Four ways to make startup and corporate relationships work [Opinion]

Many startups or early-stage small businesses think that all they need to become the next billion-dollar unicorn is to have an idea and then sell it to one big corporate.

The truth is somewhat more sobering. Most startups don’t make it past their first few years in business, for a range of reasons

But the idea of small businesses forging working relationships with big corporates is becoming increasingly more topical, with the potential for symbiotic relationships, says Ryan Cohen, the co-founder, and chief relationship officer at alternative lender Merchant Capital.

“The theory is great. Startups get a steady revenue stream and access to markets to distribute their products, and corporates become more agile and innovative through new energy, products, and services. It sounds like a match made in heaven – but it’s vital that the rules of the game, and the framework for the engagement, are made clear upfront,” says Cohen.

So how do you make corporate – startup relationships work? Four key boxes need ticking, says Cohen.

Do the hard work and the homework

Many successful small businesses appear to be overnight successes – but nobody sees the years of late-night toil and grinding away that got the business to this point. 

“One of the biggest reasons start-ups fail is because they have a product, but no distribution model. Partnering with a corporate can give you scale, but you have to understand how your product will add value to the corporate and their customers, and follow the right process,” says Cohen.

It’s also important to know, and recognise, what each party brings to the table. Corporates offer customer scale, a trusted brand, robust infrastructure, deep experience and expertise, and powerful data. Start-ups and early-stage businesses provide agility, a bigger risk appetite, a disruptive mindset, simplicity, and speed.

Connect with the right people

For a startup to succeed in a relationship with a big corporate, it’s critical to have an internal champion that is passionate about the partnership’s value. This person needs to have clout and the ability to navigate the bureaucracy to ensure the start-up is connected with the business unit that would benefit most from its products and services.

“From the startup side, make sure one of your founders is running the relationship, to show how important it is to you,” says Cohen. “And when new opportunities present themselves, a senior person will be well placed to identify them and take them forward, ensuring a deeper entrenchment of the start-up within the corporate.”

Define clear, measurable success metrics

Corporates and startups must align on values, measurable goals, what success looks like, and the timeline. The timeline should include specific, measurable, and time-bound objectives for the project. “A real victory which deepens the partnership is becoming a line item on the responsible team’s scorecard. It’s of huge benefit for the start-up to understand how this works, as it assists output and creates significantly better alignment,” says Cohen.

Keep working on the relationship

While there is always an initial honeymoon period while the partnership is getting off the ground, over time the product or service becomes part of the ordinary course of business. “It is critical to remain relevant. Set a meeting and reporting rhythm and stick to it. And build relationships as broadly as possible, so if corporate team members move, you have an existing relationship with team members and the new replacement,” says Cohen.

“As South Africa responds to the Covid-19 pandemic, relationships have never been more important. If we can carry this collaborative spirit through our social, political, and economic environments, then not only will start-ups, small businesses and corporates flourish together, but South Africa’s entire ecosystem as well,” said Cohen.

This article was written by Ryan Cohen, CRO at Merchant Capital.

Featured image: Ryan Cohen, CRO at Merchant Capital (Supplied)