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Despite a growing culture of risk aversion in the face of mounting economic uncertainty, corporate businesses will continue to invest in their relationships with startups, according to research by U.K. innovation agency NESTA and advisory firm Mind the Bridge.
The two organisations interviewed more than 30 “innovation leaders” from companies, such as Samsung, Virgin, Barclays and ABInBev in November this year and their responses formed the basis of a newly released report that looks forward to 2019 in terms of the evolving relationship between technology startups and their counterparts in the corporate world.
And if you run a startup that is keen to source investment or support from a large company, then the report – on the face of it, at least – contains some good news. As corporate leaders look to the year ahead, the growth of so-called open innovation – which essentially involves businesses looking outside their own four walls for the technologies that will help them maintain a competitive edge – is not going to slow. However, the report suggests that larger companies have been reassessing their collaboration strategies and some types of programs look set to be scaled down.
A Brake On The Accelerator
Accelerators are case in point. Over the past few years, accelerators sponsored by corporate businesses have become increasingly common. They can be controversial. Typically, these programs require participants to apply their technologies to the requirements of the corporate sponsor. The startup receives funding and mentoring, while also having an opportunity to develop relationships with senior people within the sponsoring organisation. That’s all good, but taking part in a corporate accelerator requires a commitment stretching over months, and a focus on one specific project can divert participants from pursuing other opportunities. There are no guarantees of any ongoing commercial relationship with the sponsor.
But regardless of whether corporate accelerators represent opportunity or wasted time, there are going to be fewer of them. According to NESTA and Mind the Bridge, only 60% of innovation leaders saying they will use them in 2019, compared with 69% in 2018.
Scouting For Talent
However, more companies say they will be actively scouting for potential startup partners and one increasingly popular strategy is to establish what the report describes as “outposts” in established technology hotspots. This may not be good news for European companies as respondents – perhaps predictably – cited Silicon Valley and Israel as likely locations.
Overall, around 90% of those questioned said they planned to invest in startups, with co-funded proof of concept and development the most popular strategies.
Hurdles In The Road
So in theory at least, cash-hungry startups should take comfort from the fact that corporate businesses are very much in the business of identifying and funding innovators. But that doesn’t mean that hooking up with a big company partner is ever going to be straightforward or easy. For one thing, the cultural gap is wide. The innovation teams of large businesses have boards to answer to and the the directors – in turn – are responsible to shareholders. From a startup’s perspective, the decision making and procurement processes of large organisations can be painfully slow. According to NESTA and Mind the Bridge, risk aversion within corporate businesses, coupled with protracted decision making processes are a brake on innovation.,
“All the corporate innovation leaders have definitively moved into open innovation that has now full top level buy-in. The main obstacles are mostly on the execution side and inside the corporations. Corporate culture of risk aversion and internal processes may slow down corporate-startup engagements and hinder the results achievable on this front,” said Alberto Onetti, chairman of Mind the Bridge.
Another restraining factor is the size of innovation units within large organisations. They are typically small cogs within very large machines. As such, they may not have the resources to properly identify and support startups ans might also struggle to implement innovation programs within their organisations.
“The issue for corporates is no longer to find startups, rather to effectively (and timely) implement their solutions. That’s why more and more corporates are outsourcing startup-scouting in order to focus on internal implementation,” Onetti added.
December 31, 2018 at 05:33AM
Forbes – Entrepreneurs