This article has been crossposted with Arabian Business.
Around 94 percent of startups see value in partnering with corporations because they are key to their ability to scale.
It allows them to get the market credibility required to expand into new markets, to get access to resources like funding and technology, and to get corporate clients.
We at Wamda have been studying corporate-startup partnerships for a couple of years now and we have recently released a report on the topic, in partnership with Expo 2020 Dubai, called Collaborative Entrepreneurship: The state of corporate-startup engagement in MENA.
Based on this knowledge and on our personal experience as a startup that grew through corporate partnerships, we have devised the following five do’s and five don’ts for startups.
The five do’s
1. Research well: Researching the target company, identifying its interests, its needs, its willingness to collaborate with startups and the entrepreneur-friendly initiatives it currently has in place, is essential to devising an appropriate strategy to approach it.
Large companies that are currently strategically working with startups and that have established programs and success stories would be more inclined to partner up.
However, don’t be discouraged if the company does not currently have advanced collaborations with startups, it can mean that it would just require more time and effort to educate and convert them.
2. Associate yourself with known brands: When approaching a corporation they will be looking for badges of credibility to judge if they can trust you.
If your startup brand is not well known, you need to associate it with known brands or personalities. As such, you might need to find your first partners within the known brands of your network or offer your services for free to a startup friendly company.
Once you have built this association, you can go more confidently knock on the door of other partners.
3. Recruit your internal champions: Large corporations are hard to navigate and you need to find executives or employees within the organisation that can guide you and advise you in securing the deal.
They would give you information on the partnership process and on the agenda of the decision makers. They can also advocate internally for your solution and support you in getting the deal done.
You can find them either through your network or by identifying employees that have already invested or worked with startups, or that have a startup or a small business on the side.
4. Understand the process: You need to clearly understand the corporation partnership or sales process, the available budget for your solution and the decision makers.
Internal champions, other suppliers and good research can help you get this information but don’t be shy to ask for it upfront to be able to move in the right direction.
5. Articulate what's in it for them: Propose a tailored and comprehensive value proposition.
Your solution should have an added-value that can be easily perceived by these partners, such as helping them to solve a persistent problem or reach a new market.
For example, a storage startup called Boxit helps a leading logistics company monetize its unused warehouse space by sub-leasing it to individuals.
The five don’ts
1. Don't approach too early: Since strategic corporate partnerships necessitate a clear value proposition and a substantial investment of time and resources on the part of the startups, the latter should preferably no longer be at the ideation or seed stage.
Startups should have a tested and proven offering in order to be fully prepared to develop a lasting partnership and relationship with a corporate partner.
The most suitable startups for advanced collaborations are often the ones that have reached a certain maturity level.
2. Don't rely on a few leads: Negotiation for corporate partnerships can take a long time and lead to nothing at the end. As such, startups need to diversify their leads and talk to several partners at once in the hope of converting a few.
3. Don't underestimate long sales and payment cycles: Large corporations are really slow, particularly compared to the fast pace of a startup environment.
Even when you get the impression the deal is closed, it might still take several months before you get the official signature.
Similarly, you should manage your finances smartly and expect several months delays on the payment schedule.
For example, a partnership at Wamda took us four months from the moment the partner agreed in principle to our scope of work, to the moment the deal got signed.
4. Don’t be vague in the agreement documents: Corporations have a large number of stakeholders that would get involved in your partnership, from the buyer to the purchasing department, to finance and legal.
Your counterpart at the organisation can also be replaced in the midst of the contract delivery. As such, you need to be as explicit as possible in the agreement or scope of work documents and specify the exact services you will be conducting and the pre-requisites that are to be handled by the corporation as well as the milestones you need to achieve to unlock the payment schedule.
5. Don’t underestimate the potential of ecosystem events: Attend relevant events occurring in your city, it might be an opportunity to meet with potential mentors that can support you in finding or approaching the right partners, or even with executives at large corporations looking for startups as partners.
For example, a successful startup called Vinelab met one of its key investors, a director at a global advertising company, at Wamda’s flagship mentorship event Mix N’ Mentor.