Startup founders are able to innovate faster in terms of software technologies, machine learning, cloud computing, big data or analytics. In addition, the availability of resources that can have an internal I +D department is very small compared to those that are used in the entrepreneurial ecosystem.

This makes imperative for companies to work together with entrepreneurs, and to do so in a completely unconventional way compared to the past.  For many years Corporate Venture Capital and accelerators had been the most used model of startup cooperation. The statistics speak for themselves: From 2012 to 2015, the number of global corporate venture capital deals almost doubled, and their investments quadrupled, to $29.1 billion. But through the years, has therefore been possible to analyze and compare the results and the working procedures of CVC. And the findings are hugely significant for companies to the point that many big companies as Coca-Cola, Volkswagen or Yahoo have shuttered their VC arms or accelerators entirely.

The problem of Venture Capital has been that startups could not accomplish the requirements to meet strategic innovation goals, although startups have a lot of value to offer to large companies. One of the problems has been that Corporate Venture Capital  cannot replicate the deep experience private VCs have in starting companies. The other problem that has been found it’s that CVC&A have inherent difficulties with regard to innovation transfer and integration and also is known that work with CVC&A is costly and complex to operate.

After considering the effects of Venture Capital, a new strategy of investing in startups is now gaining a lot of supporters, and it’s called Corporate Venture Client. This new strategy is seeking to improve the model of CVC&A, with the challenge of make startups become a supplier of the company. By making startups become suppliers of companies, it is agreed to give startups one of the things they are most looking for: customers. Including startups as a supplier, it means helping startups in their development and adding a great point of integration with the company. It is important to mention that both strategies aren’t exclusive, once the product has been validated, it is a good moment for the Venture Capital arm of the company to step in and invest, so it is not a must but can improve the rate of success of the venture.

In addition, startups learn to improve in business development by working with a real company, as they learn about technical, processes and quality requirements. The risk client approach also gives them real feedback on their products and services. In addition, an early established client is a great motivator for founding management teams – and can be very helpful in hiring additional talent.

The most sensitive issue corporates need to address when implementing the corporate venture client model is how to integrate a company with a product or service that is still under development as one of their many suppliers. The normal process needs to be adapted to add a phase where the startup and the corporation work together to further develop the product to make it strong enough. The first step is to find a department where the product can be validated, the goal is that both sides get to know each other so they can establish a long-term relationship and more orders can follow.

It should be noted that BMW was the driver of this model in March 2015. It was on those dates that launched the Startup Garage, where since then, they have been working on the integration of startups in the innovation process of the company based in Munich. For BMW it’s very important to look for technology the market leaders offer and their suppliers do not have.

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