What do I need to know about effective Partnering as a Start-up?
It is well known that most startups never make it beyond their first years in business. But when founders bond their startups to a larger, more stable company that needs - and benefits from - what the startup offers, startups can increase their chances of long-term success. The reason? Companies can give a startup stable revenues. When a large company works with a start-up, the result should theoretically be a win-win situation. The problem with this is that only 45 percent of companies actually do startups, and those who do often don't know how to do it right.
But even start-ups can be hesitant when it comes to partnerships with large companies. As industry experts like to say, giant companies are slow and inflexible, a nightmare scenario for agile start-ups that tend to move quickly and adapt flexibly as needed. All too often such alliances fail.
Reasons for failure:
- Misunderstandings and conflicts of interest
- Lack of commitment from one side
- Loss of information on the way there
- Problems in identifying feasible plans
- Problems managing large enterprises to reach consensus and approve budgets
- Economies of scale: Due to lower volumes and initial investment costs, there is often an imbalance between the expected unit costs that a company has in mind and those that the start-up can actually offer.
- Risk appetite and aversion to change in large companies
- Lack of understanding of how the other person works and makes decisions
- Failure to build trust
It is therefore important to set the right conditions from the very start in order to achieve a successful partnership.
Establishing the right relationship between companies and start-ups
In order to set the right tone, the following 4 questions have to be answered:
How can you get the right people from both sides into contact?
Large companies need to find out which start-ups can add value to their business, or how desired partners can do so, and link them to the business unit that needs these products and services most.
Companies that do not make these connections usually work with a silo mentality that keeps innovations away from the business units that need them most. This in turn makes an effective commitment to the relationship between the company and the start-up virtually impossible. The faster the business partners make the right connections internally, the more successful the partnership will be. Sometimes the only way to build bridges is to accept external help (where consultants can help).
Were you honest and transparent about your strengths, weaknesses and values?
The key to the successful construction of these bridges can be found in the promotion of transparency. Business teams and founders need to be honest with themselves about what they can and can't do to stay on track and achieve common goals. Even as stumbling blocks emerge, companies and start-ups should communicate openly and proactively identify challenges that could jeopardize their pilot program.
Were clear, measurable goals defined?
Clear timetables are essential for a satisfactory post-pilot relationship. Without long-term engagement plans and goals, start-ups and businesses cannot achieve levels of trust and transparency.
Do you plan on dropping in often?
Just as objectives need to be set, regular team check-ins need to be set up to test whether these objectives are being achieved. These check-ins are powerful tools for keeping the relationship in a good place and assessing whether changes are needed to move in parallel with these goals.
What is certain is that the partnership between smaller companies and large groups is complex and requires a lot of time and care. Each of the two partners can use a helping hand. But the prospects of success are not only worthwhile for the direct partner parties through the capital proceeds. In addition, connecting start-ups with their established partners can not only drive employment growth, but also further enhance the impact of start-ups and businesses on local communities. Such success concepts thus represent an indirect added value for society.