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The 3 Essentials of Successful Corporate / Startup Partnerships

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Jupe Tan is Managing Partner, Asia Pacific, at Plug and Play — an investments and innovation platform that helps startups in areas including fintech and insurtech, mobility, travel / hospitality and supply chain connect with corporate investors. Here, he explains three key points corporations must address and startups take under consideration before sealing a deal.

In the two decades since the first dotcom boom, technology has become increasingly pervasive in a growing list of industries around the world. From agriculture to aerospace, from personal to professional services — today, numerous existing products, solutions and entire business models are being disrupted.

As access to information and technology increases and product development cycles and time to market decreases, startups are engaging with more industries than ever before. Corporations from around the world — from publicly listed companies to privately held conglomerates — are working with and investing in more and more startups to complement internal efforts to innovate.

At Plug and Play, we constantly engage with corporations and startups through our open innovation platform, with over 50 accelerator programs running in 25 cities around the world. While every engagement between a startup and corporation is different, here are some best practices that we can share:

1. Ensure alignment from internal stakeholders

Innovation in a large corporation requires support on many fronts. Top down, management-level desire to explore potential new solutions and technologies from outside the organisation is essential. Management can have blind spots or may be unwilling to acknowledge external threats to their business. An excellent example is Blockbuster. The American company known for its brick-and-mortar movie and video game rental services identified the threat of Netflix too late and shut down after almost 30 years in business.

With management support, resources can be allocated and a team (or teams) can be tasked to act as champions to interact with relevant business units. Heads of business units must also be supportive and in sync with management.

2. Streamline collaborative efforts

Corporate business units should be empowered to look internally at potential technology and business gaps and then work to translate them into specific problem statements that startups can explore and help answer.

Startups are constantly working on refining and improving their products and solutions with successive iterations. Depending on the state of the startup, corporations have to provide feedback, data and other relevant resources to help shape a potential pilot engagement or proof of concept.

3. Take or make investments strategically

Startups are usually self-funded in the early days, with subsequent funding from angel investors and institutional investors such as venture capital firms. Corporations, equally, invest in startups for various reasons. Some establish Corporate Venture Capital funds to invest, while others invest off the balance sheet.

Before making an investment, it is important to consider the reasons for the investment and its implications for both the corporation and the startup. For a startup, funding is almost always welcome, however accepting an investment from one corporation may limit them from working with a direct competitor.

From the corporation’s perspective, investing in a startup can yield many benefits, such as ensuring that the startup has the resources to develop the solutions that the corporation wants and that their product development is aligned and prioritized. On the other hand, providing funds for a pilot or a commercial development instead of investing into a startup is often a faster and easier route.