Digital disruption is snapping at the heels of London’s corporates. Many are only just waking up to the fact that tech startups like Zoopla, Skype and Funding Circle – all less than 10 years old and bred in the capital – have become billion dollar “unicorn” companies, rewriting the rules of whole industries.
In 1958, the average tenure of a firm in the S&P 500 index was 61 years. Fast forward to 2015 and that life expectancy is just 18 years. But forward-looking corporates aren’t writing off startups as threats. Instead, they’re finding new ways to work with them.
Why? Because startups are key to helping corporates rejuvenate company culture, stay on top of new technology trends, solve core business problems, and expand into new markets. Successful collaborations must be reciprocal instead of simply a “brain drain”, and if harnessed correctly they can be an important way for startups to scale with corporates as their lead customers, partners and strategic investors.
Nesta, Founders Intelligence and the Startup Europe Partnership turned to more than 120 corporate leaders, entrepreneurs and investors to uncover the best programmes.
Investing in startups through corporate venturing – worth $48.5bn globally in 2014 – has ceased to be the only or necessarily best way to reap the benefits startups can bring. More popular options among Europe’s leading companies we interviewed include running events and competitions, sharing resources like tools and co-working space, business support, and strategic product partnerships.
Nesta found that one third of Europe’s accelerators are already run or supported by corporates from various sectors, including Telefonica, Accenture and Rabobank. Diageo and Unilever now also run structured pilots in London to jointly develop and test new digital products. The latter benefited from Digital Genius, a startup that helped Unilever’s biggest food brand, Knorr, expand into new markets in Africa and Asia. But this might not have taken off had Unilever not actively sought to make collaboration a more attractive option; streamlining cumbersome processes, halving payment terms from 90 to 45 days, and simplifying confidentiality agreements.
While internal opposition can take the shine off working with startups, corporates are beginning to tackle this. Dell has added a new category – entrepreneurial spirit – to its employees’ key performance indicators, which creates stronger incentives for engagement.
Every corporate has some kind of resource to support and engage entrepreneurs. But this is not enough. Organisations backing tech startups – whether investors, accelerators or universities – play a huge role in building bridges. Helping startups understand the objectives and mechanisms of corporate partners will put them in a stronger position. There’s a role for policy-makers too by supporting these match-makers and facilitating public-private partnerships. Germany’s High-Tech Gruenderfond is an excellent example of this.
Joining these forces will build a strong platform for the UK’s tech scene, scale-ups and future business growth.
Valerie Mocker is a principal researcher for startups at Nesta, the UK’s innovation foundation. The guide Winning Together, developed with Startup Europe Partnership and Founders Intelligence is available at www.nesta.org.uk