Corporate big fish must swim smarter, not just faster, to surf startup wave

Companies should set clear, realistic goals for engaging with startups to avoid the "death by pilots" scenario


CORPORATIONS need to be strategic in engaging startups, and not rush headlong into securing partnerships, said panellists at the RISE Corporate Innovation Summit in Bangkok, Thailand, on Friday.

The two-day summit featured experts in the startups and venture capital space, as well as across the public and private sector, who shared insights on innovation.

One concern about startup-corporate partnerships is how some startups suffer "death by pilots" when working with corporations on product trials for long periods, noted Eddy Lee, managing partner of venture firm Coffee Ventures.

"A pilot allows a corporate to give a brand or logo to the startup, and it's supposed to be a win-win... But we've heard...(how) startups undergo severe death by pilots. A B2B startup goes round and round, getting pilots which get very small ticket size revenue, nice logos, but then they die off," said Mr Lee, who is also vice-president of Engie Factory Asia-Pacific, a strategic venture arm of Engie.

The lack of clear objectives on the corporate's part could be one reason for this phenomenon, said Paul Ark, managing director of Digital Ventures, the venture capital arm of Siam Commercial Bank.

"Sometimes, corporates like the startup, but they don't know quite how to use them, (or) they may not quite have the budget to do a full implementation. And so, in a way, just doing multiple pilots is buying optionality."

That is, corporations take on the mentality of "I don't want you to go to my competitor, so we're going to just keep doing these projects", he added.

On the other hand, a startup may promise more than it can actually deliver in the hopes of securing a contract with the corporation. There needs to be more pragmatism on this front, said Jeffrey Paine, founding partner at venture capital firm Golden Gate Ventures.

It is also "inevitable" that leadership changes or business priorities can force companies to put collaborations with startups on hold.

But in these cases, corporations must not leave startups hanging in the balance, he said.

"Try not to waste a startup's time. You guys can (avoid) taking a risk and you'll be fine for many years. Startups cannot, they have to take risks so that they can get bigger."

Mr Ark concurred that when a big company is going through turmoil, informing their startup partners about the situation may not be top of mind.

"But I think it is still a priority that we as corporate innovators need to be better at, so that the entrepreneurs we talk to understand that the target they're trying to hit might be moving," he said.

Ultimately, the Silicon Valley mantra of "moving fast and breaking things" does not have to apply to corporate innovation, industry experts at RISE emphasised. What matters more is that they set clear, realistic goals for engaging with startups.

Mr Paine said: "We understand that it's not easy for a big company to be nimble... You just need to know each other's pain point; you need to know how everyone is aligned and work together. The clearer you are on the objective, (the better) you will be able to execute."

The Business Times is the official Singapore media partner for the RISE Corporate Innovation Summit 2019, which took place on March 28 and 29 in Bangkok.