Why Large Companies Should Partner With More Startups

Soundarya Mahalakshmi

Last Updated: December 20, 2023
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Startups are no strangers to teamwork. They work with business investors, customers, contractors, and others to ensure that operations operate smoothly. Similarly, businesses work both internally and outside to promote development.  When growing startups and large corporations pool their resources, they may enjoy the best of both worlds in terms of creativity and influence, while complementing each other’s strengths and shortcomings.Balance is essential in the relationship between a startup and an organisation. Startups use agility to explore new market possibilities, but they frequently struggle to scale. Corporations, on the other hand, have effectively scaled yet may lose out on new market possibilities. This is not to imply that neither can do the other well – they can and have – but there is an advantage to working together.

There’s a reason why 94 percent of tech CEOs are dissatisfied with their firms’ innovation performance, and partnerships are the way to go. Partnerships allow you to get access to new markets and customers. They have the potential to reduce development costs, give significant insights regarding experimental technologies and the people necessary to produce them, and, most crucially, expedite innovation. The issue is that these collaborations are far from certain. In this blog, we will dive into the advantages to collaboration, such as access to new technologies, how small startups have the luxury to speed decisions, how access to emerging markets are available, and how larger companies benefit through having the ability to test out newer trends with startups. We will also look at the challenges that companies face through these partnerships, and examples sprinkled throughout the blog.

Access to New Technologies And Innovative Solutions

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Partnering with startups offers larger companies access to new technologies and innovative solutions that may take time and resources to develop in-house. Startups often specialise in cutting-edge technology, such as AI, blockchain, IoT, or other emerging fields. They excel in rapid prototyping, allowing larger companies to assess the feasibility of new technologies without committing extensive resources upfront. Startups often consist of experts in niche areas, allowing larger companies to tap into their specialised knowledge base without hiring or training new talent.

Startups are more flexible and willing to tailor solutions to specific needs, allowing larger companies to access custom-built technologies or solutions that address their unique challenges or market demands. Partnering with startups provides an early adopter advantage, allowing larger companies to incorporate cutting-edge solutions into their products or services before competitors, gaining a competitive edge in the market. For example, a large automotive company might partner with a startup specialising in battery technology to explore more efficient and cost-effective energy solutions for electric vehicles.

Microsoft and GitHub: The software industry relies on developers, and open-source communities offer a rich source of innovation and collaboration. That’s why Microsoft decided to acquire GitHub in 2018 for $7.5 B. GitHub is a popular code-repository service that millions of developers use, as well as companies like Airbnb, Shopify, Netflix and more. Microsoft CEO Satya Nadella explained the rationale behind the acquisition:

“As a developer-first company, Microsoft is joining forces with GitHub to reinforce our commitment to developer freedom, openness and innovation. We….will do our best to enable every developer to build, innovate and solve the world’s most urgent problems.” The deal, which was initially intended to boost Microsoft’s open-source presence, bring its tools and services to new audiences and increase GitHub’s adoption among enterprises, also resulted in attracting valuable new talent.

Increased Agility And Speed

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Startups are usually more agile and adaptable than larger corporations, allowing them to react quickly to changes in the market. Learning from the expertise, work style, and development process of smaller, younger ventures can help corporates to keep up with the trends. Partnering with startups can significantly improve the agility and speed of larger companies. Startups often have streamlined decision-making processes, which can be adopted by larger companies to reduce bureaucratic hurdles. They operate in lean environments, allowing them to iterate quickly and adapt to market changes. By partnering with startups, larger companies can leverage their rapid prototyping and development cycles, bringing new products or features to market faster. Startups are also more flexible, allowing them to pivot and adapt to market feedback. This flexibility is valuable for companies entering new markets or responding swiftly to changing consumer demands. Additionally, startups are adept at optimising resource utilisation, which can be learnt and implemented by larger companies. For example, a large software corporation could partner with a startup specialising in agile methodologies to implement more efficient development practises, leading to faster product releases, quicker responses to market changes, and enhanced competitiveness. And it is not just about the product itself. Larger companies benefit culturally from bringing a startup in the mix. New ideas are generated, viewpoints are changed, and innovation flourishes.

The truth is, technology is relatively cheap and it is being rapidly developed by startups. While corporations offer large distribution channels, they are often looking for innovative technologies to enhance their business quickly, without adding to their overhead. As partnerships between big companies and startups grow, the opportunity for acquisition can make sense for both sides. Combining the agility and creativity of startups with the resources and distribution channels of large companies can lead to profitable partnerships. And that is the truly amazing aspect of the changing business model.

BioNTech-Pfizer Partnership On COVID-19 Vaccine Development

Pfizer, a SwitchPitch client and a renowned pharmaceutical company, teamed up with BioNTech, a German startup, to create the Pfizer COVID vaccine technology. BioNTech contributes its expertise in mRNA molecules, while Pfizer offers its experience in vaccine development and delivery.The two companies started working together in 2018 on mRNA-based flu vaccines. BioNTech normally focuses on developing personalised immunotherapies for  cancer patients using mRNA molecules, and has about 1,500 employees. In March 2020, the two companies announced a joint effort to develop a COVID-19 vaccine. BioNTech’s CEO, Ugur Sahin, said that the collaboration is a good match because it enables BioNTech to “develop and distribute a potential vaccine in the shortest possible time.” Pfizer and BioNTech’s vaccine, based on mRNA technology, was the first COVID-19 vaccine to be authorised in Europe and the U.S last year. To meet the high demand for the vaccine in those two regions, Sahin recently said that the companies would increase their 2021 production target to 2 billion doses, up from the previous goal of 1.3 billion, according to an article on FiercePharma.

A large-scale study has confirmed that Pfizer-BioNTech vaccine’s two-dose regimen is 94% effective, as FiercePharma reports. The companies are also in talks with the FDA and EMA about testing a new booster that is designed to combat new variants. Moreover, Pfizer has a track record of forming partnerships with startups and funding biotech innovations. The Pfizer Breakthrough Growth Initiative (PBGI) is one recent example. Pfizer’s innovative culture has certainly helped it achieve the success of its co-created COVID-19 vaccine.

Anytime Fitness and Delta Trainer Team Up On Digital Personal Training Platform

Covid-19 brought a lot of changes to the fitness industry. As gyms were shut down, people had to use their homes as their ‘fitness studios’. With the help of Pittsburgh-based startup DeltaTrainer, people could get the same training experience online as they would with an in-person trainer. DeltaTrainer successfully partnered with the largest gym chain in the world, Anytime Fitness. The goal was for DeltaTrainer to provide the innovations and technology that customers and fitness trainers were desperately looking for. This includes an app that detects when a specific exercise is started so that live feedback can be given on an individual’s form and pacing.

The partnership saved many gyms from going out of business, making it a great example of how partnerships can make you stronger. And of course, not only did Anytime Fitness and DeltaTrainer benefit from the collaboration – the partnership was able to make the pair’s clients physically stronger too, by improving their overall health and wellness. With this collaboration, there is no reason to not get exercising!

Access to Emerging Markets

Partnering with startups offers larger companies access to emerging markets through localised understanding, innovative market entry, cultural adaptation, and access to distribution networks. Startups often have a deep understanding of local consumer needs, behaviours, and market dynamics, which can be leveraged by larger companies. They can also offer tailored approaches to emerging markets, helping them navigate cultural nuances and avoid potential pitfalls. Additionally, startups can provide access to established distribution networks, allowing larger companies to introduce their products or services efficiently. Risk mitigation is also a key benefit of partnering with startups, as it helps mitigate risks associated with uncertainties in regulations, consumer preferences, and market conditions. For example, a multinational retail corporation could partner with a local e-commerce startup in a developing market, providing access to the startup’s delivery network and understanding of local consumer preferences, facilitating smoother market entry and improving market penetration strategies.

Cultural exchange between large companies and startups offers several benefits. It fosters innovation diversity, as startups often have a different working culture that encourages risk-taking, experimentation, and an entrepreneurial mindset. This can be instilled into larger companies’ culture, creating a dynamic and creative environment. The exchange of ideas between diverse teams can spark new thinking and unconventional solutions. 

Startups are agile and adaptable, offering valuable lessons in adaptability, speed, and resilience. Cultural diversity is also fostered by the diverse teams, enhancing sensitivity and understanding within the organisation. Cultural exchange promotes collaborative growth, allowing startups to learn from established processes and experiences of larger companies while benefiting from the agility and innovative approaches of startups. For instance, a traditional finance institution can transform its approach to product development and customer service by imbibing the startup’s culture of agility, risk-taking, and innovation.

Risk Mitigation 

Engaging with startups offers a thrilling adventure for larger companies, offering opportunities for discovery, testing new horizons, calculated risk, and a collaborative expedition. It’s like sailing into uncharted waters, where every turn brings new revelations, fresh ideas, or unexpected innovations. Startups provide a space for experimentation and risk-taking, with enough safeguards to prevent a complete shipwreck. Working with startups involves a cultural exchange, where learning and growth occur on both sides. The excitement of unveiling innovation is like unwrapping a gift, not knowing what’s inside. Partnering with startups is not just a business move; it’s an exhilarating journey towards innovation and growth. The journey is not just surprising, brilliant, and always an adventure, making it an exhilarating journey towards innovation and growth.

Harbour-ADT partnership on home-security service: Harbour, a safety-focused platform, introduced Harbour Premium, a subscription service backed by home-security giant ADT. The main goal of Harbour is to simplify home risk assessment for users. Their app offers gamified lessons and quizzes on preparing for specific emergencies, breaking down larger tasks into smaller, manageable steps, like storing water, checking smoke detectors, or assembling a go-bag.

This partnership integrates ADT’s professional monitoring and their mobile safety platform, Safe by ADT, into HarbourHELP, a new emergency feature in the premium service. By pressing the HELP button, users can swiftly connect to ADT’s monitoring team, who can then contact the user, alert authorities, and share their location with emergency responders.

Harbour secured $5 million in funding in 2020 from a single investor, 25 madison, a New York-based venture studio that supports and funds companies from their inception. Following this, Harbour publicly launched their product in October of that year. Regarding the partnership, Harbour’s CEO, Dan Keesler, highlighted that ADT’s nationwide network is a valuable resource for Harbour. While there’s a financial aspect to the relationship, the core is strategic, driven by aligned visions between the companies. They aim to collaborate and achieve objectives that neither could accomplish independently.

What Are The Challenges Of Startup-Corporate Collaboration?

There are some common challenges that startups and enterprises face when they decide to collaborate on ventures. Here are some of them.

Startups are protective of their ideas: Smaller companies sometimes fear that an enterprise partner is out to steal their intellectual property. They are hesitant to share innovations, even if their collaborator has the resources to help them succeed. In reality, big companies are likely not interested in stealing a new idea. Corporations tend to focus on scaling

Startups fear being exploited: Small business owners may be reluctant to be transparent with their big business partners. This reluctance can make it difficult for the enterprise to evaluate a product’s or service’s viability. When a startup keeps its cards too close to its chest, it becomes harder for larger corporations to determine whether or not the startup is the right investment fit.

Enterprises may be sceptical of a startup’s lack of experience: Startups obviously have little in the way of a track record. This lack of experience and credibility makes the enterprise-startup partnership a risky proposition.

These barriers – some real, some based on misperceptions and fears – have prevented too many potential partnerships from happening. To forge a successful collaboration, both sides must take the risk and dive into the relationship, trusting that the other party is working toward a mutually beneficial goal.

partnering with startups is more than a strategic move for large companies; it’s an exciting gateway to innovation, agility, and diversified growth. It’s a journey where risks meet calculated rewards, where established corporations learn from the nimbleness of startups, and where cultural exchange sparks creative fires. This collaboration isn’t just about accessing new technologies or markets; it’s about embracing a different mindset—a culture of innovation, speed, and adaptability. It’s about exploring uncharted territories, experimenting with new ideas, and fostering a dynamic environment where both sides flourish.

Navigating Career Paths With Mentoria

Corporate-startup collaborations are a powerful tool for driving innovation, growth, and success in today’s dynamic business environment. By leveraging each other’s strengths and capabilities, large companies and startups can achieve mutually beneficial outcomes. Mentoria’s counsellors provide one-on-one guidance to help students and professionals develop a career plan. They can also help with resume and cover letter writing, interview preparation, and job search strategies. We also offer a variety of workshops and webinars on topics such as career exploration, job search strategies, and professional development.

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