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How Startups Benefit From Collaborating With Large Corporations

November 10, 2020 6 min read

Opinions expressed by Entrepreneur contributors are their own.

is no longer something that companies should strive for but something that’s become necessary for survival. That said, it’s long been difficult for to keep pace with the innovation of smaller businesses and more nimble startups. As a result, corporations are fiercely working to find ways to encourage innovation, for example through innovation labs, building disruptive cultures, or hiring chief innovation officers. 

While these shifts have helped and have enabled big companies to establish cultures of innovation, there’s one increasingly popular way that many companies have found to encourage innovation: collaborations with startups. When done correctly, these collaborations can be mutually beneficial and can help both parties develop, gain a competitive advantage, and ensure long-term success. 

Why corporate and startup collaboration is so Important

A 2017 Unilever Foundry report predicted that “startups and corporate collaboration will evolve from an optional extra to a -critical investment in the next five years.” 

In fact, that report goes on to predict that corporates and startups will even share space and work in the same physical space by 2025, driven in part by some of the key benefits that these partnerships provide like the ability to learn something new, improved efficiency, and the chance to find new ways to solve problems. 

For corporations, the ability to innovate is the biggest advantage of this . Startups offer big businesses agility, energy, access to new technology, increased understanding of target markets, and customer-focused innovation. At the core, startups provide corporations with the speed and focus that can help them outpace industry competition. 

Related: Genius Loves Company: 4 Ways to Cultivate Creative Collaboration

For startups, the greatest advantage of this relationship is often the resources that corporations can provide. Big businesses provide the necessary revenue to free startups from needing additional investors and to give them a chance to focus on their long-term interests. This is a key benefit for startups, who generally have few resources and are under great pressure to make those resources go as far as possible. In addition, the relationship offers startups a chance to develop and scale products, to enhance their reputation, to develop a competitive advantage, and to learn from an established business’s market knowledge, experience, and expertise. 

Tips for establishing an effective collaboration 

While there are many benefits from this type of collaboration, it does not come without risks for both parties. However, being strategic throughout all phases of the process can ensure that it’s a positive experience for all. Here are a few keys to keep in mind when considering a collaboration: 

Focus on strategic fit 

Experts advise that the single most important factor when it comes to the success of this type of collaboration is strategic fit. A study by Imaginatik and Mass Challenge found that 44% of respondents reported that this is the most important determinant of success. The report went on to explain that, “strategic intent determines not only which startups a corporation chooses to interact with, but also how they build the relationship, as well as which vehicles, processes, and people are involved.” 

Related: Points to check before letting a large company enter your business

For startups, focusing on strategic fit means understanding what they’re going to accomplish for a particular company, specifically understanding what the startup can provide and why a business would benefit from the partnership. For corporations, this means really doing the research and getting all the necessary information to understand what a particular startup can do, how it works, and what the business will gain from the partnership. 

I spoke with Dr. Cheryl Robinson, founder of Embrace the Pivot, about the importance of strategic fit in partnerships. She reminded me that sometimes patience is the name of the game.  “Early stage companies often do not have the luxury of the optimal organization to partner with but they do always have the power to say no to suboptimal ones. Partnerships should bring solutions not problems…and if that clarity of fit is not there then don’t be afraid to say no to a deal” Robinson said in our interview. 

Startups should focus on multiple corporations 

One common mistake startups make is becoming singularly focused on one business. This increases the risks and can lead to startups becoming more of a consultant for one corporation than a meaningful collaborator. A key way for startups to minimize the risks of corporate collaborations is by reaching out to multiple businesses and avoiding the pitfall of putting all of their eggs in one basket. 

Set clear expectations and realistic timelines

From the outset, both parties should establish clear expectations for the collaboration, including timelines. As work progresses, it’s important to regularly revisit and revise these expectations to ensure that all parties are working towards the right goals.

As part of the expectation setting, it’s a good idea to set timelines. This is often a point of conflict, as startups move quickly and businesses generally do not. Both parties should set realistic timelines, with startups understanding there will be a need to be patient and corporations appreciating that they should move as quickly as possible to fully benefit from the partnership. 

Work to maintain a two-way collaboration

Too often, corporations dominate the relationship and it’s not truly a collaboration. This is bad for both parties and takes away many of the benefits of this relationship. Both parties should work to avoid this common pitfall and to ensure that the relationship is a two-way collaboration where both parties are heard and equally valued. 

Collaborations between startups and corporations can be difficult and carry some risks. That said, they’re an increasingly essential way for both parties to grow and thrive. Leaders should work to get the most out of this type of relationship by being strategic about how relationships are established and developed. 

Related: 7 Great Collaboration Tools for Your Business


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