Gonzalo Galindo, Krishna Motukuri, Luis Felipe Giraldo
In the world of entrepreneurship, there is a symbiosis between technology-based startups that have a B2B business model and corporate ones. Take Zippin, a technology company that uses artificial intelligence in the checkout process by enabling stores and providing a frictionless shopping experience to the consumer, the company opened its first cashierless store in San Francisco in the summer of 2018. Its technology enables high precision using a patented overhead camera system in conjunction with intelligent shelf sensors, combining the powers of smart sensing, visual cognition, and machine learning technologies. The platform recognizes consumers, helps manage the masses within the site, and enables the store to have better inventory control, as well as optimize real estate and personnel costs.
Zippin’s business model is based on providing technology to retailers, so establishing solid and strong relationships with corporations is essential to the company. However, in what way can collaboration between startups and corporations be facilitated?
Entrepreneurs must be clear that working with corporations adds a lot of value since they have the resources to help the entrepreneur scale and create an attractive business. Corporations will be willing to collaborate as long as they generate value. Usually the integration processes can be long and complicated, as Luis Felipe Giraldo of Velocity X at INC Monterrey pointed out. Therefore, startups must prepare to face long sales cycles and bureaucratic processes, trying to align expectations along the way.
Additionally, the startup must select a project leader who is resilient and always seeks a mutual benefit with the company. It is important that in the process they understand the corporate organizational structure and its decision-making process. According to Krishna Motukuri, founder of Zippin, sometimes you have to sacrifice speed for added value that corporations can provide you.
Some entrepreneurs have not been in the business world, so they have to learn how to interact with them. Corporations have a reputation, a market, and operations to take care of, so some initial requirements for running a PoC, a pilot, or a commercial agreement could be uncomfortable. However, according to Gonzalo Galindo of Cemex Ventures, corporations need to understand that for a startup to be successful one of the criteria is the speed of execution, therefore they have to be selective in the contractual terms and implementation processes to comply with the objectives of both parties. One solution for corporations is to have dedicated resources to develop business cases with startups.
Some corporations have a CVC team whose function is to invest in startups with the objective of generating value to the strategy, strengthening the corporate capabilities, or solving specific problems. The entrepreneur must recognize that these investments can bring him a lot of value as long as his interests and expectations are aligned. In addition, the entrepreneur must be clear and solid in the terms that he is going to request from the corporate for the development of the business. The startup should not adapt the product to the corporate needs, if the rest of the market doesn’t ask for it.
For the corporate and the entrepreneur, making an investment in the startup is a mechanism to align interests and seek the economic success of the project. However, the corporate would not have the need to invest in the startup to have access to innovation, technology and disruptive models. In the same way, the entrepreneur does not require corporate investment to be commercially successful, raise investor capital and grow the business exponentially.
The collaboration between startups and corporations goes beyond investment, they are focused generating value for both parties. The approach must be dynamic and flexible. It must also have rapid adoption by the company, allocation of resources from both parties, and openness to share knowledge and learnings from the obstacles during the process.
In the entrepreneurial ecosystem there are several participants that can help in the relationship between startup and corporate, one of the most relevant are accelerators. These link startups to corporations, being a kind of intermediary that facilitate their relationship and the achievement of the success of the project.
Zippin is an example of a startup that has gained traction from the corporate hand. The fundamentals that have allowed it to move forward are the alignment of each of the parties, the motivation of dedicated teams that have sufficient resources to develop the project, and adopt a win-win mentality.
Corporations should keep in mind that startups will continue to evolve and many of them will be market leaders. Sometimes they will have to collaborate with startups that have likely raised hundreds or even billions of dollars. Companies have a lot to learn from the agility, technology, and problem solving of startups. Having a flexible and humble mindset is imperative. Entrepreneurs in their quest to build a large business that lasts over time must learn from corporate business processes, adapting them to their own reality. They both need each other.
ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.
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