Corporations and Start Ups

Posted by Jeff Carter
on October 2nd, 2012

One of the things that I have worked on over the years was building a pipeline. Start ups have a pain point, cash flow. Corporations also have pain points. Sometimes its development. Sometimes its innovative branding. Sometimes its in procuring good talent. Start ups can assist them, and in many cases can do it more efficiently than they can do it themselves.

The problem is when the aircraft carrier company sits down at the table with the motorboat start up, problems immediately arise. How does this innovative motorboat help the aircraft carrier?

Corporations have to prepare themselves to work with start ups. Internally, they need to set parameters. The parameters they set must be relevant to the problem they are trying to solve. Simply looking at top line revenue might be a bad metric depending on the business. What if the business sells a hyper innovative product at a cheap price, and also doesn’t have a massive market the way it’s currently positioned? Top line revenue might be meaningless.

Conversely, start ups have to be prepared as well. Things aren’t going to happen in one meeting. They won’t happen in two meetings. But something should happen by the third meeting. At least an action plan by the company that shows they are interested and will pay for a service. Devote enough resources to get the big company interested-but don’t divert your entire strategy to service one big kahuna corporation.

Is corporate involvement necessary to develop a thriving ecosystem? Depends. For medical technology, I think so. Companies need to be buying start ups. Big hospitals need to be trying start up products and getting them in the hands of the end users to see if they work, and so the companies can iterate and make their products better. For other technology, it just depends.

The one advantage active corporations can bring is to become a customer, and provide much needed cash flow to the ecosystem. Companies that want to help local start up ecosystems need to figure out ways to become a customer. It might be as simple as recommending an application like Smarteys to it’s employees. But the important thing is to prepare the company to engage. Be mindful that delay causes the tomato to ripen a little longer on the vine. Delay too long and you create rotten tomatoes.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.