Breathtaking arrogance, sloth-like invoice payment, and flagrant disregard for a startup vendor’s health are the tip of the iceberg when it comes to how corporates treat their startup partners, and a big reason why corporate startup partnerships fail.
I’ve been on both sides, but it’s only when you leave the corporate world and set up your own business you realise just how abject the treatment of smaller firms can be.
Only this week, an entrepreneur I spoke to — let’s call him Mark — told me about a meeting he had with the digital arm of an international luxury brands group:
“We started talking pricing. The head of marketing burst out laughing, paused, then said with a straight face, ‘working with us is payment enough’. I was too flabbergasted to say a thing at first!”
I’ve had countless conversations like this.
Like talking property prices with a bunch of parents in south-west London, the main topic of conversation at startup meetups is how difficult it is to get a decision or payment from corporate partners.
You can shout as loud as you like — if you dare — but the truth is your words will often bounce around the corporate ‘echo chamber’.
It pains me to say all this as I spent most of my career working for Unilever and launched The Foundry, its global platform for collaborating with startups, in 2014. I’m proud of what we achieved and the startups we helped to scale.
We created a simple onboarding process, startup-friendly payment terms, and pared back contracts for smaller businesses.
Yet that didn’t make me immune.
When I left to start the boutique innovation agency, Co:cubed, I did some work for my former employer. Over 12 months’ later I still hadn’t received payment. Depending on the size of the cheque, that can be the difference between being able to hire a key member of staff or might even lead to a business running out of cash.
Going back to Mark’s story, he spent months speaking to the technical innovation agency of one of the world’s largest marketing groups. He had a signed agreement and been ‘paraded’ by the corporate as an example of the great tech the organisation now had at its disposal.
Meanwhile, Mark had turned down other business and hired people to fulfil the agreed project. Yet when the corporate’s head of AI left, their successor put all projects on hold. The result? Existing investors were too spooked to follow-up and his funding round fell through, leaving Mark’s business on a precipice.
Without the funding or the project, the business was forced into a fire sale exit with its tech assets snapped up for a far more miserly sum than the pitch deck had once suggested.
More than two-thirds of startups are B2B businesses. They rely on other businesses buying their products and services. 69 of the top 100 economic entities are corporates, with Walmart alone bigger than most countries. So if the global brands aren’t great partners, the inevitable result will be stifled growth - both for the startups and economies. Worst case, it will see brilliantly innovative businesses go to the wall.
It’s imperative we fix this.
If you’re a corporate reading this, you might wonder why you should care. After all, another startup failing is hardly going to cause a ripple and big business can just look elsewhere.
But that’s the short-sighted view. Startups - not corporates - are creating the future. Partner with the pioneers, and as a corporate you’ll get to the future faster. Ignore them and you’ll inevitably erode shareholder value.
And we don’t need to look far to see mighty oaks do fall - and fall hard.
Through Co:cubed, we work with many of the FTSE100 and want to see them harness great innovation to realise the opportunities to scale. It all begins with being a good partner, get this right and corporates will benefit by innovating in a more frictionless way, attracting the world’s best partners and improving their own operational efficiency.
So, for everyone’s good, it’s time to stop this issue being swept under the carpet. Corporates have been given an easy ride, largely because startups haven’t had a voice.
To bring visibility and accountability to the issue, we’re proud to be partnering with London Business School on the launch of a global platform to rank the corporates that make the best partners for startups. What Glassdoor did for employees, GoPartner.com will do for startups and other vendors.
It will hold corporates accountable, help them flag areas where they can improve, and highlight examples of best practice for others to follow.
Startups deserve to know which corporates are delivering on their promises - and we’ll all benefit from corporates rebooting the way they partner with innovators.
Jeremy Basset is CEO of boutique innovation agency Co:cubed, which this week launched GoPartner.com for startups to rate and review corporate partners.
For more reading on corporate startup partnerships, read our previous post analysing Deloitte data on why big corporates are only interested in “innovation theatre”.