How can startups build successful collaborations with corporations?
This article was first posted on the Coentrepreneurship platform.
Collaborative entrepreneurship initiatives are trending and an increasing number of startups are engaging with corporations.
According to a recent study, published by Wamda and Expo 2020 Dubai®, 92 percent of surveyed startups reported that building a partnership with a large company has had a positive impact on their growth.
It actually helped them increase their brand awareness, secure funds, develop new products or services, and enter new markets. Nonetheless, establishing a successful corporate collaboration can become an obstacle course for startups.
So, how can startups overcome these impediments and build fruitful partnerships with established companies? This question has been asked to a selection of experts in the MENA entrepreneurship ecosystem and their answers provided valuable tips for startups to successfully go through their collaborative entrepreneurship journey.
Getting ready for collaboration
Before initiating a corporate partnership, the first thing startups should assess is their internal readiness.
In fact, they should not start looking for corporate partners unless they already have developed a commercially viable solution. “A startup should approach a corporation when it has a clear value proposition and it feels confident and comfortable with it,” says Omar Sati, founder of DASH Ventures. For Sati, when a startup can propose to the corporation a product that is better, cheaper, and more efficient than what it already has, “it should go and knock at its door.”
Those experts consulted in the report, however, also advise startups to approach corporations at the early stages of their development if they need to build prototypes.
They said that working hand in hand with large companies to develop prototypes will allow them to obtain direct feedback and quickly adjust the product to their partner’s needs. As a result, they can rapidly gain traction and significantly reduce their time to market.
Once the startup is ready to start its collaborative entrepreneurship journey, it should analyze its market, define its target segment, and identify the large companies operating in it. It should then examine in depth each corporation of interest, to recognize its specific needs and shortlist the ones that could be interested in its value proposition.
According to MENA-based investment experts Issa Aghabi and Dana Horska, startups should “choose companies that can add the most value in terms of potential new clients, brand name, and support”. They also noted that when making their choices, startups should consider the company’s ease of operations and its capacity to open new doors and introduce them to places where it is difficult for a small company to enter.
Establishing the relationship
After selecting their corporate targets, startups should reach out to them and contact their gatekeepers.
They should also leverage their networks to get introductions at the right level. For Noor Shawwa, the managing director of Endeavor UAE, “connecting through a referral is a great way to get things started quicker”. He added that, once the connection is established, “entrepreneurs should be clear on what they offer, what they want, and how they envision the collaboration”.
Startups should present a useful product or service and not one that is simply a nice-to-have. They should make sure that they know the problem they will be solving and the business rationale behind their proposals inside-out.
Contacting the right people and presenting a good proposal are not enough, in themselves, to secure a partnership with a corporation. Startups still need to successfully navigate through the negotiation phase.
To do so, they should define sound collaboration goals and be aware of the time necessary to close a deal. According to Amir Farha, managing partner at BECO Capital, “startups should set clear negotiation’s milestones. They should also identify a champion within the corporation that can give them indications whether to continue or suspend the discussions”. Negotiations cost startups time and money. Therefore, they should always make sure they are spending wisely.
Making the partnership work
Startups should not reduce their efforts once the partnership agreement is signed with the corporation.
They should nurture the relationship to avoid any loss of interest from the company’s side.
They should work simultaneously to deliver on their promise to gain their partner’s trust, whilst closely monitoring payments to avoid any cash shortage; establish connections at all the levels of the organization to protect the deal from any change in leadership; and institute a clear line of communication between the startup and the corporation to ensure the proper implementation of the deal and the quick resolution of any arising problem.
Finally, all the interviewed experts agree on the fact that startups should cautiously plan and prepare each phase of the collaboration process. As Hagop Tamanian, investment principal at Silicon Badia, said: "Partnerships with corporations can be useful for some startups, but, in general, startups should not be dedicating too much time, effort, or resources to developing corporate partnerships, especially in their early stages."