption of Financial Technology in Banking and hence partnered/acquired Slydepay with Dream oval
Aramex: Founded by Wamda Chairman Fadi Ghandour, Aramex is the region’s leading logistics company. It used its position to help startups gain access to preferential rates on shipping among other services. Moreover, the company supported entrepreneurs through mentorship, incubation, and intrapreneurship opportunities.
The Zubair Corporation: For entrepreneurs in Oman, The Zubair Corporation – a large conglomerate specializing in energy, logistics, engineering, and construction – launched an incubation center aimed at cultivating new enterprises.
DP World: The Turn8 accelerator in Dubai, created by executives at DP World. The Emirati marine terminal operator launched the accelerator in an attempt to enhance entrepreneurship in the Emirates. So far, 23 companies have benefited from Turn8’s services.
Vodafone Egypt: Like other corporates in the region – most notably Saudi telecom STC and the Middle East Broadcasting Company – Vodafone created an investment fund in Egypt designed to take equity stakes in promising startups. Unlike STC and MBC, however, the Vodafone fund is dedicated to investments in mobile and telephone ventures. Presumably, the investments are made with a mind to eventual acquisition of technology or talent.
Cisco: The American company has partnered with AMIDEAST to provide training programs to entrepreneurs. The Cisco Entrepreneurship Institute is active in Lebanon, Morocco, Tunisia, Oman, and Palestine.
How to start engaging
Before corporates start engaging, they need to figure out what their quid pro quo is; what they will get in exchange for the investment they are putting in.
What are the KPI’s?
- Are you looking to make your organization more innovative and willing to take risks?
- Looking to recast our corporate brand in the digital age? (Maybe it is for PR purposes)
- Solve key business problems in a quicker and more cost–effective way?
- Create awareness of new market trends and emerging technologies?
Different Ways to Engage
- Acquisition: some industry giants, for instance google, Cisco, Facebook etc. have grown their businesses by getting hold of startups. They do this by either investing in startups or completely acquiring them; this move helps them to get fresh expertise and new technology to support their businesses. So instead of companies going to already made companies, they can rather go to startups for fresh ideas; which in turn helps startups to grow. There seems to a proliferation of smaller companies acquiring and consolidating rather than bigger corporates acquiring startups.
- Collaboration: A perfect example is the ‘Unilever Foundry’, a program that promotes collaboration between corporates and startups. Unilever Foundry is a platform that Unilever uses to provide single entry for innovative startups who want to partner with them. Startups also get to apply for funding through Unilever ventures from the same program.
As part of the three-pronged program, startups can submit ideas to the Foundry site which will host an ongoing series of projects on different themes. Successful applicants will get $50,000 and a chance to create a pilot program with a major Unilever brand. At launch, the projects on the Foundry site revolve around sustainable living, digital retail experiences, smart kitchens, and quantified self. The second main element is mentoring—startups will have access to Unilever marketers over a period of three months. And third, the Foundry is linked to the company’s existing venture capital arm, Unilever Ventures, giving strategically relevant startups in the digital marketing, mobile, content, e-commerce, analytics and data spaces, a chance at funding.
For startups to flourish they need to engage with each other for support and networking purposes.
Examples of Corporate-owned incubators:
Goal: To make investments in 10 startups developing financial services technology, in areas like digital banking, payment solutions, and securities trading platforms. On 5th April Asoriba a startup application development company from Ghana was added to the 10 startups to take part in the program for 2016.
Location: London, UK
Goal: “Founders are given an unfair advantage through the power of Coca-Cola and the opportunity to do what most can only dream about. Coca-Cola gets early access to new, fast-growing markets and proven growth opportunities for our business.” Once the team validates its idea, Coca-Cola makes a minority equity investment. Program has no application process; founders are selected by Coca-Cola through references and the company’s network.
Deutsche Telekom’s hub: Raum Accelerator
Goal: Provide seed funding for startups that have the potential to fundamentally transform important markets for Deutsche Telekom. Startups receive capital to establish market traction as well as added benefits like co-working space, mentoring and introductions to Deutsche Telekom.
Partners: General Assembly and Betahaus
Goal: Back ten startups in the media and entertainment space, with up to $120,000 in funding each. Through the Disney Accelerator, select companies will again access to the range of creative expertise and resources of The Walt Disney Company to help them develop their innovative new entertainment experience and products.
Location: Los Angeles
Intel Education Accelerator
Goal: grow education start-up from their initial Angel funding and a working beta product to a transformative company that changes education for student success.” Potentially up to $100,000 in investment from Intel Capital.
Location: Redwood City, Calif.
Goal: a global initiative empowering entrepreneurs around the world on their journey to build great companies. We work with startups at every stage of maturity to provide the tools, resources, knowledge and expertise they need to succeed.” Also promotes the use of Microsoft Azure cloud services and other Microsoft products.
Location: Bangalore, Beijing, Berlin, Seattle, Tel Aviv, Paris, London,
Goal: to host 10 companies for a three-month immersive, mentor-driven startup. The program aims to leverage the success of the Nike+ platform to support digital innovation by connecting with companies that share Nike’s commitment to help people live more active lives.
Also to Encourage companies “to use Nike+ technology to create products and services that will inspire athletes across a broad range of activity and health goals including training, coaching, gaming, data visualization and quantified self.”
Location: Portland, OR
Goal: “Attract entrepreneurs who “want to help us develop products and services that can become the connective tissue between our various devices — TVs, mobile phones, tablets, cameras, laptops, home theater systems, etc.” Samsung promises them “all the benefits of running a startup – fast pace, small teams, risk-taking energy – but with all the advantages of Samsung’s resources, access to our decision-makers and product roadmap, and distribution to our massive audience.”
Locations: Palo Alto, CA and New York, NY
- Entrepreneurs in residence
Some companies have entrepreneurs in residence (EIR) programmes, in which startup founders spend some time within the offices of large corporations. This helps the larger company open up ‘innovation pathways.’ This EIR model is more popular, however, in business schools and VC firms.
Startups can be a real strategic advantage for large companies, who must investigate and assess deliberate mechanisms for engaging with entrepreneurs, advises Krisztina Holly, EIR, City of Los Angeles, and founding executive director of the Deshpande Centre for Technological Innovation at MIT.
- Special interest groups
Some technology areas and business models will take a long time to mature, such as smart cities powered by Internet of Things (IoT). This calls for long-term engagement by large players via forums like a Special Interest Groups (SIG). For example, TiE Bangalore has launched an IoT, SIG with large players like Intel, Cisco, Bosch and Infosys working with startups in the areas of Design for Manufacturing (DFM), testing and interoperability.
- Entrepreneurship networks:
Organizations whose key business model is to support startups can organize and host regular events for capacity building, mentorship between corporates, investors and startups. These events will open up new avenues for ideas generation, validation and business deals for the startups.
The 2014 GE Global Innovation Barometer survey reports that 85 percent of corporate respondents said, collaboration with startups and entrepreneurs will drive success for their organization in the future. This indicates how engaging startups can be beneficial to corporate bodies.
In summary, large companies must actively engage with startups for new ideas, shelf-ready technology and fresh talents to drive their businesses.