It’s been a tough year for fundraising, and as startups have come to terms with that reality, some — who wouldn’t have done so previously — have begun turning to corporates as a source of funds, revenue and strategic support. Yet many founders remain wary, put off by stories about the effect that working with a corporate might have on their business.
So we asked Robert Haines, cofounder of Founders Intelligence (FI) — a consultancy that helps corporates define and deliver growth, often through partnering with and investing in startups — which concerns around corporate partnerships are true and which are mythical tales.
Here are the six myths he picked — and debunked:
1/ Corporates want to steal your ideas
While corporates stealing your ideas may be a concern, Haines says some corporates may lack the innovation muscles needed to execute them, and it’s very possible for founders to engage with a corporate to feel out an opportunity without giving the game away.
“It’s a worry that I had in the early days of starting Founders Intelligence,” he says. “My experience is that is that it’s typically the more experienced and successful founders that are most comfortable with being very open with corporates — and that's because they know how hard it is for big corporates to execute on innovation and are willing to give the benefit of the doubt to exploring whether a partnership works for them.”
As a result, Haines’ top tip for founders is to be more open than their natural instinct might suggest, but always “be very, very explicit upfront about what they want from a partnership or from an investor”.
2/ Corporates will demand unreasonable terms
Many corporates have sophisticated partnerships and CVC teams and know that if they live up to a reputation of demanding unreasonable terms — around things like IP or working with competitors — they will miss out on the best deals, says Haines.
But he adds that they have been seeing more exclusivity terms being put into deals as the funding market dries up.
“This isn’t always a bad thing if the value exchange is right,” he says, giving the example of a large client that has a significant interest in technologies around food waste reduction.
“They are working with an early-stage company and providing significant infrastructure to execute their technology, as well as the contractual relationship.
“It’s a very close and tight partnership and without it, this early-stage company wouldn’t be able to begin their journey in the way that they had envisioned. So for me, that is a very fair, perhaps even generous value exchange on the part of the corporate partner because without it, the founder can’t execute their vision.”
3/ Corporates will slow you down
While it’s true that processes in corporates can be slower and more bureaucratic, they can be fast when set up right, says Haines, which mostly comes down to getting their investment theses, senior leadership support and procurement and investment processes right up-front.
“When we started Founders Intelligence, our working assumption was, if we have the best ideas, and the best network, that we will be able to create the most impactful innovation possible,” he says. “And what we learned very quickly was, if we don’t also have a very, very strong point of view around how to organise for innovative behaviours as a big corporate, then you have no chance of getting your ideas to market.”
He says that it’s crucial to get the “boring stuff right” — around governance, who sits on investment committees, how much money is set aside and how the people in the corporate teams are actually incentivised — so that “you create enough protection in the growth-focused unit to make partnerships and investments work”.
4/ Corporates can hinder future funding rounds
Haines says that the myth that raising money from corporates will hinder future funding rounds due to signalling issues is more myth than reality. "Research tells us there’s a higher likelihood of exit for an early-stage startup that gets CVC support as opposed to purely VC-funded ideas,” he says.
5/ All corporate accelerators are PR stunts
Haines says that most of the “insincere corporate accelerators are dead” now, so those still being funded are largely the ones that are delivering strategic gain to both sides.
Qualities of accelerators that would add real value to startups — which founders must look out for — are hard commitments to invest and scale partnerships as startups progress, he adds.
He says that founders should always look at what the intended conclusion or end result of an accelerator would be.
A good example is the Lego Play for All accelerator that Haines helped design. Lego is investing $20m in startups working on innovations that support neurodivergent children. The ambition of the programme is to find partners the Lego Foundation can work with over the long term in the same way they do the large global non-profits they typically work with. “That’s a very reassuring message that Lego are serious about delivering scaled impact in the space,” Haines says.
6/ Small test pilots are great to test partnership fit
The common belief that small test pilots are ideal for evaluating corporate partnerships is often misleading, says Haines. Such pilots, due to their limited scale, may fail to engage senior leaders inside the corporate or struggle to gather enough proof points to be useful. “When a project has a certain scale in investment terms, it just gets taken more seriously in a large organisation — and, therefore, you get more weight behind it,” says Haines.
Looking to deliver entrepreneurial growth within your organisation? At Founders Intelligence, we specialise in helping corporates deliver their next $1 billion revenue line through learning from and working with the best technology entrepreneurs. Contact us to find out more.
