Startup-corporate partnerships 1/3: the logic behind them

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King Abdullah II of Jordan with Queen Rania at the opening of the MENA ICT FORUM in November.

In the first of our three articles looking at the culture of the startup-corporate relationship. 

It's difficult to overstate the importance of job creation to economies across MENA. Viable startup activity continues to contribute to the creation of new professions and eventually, as those new companies scale, careers. As the sector continues to gain support from policymakers, corporations have begun to contribute to the sector’s success.

Many people may be familiar with the concept of Corporate Social Responsibility (CSR). It is mainly a form of self-regulation committed to by businesses that seek to comply with ethical standards in their communities. In some cases, corporations meet their CSR responsibilities through the provision of financial or technical support to non-profits or other community institutions. In others, they do so by working with startups to drive their viability. 

The benefits of a partnership

Some corporations like Aramex and Zain in Jordan work to partner with startups – which can make good business sense. They provide services and support both to meet their social responsibilities and to cultivate new markets for their services. The leadership teams at both companies have realized the long-term benefits of working with growing companies in their markets.

By working with startups large businesses can gain access to new and nimble technologies. In a sense, they can outsource the development of beneficial technologies – thereby offsetting the risk of doing the research and honing the utility of a product or service. For that reason the eventual acquisition of a small business or startup by a large corporate is termed “acquihire,” a portmanteau formed by the words “acquire” and “hire.” They may also cultivate new customers that could one day represent significant sources of revenue.  

For startups the benefits to committing to a corporate partnership can also be substantial. Established companies possess institutional experience and know-how. They can significantly reduce the pains faced by small businesses through guidance and by reducing some knowledge barriers to scale.

Moreover, a new company with an unknown brand – which can be an especially important asset for consumer-facing businesses – gains significant credibility through partnerships with well-known corporates. In addition, corporate partners may sometimes be able to deliver distribution channels that would otherwise take years and untold amounts of capital to develop. The partnership between Aramex and ShopGo is a good example of how that could work. ShopGo’s onboarded clients – regional retailers usually – are automatically plugged into Aramex’s delivery network to make the most of the ecommerce boom here in MENA. The relationship delivers benefits to both parties.

Choosing the right corporate partner

For the benefits of a corporate partnership to really materialize both parties must have some degree of operational or competence overlap. For that reason startups must identify what they aim to achieve – the actual benefits they believe they can attain – before approaching a large corporation. For instance, if a new company produces video games, a relationship with Apple – which operates iTunes – may be more helpful than a relationship with Warner Brothers, the film studio. 

It is also worth remembering that corporations typically move slowly, taking six months or more to commit to a relationship and terms. Startups – usually cash-constrained and frenetically active – tend to have limited amounts of time. That too should be a consideration for anyone pursuing a corporate partnership. 

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