To build the ecosystem, we need collaborative environments ready to bring breakthrough innovations to the market. Different collaborations can be put in place but building relationships with private industry players is typically the most demanding.
In my previous articles, I focused this DeepTech series on:
(1) Explaining the challenges of the Spanish DeepTech ecosystem
(2) Providing a solution to solve these challenges
(3) Defining the type of partnerships startups need to have to add value to the planet.
Now we can start exploring how to build synergies between DeepTech startups and companies to foster the Spanish DeepTech ecosystem.
Let’s jump into designing a platform for corporates to collaborate with DeepTech startups.
DeepTech startups face diverse challenges from funding to market access and technical / business expertise, among others. To access the resources they don't have, startups rely on several stakeholders to help them address these specific needs.
Such collaborations are especially important for DeepTech startups since they find themselves at the crossroads of fundamental research and industrial application.
Universities, public institutions and investors have a key role to play in the development of the Spanish DeepTech Ecosystem, however companies - whether corporates or SMEs - are the only potential partners that meet all startups' needs by combining technical, industrial and commercial resources and skills.
To implement the creation of a strong Spanish DeepTech Ecosystem we must understand three crucial steps:
(1) The key singularities DeepTech startups have (based on their maturity levels) ...
(2) ...to find the obstacles when establishing corporate partnerships...
(3) ...to build a long-lasting platform that best adapts to collaboration between corporates and startups.
Instead of following a standard formula developed outside of the DeepTech environment, companies should define a clear framework to collaborate with startups in different stages.
The following information is taken from interviews with various Spanish universities (UPC, UPF, IQS, UB and UAB), Spanish SMEs, DeepTech experts and different reports such as “The Dawn of the DeepTech Ecosystem” by Hello Tomorrow & BCG.
A new framework development
(1) Define a clear corporate innovation strategy
Companies interested in collaborating with DeepTech startups must find an appropriate balance between internal and external sourcing of innovation:
(a) Set up innovation objectives from the corporate perspective which may focus on:
- Strengthening the core business
- Expanding into adjacent areas related to the core business
- Exploring and preparing for future market entry into unrelated business areas
(b) Search fields and innovation domain priorities
(c) Maturity profiles of the startups that the company wants to partner with
(d) Required resources for delivering the platform mission (dedicated budget, people, etc)
Once this strategy is clearly defined, we can jump to the next step: developing an agile environment and involving all business units.
(2) Build an agile environment
Embracing a standard methodology will veil significant challenges to companies. The better strategy is to focus on agility and engaging relevant people at the top management, project management and operational levels.
The optimal approach to take depends on the company, its objectives as well as the number and profile of startups the company wants to work with.
(a) Ensure lighter and faster processes: to improve interactions with small and agile startups, corporates should tailor their internal processes to handle more agile interactions; alternatively, they could create parallel processes and dedicated staff so the rest of the organisation can remain focused on business units. The most important processes to adapt are: procurement, legal and financial.
(b) Set up adapted governance to ensure fast-track decision-making: top management can oversee relationships with startups when it has reached a critical level to ensure the framework aligns with corporate goals. Dedicated experts from the company can serve as project managers for the collaboration. The startup benefits from corporate knowledge whereas corporates foster internal cultural change toward entrepreneurship.
(c) De-risk the technology before involving the business operationally: protecting the business from the risk of the collaboration at its earliest stage by setting up a team to de-risk projects for a defined period.
(d) Give startups easy access to corporate resources: when possible, corporates should allow startups to navigate freely through its resources for a specific period of time under a protective data usage policy. This not only helps startups become a potential business partner but it also spreads an entrepreneurial spirit in organisations and valorizes sleeping IP.
(e ) Adapt KPIs to track long-term results: collaboration with startups requires different processes and KPIs to ensure their results. Most corporates struggle with this. The right balance between financial and strategic metrics will depend on the collaboration mandate and should reflect: the knowledge acquisition in early technology stages and financial impact in late maturity stages. A 100% financial orientation will lose innovation objective and a 100% strategic focus will lose financial impact which must be considered at some point. The KPIs should be clear and corporates should share the reporting with the startup and within the company through regular communication.
(3) Initiate collaboration
Before structuring the relationship, corporates should consider a less formal relationship, as a temporary transition, with limited commitment on both sides so the startup can demonstrate its potential as a business partner, clarify what is has to gain in the partnership and test the teams’ complementarity.
(a) Share a common objective: both parties should be transparent about their real objectives and if possible they should jointly define the desired endgame (who does what, who pays what and who owns what).
(b) Address IP rights and exclusivity upfront: establish from the beginning a clear relationship of who owns the IP and whether there is any exclusivity, or not.
(c) Find short-term wins that will help parties quickly challenge and improve the value proposition, test the complementarity of the startup and corporate teams and build momentum through a short but intense period. It also helps bring financial resources to the startup prior to emergence of the final product and market.
(d) Agree on a common roadmap with clear milestones that will allow parties to define together the most efficient path to the common goal. Each milestone offers the opportunity to confirm or change the next milestone, go to the next level or stop the relationship.
(e ) Review the target and roadmap regularly: agility is crucial when exploring relationships driven by an opportunity. Example: explore the potential applications of a technology rather than a corporate looking to find a supplier for a specific product.
(f) Pay attention to startup cash flow.
(g) Design a suitable contract that ensures alignment of interests and fair repartition of the value created.
(4) Detail your collaboration
When establishing collaboration between the corporate and the startup, they must decide whether to reach specific business or financial goals, and when to stop.
(a) Set up a partnership to reach specific business goals based on the different technology maturity level of a startup and, its readiness in the market, partnerships vary. A product development partnership should be set up when the technology is in an early-mid stage maturity (TRL 1-7). Conditions may vary based on their high or low market readiness. On the contrary, when the startup is in the late stage, two partnerships come up: go-to-market partnership (when there is a low market readiness) and commercial partnership (when there is a high market readiness).
(b) Weigh the value of an exclusivity-based relationship: this can limit the startup exposure to other stakeholders in the ecosystem hurting the changes for success. The best practice might be to introduce the startup solution to other non-competing corporates as the knowledge startups gain from these other organisations will often benefit the original collaboration. Whenever exclusivity is introduced, it should focus on late-stage startups, be limited to a specific market or geography and period time to set up collaboration milestones and/or offer startups specific and advantageous conditions in return.
(c ) Leverage corporate venture capital (CVC) to reach financial and strategic goals: startups look more to corporates for market access and technical expertise than for funding. However funding can occur internally through CVC or investments in a venture fund not directly tied to the company. Besides supporting a potential business partner, CVC can be powerful to align corporate and startup strategies.
To conclude, a corporate should not limit its relationship with a startup to a one-to-one relationship. Corporates must make startups part of a broader community and engage them with other startups, companies, investors, suppliers, customers and scientists to help build a connected ecosystem that can accomplish several things:
(1) De-risk its startups portfolio
(2) Increase portfolio visibility
(3) Better understand the ecosystem through a broad range of technologies
(4) Enable startups to help and mentor each other
(5) Propose a value proposition attractive enough for startups to join the company
(6) Acquire weight in the industry to impose new standards
New ways of collaboration can be set among corporates and startups. More agility is needed when collaboration arises between corporates and startups and new procedures must be implemented so the relationship can grow efficiently.
Coming up next, we'll explore how corporates leverage their indicators so they can better adapt to DeepTech startups' advancements. In addition, we'll find out more about the best KPIs corporates need to set up to best monitor their DeepTech startups portfolio.
Stay tuned for Part 5 of our Spanish DeepTech ecosystem series!