Startup-Corporate Partnerships: Keep the Love Alive

For startups longing to grow, access resources and secure funding, the right corporate partnership can seem very tempting. After all, what corporations lack in the flexibility and agility of a startup, they make up for in reach and assets. Together, the startup and the corporation appear well-positioned to pivot strategies, train and hire teams, and launch entirely new businesses with speed and at-scale. 

Yet while startups and corporations have a lot to gain from one another, they come from very different worlds—and it shows. Partnerships are often fraught with process disputes and conflicting business visions. Without intervention, often from a third-party consultancy, structural and cultural clashes can doom once-promising relationships.

Obviously opposites do attract. In 2020, Vodafone partnered with Sparqa Legal to expand into the consumer legal-tech market. Schneider Electric partnered with Greentown Labs, a climate-tech incubator, to select promising startups in the energy space. Looking ahead, if startups and corporations want to drive innovation together, they’ll need to learn how to communicate and cooperate.

The warning signs 

There are common causes for friction in these partnerships: 

• Timing: Startups make mission-critical decisions daily with ruthless pragmatism. Corporations need six months to a year to make similar decisions. 
• Process: Startups lack the formality of corporate processes. Incompatible operations lead to big headaches and dire missteps. 
• Purpose: Corporations own large portfolios, measuring the success of their mission incrementally. Startups exist solely to disrupt the status quo now. 
• Level of Risk: Stakes between parties are generally not the same. Startups are all in, betting big on partnerships. Corporations typically think they have less on the line. 

Making the connection 

For startups, making that initial connection with a corporation can be daunting. It’s critical to come armed with radical ideas, but also solid business foundations. “Startups need to reach a certain level of maturity before interacting with corporates,” says Sylvain Grivel, Innovation Lab Management Head at Sanofi in Lyon, France. “Proof of concept is not enough. They should already have a good understanding of both the business potential and the strategy to seize it.” 

It’s not unusual for startups to be suspicious of a corporation’s intentions. At frog, we’ve worked with many startups that are ready to be acquired but feel too protective of their vision to risk committing to the wrong partner. An acquisition can feel a kiss of death to a startup’s sense of purpose. “If the big co wanted to swallow us, they had to acquire us,” says Greg Sorenson, CEO of DeepHealth in Boston, Massachusetts. Alexandre Andre, who assists startups at the Lyon-based Incubator Manufactory, has seen how acquisition can lead to apprehension. “A common goal is to be acquired by a big company, but the fear is to be absorbed, dominated, without any countervailing benefit.”   

Keeping the love alive takes trust. It takes communication around IP, aligned success metrics for shared purpose and clear exit strategies. These are all areas where third-party intervention can keep businesses in sync, offering a neutral ground to experiment with new ways of working, while acting as translator to speak the languages of both startup and corporation. 

Making the romance last as long as it’s profitable for both

Looking into a Post-Covid business future—where continuous innovation is needed to address evolving customer needs at an alarming pace—startups and corporations are wise to form healthy bonds to meet tomorrow’s challenges head-on.

It’ll take TLC from both partners and often outside help to arrive at a happy ending. If the partnership’s a match, it’ll be a win-win. If it sours, it doesn’t need to be a devastating blow for either side. Like all breakups, the hope is to learn a lesson to take into your next alliance. Who knows? The next partnership could truly be the one.