Corporate-startup partnerships aren’t an easy win-win. Here’s why.
By Joe Gan, AgFunder
Corporate-startup partnerships are on the rise. Since 2013, the number of corporate investments in startups has nearly tripled to 2,795 in 2018 from 980, increasing nearly 10 times in value to $180 billion from $19 billion. That’s according to GCV Analytics, a company that tracks corporate venture deals. But is this good news for both sides?
There’s some clear value to be gained from both: corporates provide the resources and legitimacy that startups aspire for, while startups have agility and novel ideas that corporations value.
“It sounds like it should be [a win-win]. But it’s hard to make it so. The situation is complex because the two parties are totally different. You need to create the right interface to communicate with startups and for them to talk with organizations,” says Barbara Guerpillon, director of Unilever Foundry Asia.
Guerpillon leads The Unilever Foundry, a platform for the consumer goods giant to collaborate with startups worldwide. According to its website, it enables Unilever’s global brands to ‘accelerate experimentations and pilots with new technologies more efficiently, effectively and speedily.’ The Foundry has scouted thousands of startups, worked on over 150 pilot projects with pioneering start-ups, and invested over $30 million since its inception in 2014.
“We are here to leverage the speed of tech out there, and that’s why we partner with startups,” adds Guerpillon.
Co-dependency, with lots of strings attached
Comparing startups and corporates is like pitting apples against oranges. The two entities have vast asymmetries within their systems. These include disparities in size, structure and power, amping up the difficulty level for startups to connect with the right people, or departments, within large corporations.
“By watching all these startups, we can appreciate the values that they bring. It also serves as a wake-up call – if we don’t change the way we think, we will destroy ourselves and our businesses,” warns Low Kim Huat, Yara’s regional director (Emerging Markets). However, despite heralding the great anti-apocalyptic purpose startups bring to the corporate table, Low warns that both parties have ‘very different mindsets,’ and to have these two groups working together is a ‘big gap to bridge.’
Why does such a chasm exist? Well, first up, let’s just spell out what the two actually are. By definition, a startup is likely to be newly-minted company aiming to provide a new innovative product, like processes or services, to its key market, often in an effort to disrupt the industry it’s in. Startups are typically backed by venture capital or other investors, which means they usually hope to be acquired one day or provide another type of exit for its investors such as an IPO. On the other hand, a big corporation is a larger, more stable, and profit-making enterprise with no plans for a so-called exit, although could still answer to investors if it’s a publicly listed entity. As for examples in the ag and food space, think perennial big shots like Monsanto, Bayer, Syngenta, Unilever, Campbell, Kraft Heinz and CNH Industrial.
CNH Industrial bought Australian farm management software platform AgDNA on September 5. Check out our coverage of that deal, here.
“But working together is never easy”
Kickstart Ventures’ Minette Navarrete has seen it all. Though she’s now president of a corporation with links to Philippine conglomerate Ayala Corporation, she tells us she’s been on the other side – having slugged it out together with startups. And she shares her unique blend of expertise in sizing up the problem when it comes to aligning the two types of entities – in her own words, “navigating the minefield”.
“For us corporations, our purpose is to break barriers. To build bridges between startups and corps. To create a disproportionate leverage to allow people to succeed where they wouldn’t. Frequently, that’s our understanding. Working together is never easy,” waxes Navarrete. “Startups have to face timelines and deal with different clock speeds. On top of that, expectations are very different. And what we hope to bring is an understanding.”
But what sort of problems do startups face in a corp collab? In short, it’s red tape. And lots of it. Multi-stakeholder partnership platform Grow Asia tells us that typical grouses include negotiating commercial terms, restrictive policies, including the length of exclusivity, IP ownership, as well as the lengthy process of proposal development and list of submission requirements.
“As a startup, you need to scale your sales in an energy-efficient way. Due to a startup’s limited resources, the idea of selling your tech to a multinational corporation (MNC) is very attractive. But MNCs have very, very different requirements. MNCs have huge hygiene factors in procurement, like meeting security requirements,” says Spencer Morley, COO of Farmforce.
As a fellow agtech startup, Tanmay Bhargava, head of Asia Pacific at Intello Labs shares Morley’s pain.
“One of the challenges in scaling up is related to change management. How we bring about change, is by reeducating users of our product. For example, when we worked with companies, the network included everyone from C-level people to quality assurance teams. With that many people, It becomes difficult to ensure everyone is aligned,” says Bhargava.
Intello Labs is one of the nine startups AgFunder & Rocket Seeder’s GROW Accelerator has chosen to work with. Find out more about them here.
So, how can startups make the journey that much smoother? Navarette says, “It’s important to keep telling the story in a way that people are able to understand. Spelling things out helps bridge gap between startups and corps and helps them understand we are on the same side.”
This article was originally published on AgFunderNews and reproduced with permission.