“ACME Inc, a Fortune 500 company welcomes submissions from SME’s & Startups”
What’s not to love about that!
Well, having worked within corporate innovation teams and subsequently pitched to some, I want to tell you that things are not quite as they seem…
With a few exceptions, large corporates struggle to get new ideas off the ground. However once they do get going, they are usually pretty successful. Large enterprises have the financial resources and experienced delivery teams to make things happen.
The value of the startup to the corporate
The challenge faced by the corporate is deciding whether to formally initiate a project and commit the resources to it. This is where the startup comes into play. Working with startups allows large corporates to test the water. The eager startup will move heaven and earth to overcome the hurdles, most of which will be erected by the corporate itself.
For example, the compliance team within the ACME Inc may insist on X, but ACME’s engineering team might only support Y. Result - nothing happens. However, the eager startup - Gullible LLC, will graciously rewrite their entire platform to support both X and Y. It’s a match made in heaven. Until the corporate decides to formally initiate the project…
Moving beyond the pilot
At this point the startup has de-risked everything - the corporate knows what to do, the business case can be justified. Time to hand over to the grown ups. The in house delivery team takes over, thanks the startup for their hard work and brings in Infosys, IBM or whoever else to take the project through to production.
The hurdles that prevented the corporate from getting the project off the ground often prevent it from keeping the startup onboard. Technical architects refuse to sign off technology that isn’t “enterprise grade” (I know, because I’ve done this myself!), compliance officers need to see ISO 9001, 27001 and other certifications, credit controllers demand N years audited accounts.
Look beyond the headlines
It’s important to look beyond the headlines. The fact that a company selected “10 amazing startups from last years cohort” means nothing. How many of those startups progressed beyond pilot stage? How much revenue are they receiving?
Startups come in all shapes and sizes. The fact that a company was willing to work with a 400 person strong, Series C startup doens’t mean they’ll work with a bootstrapped or seed level company.
Paradoxically running a pilot for a large enterprise could actually work against you. “We’re used by Acme Inc.” is a great marketing slogan, but if Acme didn’t progress beyond pilot it’s a potential red flag to others. Remember, most large corporates are inherently risk averse - Selecting a product after others have discounted it is a bold move.
There are exceptions
Of course there are exceptions. Some very large enterprises take a measured approach to risk - getting to market early may override concerns related to working with early stage companies. To some extent it depends on the sector. From my own experience I’ve found the regulated sectors e.g. energy and financial services are the most cautious, whilst media companies are more willing to “take a punt”.
However, the truth is that for most large corporates, startups are most valuable during the earliest stages of a project. As the project matures, startups become less of an asset and more of a liability. So if you work for a startup, be careful and don’t invest too much of your time in that “golden opportunity”.