The benefits for corporates to partner with startups are huge. It helps them to be constantly innovating
without having to innovate them selves. It furthermore allows them to stay ahead of the
curve and create a competitive advantage that is hard to beat.
In this episode we will be talking about how the partnerships can look like and what the best way is
to go about it.
There are many different ways on how to structure these kind of partnerships. Usually the light
partnerships are the easier to start with but there is also more in depth partnerships that make
sense for the long term.
There are three major categories that make sense:
The commercial agreement:
In the commercial agreements it is just the case of a corporate utilising the technology or the service
of a startup by paying for it. There is a few different levels of depth. The corporate can just
utilise publicly available software offered by startups to improve their business.
Startups offering a off-the-shelf SaaS (Software as a Service) model are usually the ones this applies
to the most. It is very common in accounting, human resources or customer relationship software.
In other cases the startup offers more cutting edge technologies that require customisation to the
client. In those cases they get the software but have to add on some customer support in order to
custom fit the software for the specific client.
And sometimes do even corporates require custom build technology based on an existing platform
that a startup is offering. In this case, they purchase the software or service normally but then finance
the startup to build their requirements.
Added value partnerships:
Added value partnerships are partnerships that give the startup some other value other than monetary
for their service. In many cases it allows the startup to build creditability in the market, proof
their concept or just open a door for the future.
This is the partnership that most corporates seek as it has no cost for them and at the same time
they leverage their brand and company in order to achieve that. This type of partnership makes
sense to super early stage startups but also only to a limit.
Corporates try to take advantage of this fact multiple times because they do not understand the
long term vision and benefit of these kind of partnerships. At the end of the day, the startup is just
another business that has to generate revenues. Only when they do that, they can expand their
business offering which will ultimately lead to benefiting the corporate.
Equity Investment:
When corporates fully understand the offering of the startup and the potential future upside, they
get interest to get involved more. So on top of a commercial partnership or added value partnership
they seek to get an equity stake in the company. This case is very rare but very beneficial for
all parties involved.
The startup gets a strategic investor onboard that can potentially provide much more than just
money and real market insight. It is also great credibility for the startup. The corporate in this case
has full insights of the development of the startup and can ideally get involved in shaping the future
of the product offering and ideally in a way that benefits the corporate.
As the founder of SnappCard I have gone through all three partnership with different entities. The
commercial agreement is the most crucial one the business. The added value partnership was very
beneficial for us in the beginning to get us off the ground but the most beneficial one was the Equity
Investment from one of our big clients. We aligned on the vision and with the financial support
and the know how we were able to take our business to the next level together.
There is a lot of space for more partnerships in our region and the companies need to not only understand
the direct benefits they can have from a partnership like this, but more importantly the
long term returns it can bring.
Large corporations can benefit from start-ups
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