How corporations can partner with a venture — successfully

Thinking about a potential partnership? Here are four steps to collaborating effectively.

If you’re thinking about acquiring new talent, accessing larger markets or building new products, a commercial collaboration may be the answer. Whether it’s a product co-development or the procurement of an existing service, these collaborations can offer a big benefit: faster, cheaper access to products and services that are either in development or already exist. Plus, it’s often more efficient to work directly with a startup than to incubate those innovations in house.

Collaborations between corporations and startups are a growing part of the tech landscape. “Digital transformation is a huge priority for corporations,” says Lucas Perlman, director of enterprise technology at MaRS. Due to the pandemic, more companies are racing to digitize their operations, he says, which means solutions from startups are more crucial than ever.

Canadian companies can help. For instance, in March, Roche Canada, a biotech company, created a data science coalition in order to facilitate knowledge sharing during the pandemic. The coalition was looking for epidemiological data to help track the spread of COVID-19. Enter ThinkData Works, a Toronto-based venture, which connected them to publicly available data sets from its global sources. The resulting collaboration sped up Roche’s time-to-market and allowed the coalition to bring essential COVID-19 intelligence to front-line workers, hospitals and suppliers.

Thinking about a potential partnership? Here’s how to do it.

Define the problem you want to solve

What issue are you trying to address?  Does it support the overall business strategy? Answering these questions, and developing a problem statement, are among the most challenging parts of a collaboration. But they’re also the most important — defining what both parties will work on together, and putting that in writing, is critical to success.

Problems often arise when a corporate partner hasn’t thought through the problem they’re trying to solve, says Perlman.  “People often think the problem is X, but when they start talking to a venture, it’s actually Y. Developing a really clear problem statement that illustrates how you would measure the success of an intervention makes sourcing and finding the right technologies much easier,” he says.

One way to approach the statement, says Mark Hyland, a senior advisor for growth services at MaRS, is to define the opportunity in terms of the capabilities you want to unlock. Are you trying to reduce customer churn? Increase customer adoption? Streamline communication between employees? The strategy should involve an important problem that is core to the business and that all parties agree needs to be solved.

Create a measurable definition of success

The next step is defining what success will look like and how it will be measured. To do this, Hyland recommends attaching numbers to the problem statement. These metrics don’t need to be final but they do need to illustrate how solving the problem adds value to the business. Defining a successful outcome also helps identify the right solution. Without this step, many corporations attempt to solve a problem without confirming that the solution will be meaningful.

“If the problem isn’t a priority for the business and if it’s not going to have a material financial impact, then it’s very unlikely that proper resources are going to be allocated to solving it,” says Hyland.

Things can stall, for example, when the conversation turns to pricing and both parties’ numbers differ. “We’ve seen a lot of time spent on the process before this realization is made,” he says.

That vision can help in other ways, too. When Hyland was head of sales at Quickplay Media, a video streaming services startup, Quickplay’s partnership with IBM fizzled when both parties realized they weren’t aligned on priorities. In fact, Hyland says this is the most common problem he sees: partnering for partnering’s sake. What sounded like a good idea on paper didn’t create real value for either company.

Secure the resources you’ll need

Once you’ve established that a partnership can benefit the organization, it’s time to establish executive ownership. Buy-in from the senior levels of the company gets you to stage two: allocating the right resources to move the partnership forward. Putting those in place means that when either partner makes a request, the resources are available within a reasonable time frame.

Hyland also recommends streamlining the procurement policy and onboarding processes to make buy-in easier. This could mean putting together FAQ lists for key parties or addressing budget, hardware or security issues upfront. And whether you’re approaching a startup for the first time or working through a late-stage deal, creating a team that’s responsible for decision making will address another common challenge: a slow approvals process.

Lastly, Perlman and Hyland stress that all partnerships should move ahead with empathy for the startup, which may have limited time and money as well as pressure from investors. Anticipating how the engagement will advance the venture’s business goals as well as the corporate partnership is important. “Having empathy means thinking about whether or not it’s worth the venture’s time,” says Perlman.

Plan for long-term success

Thoroughly going through the steps outlined above — defining the problem, establishing budgets and business value, and securing executive ownership — can help you figure out what problem you’re trying to solve. They can also help establish that you’re got the right internal alignment and an understanding of how you’d measure success. The framework also lets you vet and qualify technologies more effectively before you proceed.

Great collaborations are able to leverage the existing knowledge on both sides. However, many venture-corporate collaborations often fail to get past a proof of concept stage, says Perlman. The most successful partnerships come from a vision for long-term success, and they bridge the gap between the realities of a large enterprise and that of a small startup.

“True innovation and value to the business can only come through scaled collaboration,” says Perlman.