When collaborating with a startup, a lot can go wrong. But if you focus on four simple steps, it will be much easier. Start with the scout, be aware of what scouting is and what it comes with, the good as well as the bad. Then focus on your company first: check on the needs and goals for collaboration. Only when you know what is needed can you find a workable solution.
Next, consider the startup. Where to find them and how to select the best ones. Once this is done, the most crucial last step is to start: creating a successful partnership and bringing everyone together. Think about ME, US and THEM.
ME – What is scouting
The shiny world
“I’m a Startup Scout.” Generally, people in the innovation industry understand what this means. Ever so often, however, I look into a confused face when introducing myself. When adding, that my mission is to find innovations and interesting technologies that could help us improve our business, people usually vaguely get what my job is. People assume that you attend conferences all week and hang out at meetups the rest of the time. “Wow, this job sounds amazing! Do you get to travel a lot?” is one of the most common reactions to my job description. Yes, at first glance, my job sounds like a dream come true. Attending interesting conferences where you learn new stuff, being in contact with inspiring founders and experiencing future innovations hands-on, not being slowed down by boring operational office bound tasks, and mostly, some imagine, with a beer in the hand.
Routine is not sexy
In a way, as a scout you are a professional networker. Attending events and talking to as many people as possible is part of the game. Spending time at meetup-bars or hotels, chit-chatting about business while exchanging business cards is what a scout does. But this is just the glorified external view of the job. In reality, you spend most of the time in front of your computer. There is nothing sexy about good old desk research. Going through endless amounts of pitch decks, founder’s bios and technical specifications to find the one that fits your needs can become exhausting. Trying to schedule calls and getting lost in finding a time slot that allows all stakeholders to join is frustrating. Especially in big corporations, there is always someone on sabbatical, someone important is on maternity leave or another colleague only works part-time others are blocked with mandatory team meetings or the only real time available is over lunch. Seriously, scheduling a meeting with multiple people, even from the same business unit, is so complicated, this is probably the most frustrating aspect of life as a startup scout. So, the reality is much different from those glamorous perceptions of constant mingling with thought-provoking innovators.
The struggles of finding a time slot
Scouting for startups is not for everyone. Most people get attracted by the shiny world of business trips and potentially creating something new. Being motivated to bring external innovation to the company and fostering innovation is what motivates them. Eventually, though, you get frustrated. It is taking a long time to find the right startup. And even when you think you found it, you have to convince the business unit about a potential collaboration, champion the startup internally and resell their pitch to colleagues. Colleagues, that usually politely listen but then find tons of reasons why they cannot work with the said startup. It is easy to hide behind the daily workload, to find excuses in internal routines and guidelines, or to just question a startup for being a a startup without a big-name company elaborate, tried and tested sales approach.
I love my job, but internal hindering or even opposition to the new that you proudly found to improve their business will get frustrating. This is also the moment when you separate the wheat from the chaff, when most of the trainees realise that scouting is not just happy networking. I mean the word networking consists of the word working, which can be tough sometimes.
US -What we need before getting started
What is the secret sauce to successful scouting? There is no general recipe for success. Over the years, I learned some tricks that helped me better understand the business’s needs and therefore connecting the right startups with the right people.
Go from the inside-out
Ideally, you attend an event or meet a startup, if possible, in the founder’s garage, which has the next big thing that transforms your industry. In the best case, you found the next big unicorn and as a scout, you can hand it over to the business units, which thankfully will take this in. This happens rarely. Bringing innovation from the outside in is tough. In an ideal world, scouts find innovations from outside the company’s core activities that could create a new business stream. If you are new to this, do not place too much focus externally, even though this might be your vision. Your company might not be ready. Therefore, start with the inside out approach.
Problems worth solving
This means that for good scouting you need to look inside your company first. What are the investment goals, if you want to invest venture capital? What are the internal business problems that business units are tackling? Which of those are problems worth solving? As a scout, you are focused as much on your internal stakeholders as you are focused on the external startup market. It makes your job much easier if you search the market for a solution to an internal problem, where you might solve a customer’s pain or save the company money. If there is an internal hunger for it, you can successfully hunt some great startups, with a greater amount of ease.
All sorts of different collaborations are possible
Often the scouting process resembles a procurement process. Business units might be looking for the next supplier, and it is important to let them know that a startup is not a supplier. Not in a classical way. Projects with startups are usually focusing on collaboration, where for example the startup brings in new technology, and your company is chipping-in market expertise or the power to scale-up an innovation. Especially in companies at the beginning of their open innovation journey, finding the right mode of collaboration is important. I did get scouting jobs from business units, that just wanted to find a new supplier to an internal problem. Most likely, those suppliers were not technically startups. Yet, I was still scouting for them, finding the solution available in the market. My primary goal was not to satisfy them by providing a list of potential suppliers but to open their minds. Letting them know, that I could find solutions, potentially even when there is no solution on the market yet. But there might be a startup working on something similar. And this is how I created hunger.
Draw the bigger pictures, you have the best overview
It is a step by step process, solving a lot of inside-out scouting jobs, you prove to those ever so critical business units and operational managers that there are solutions to their problems available in the market. It is important to clearly understand what the business wants. Often, they approach the scout with a very narrow use case. It is in their DNA to only see their problems and not those of other business units. I suggest talking to them in person, trying to understand their problem better and also drawing the bigger picture. Since they are so deep into the everyday reality of their operations, you as a scout sometimes can open their eyes to what is going on in the market to both the left and right of their ring fenced problem. Grab a coffee in the office and inspire them. When scouting, never forget who you’re scouting for. Scouting might be very different if you are looking to develop a new product or service with an external partner versus improving an existing one. Also, businesses often have a “not invented here” attitude, or rather want to build things themselves instead of collaborating with a startup. In those cases, the goals for scouting have to be clearly defined. Where can you go, what risks are you allowed to take?
Small successes with open innovation will open up your company
Even though scouting jobs that focus internal problems are sometimes very limited in scope and limits your ability to scout freely, it can help you in the long run. because delivering success stories, even small ones, is an important part of the game. Having successfully scouted for one business unit might inspire another units to assign you with another scouting job. Ride on the wave of success, even if just internal. Taking small steps is not a sign of bad scouting, and slowly ramping up scouting activities helps your organisation to better absorb external innovations. Solving inside out problems will give you legitimization for scouting outside in as well later. So ride that unicorn.
THEM -How to find a partner in startups?
As a scout, you have to be open and you must have the gift of the gag. . More so even, you must like to listen. It is important to listen to as many startup pitches as you can. Attend as many pitch battles as you can find. Even those that seem irrelevant to your business right now may turn out to have an approach that might be relevant to you. Or solve a problem you haven’t even started to think about. But in talking to all those startups, be honest. There is no need in telling a startup, that you liked their solution and will connect them internally when you already know that they are no match for your companies’ goals. Have the guts to signal when you see no collaboration. Don’t waste their or your time. The startup ecosystem is small, and founders talk to each other. If you turn out not to be a reliable partner, word will get around pretty quickly in the scene.
Innovation from unexpected places
An easy way to find the best startup is to look into conferences that match your area of interest. If possible, look into programmes that are tailored towards startups such as incubators or accelerators. Most of them gather startups from a similar industry or field of technology. If you find the right one, you might tap into a larger pool of startups which have gone through those programmes. Another source for finding startups can be other corporations like yours. There is a big number of corporations that run startup programmes tailored towards them, that have a corporate venture capital arm or that work with startups from a specific field. By connecting to those entities, which are usually quite open, (hence open innovation), you can tap into a larger pool of relevant startups.
Looking outside the box is a sentence that is getting a bit tiring. Sure, look for innovation not just in your company’s comfort zone. How about looking outside your box, but inside the box of another industry? Over the years I noticed that many industry sectors, even when different, tackle similar problems. Or at least there is an approach that could be adapted to your company. Try speaking with other industry experts that tackle similar problems than yours.
Different shapes and forms
Having clear goals helps the scouting process. but successful scouting is not only relevant for “us” but also for “them”. In the end, there are two parties in a partnership. Therefore, it is important to know what you should be looking for. Startups differ in various stages. The earlier stage a startup is in, the more it could be molded to your needs. Sometimes early stage startups want to work desperately with a corporation and adapt their product or even market strategy to do so. . This is risky, because if a corporation lures a startup too far out into its orbit, the startup might lose their technical advantage and grow into some kind of tailor-made mutant company that lost its original purpose and is uber-dependent on one large partner. On the other hand, the later stage startups are more likely to have a prototype or even a fully functional product ready. They managed to survive the critical first few years and probably demonstrate a more structured and matured financial future. They might have some big venture capitalist backing and mentoring them. This reduces the risk of them going bankrupt while working with you.
WE -Matchmaking. It is like a marriage
Speak startup, and translate to those that don’t
What I always say to a startup is that I am not the best person to talk to, but the first. They first have to convince me, and then I will champion them internally. If I like the startup, I will talk to the business. As a scout, you have to be bilingual. You have to understand the buzzwords in startup speech and be able to evaluate the best startups all while being able to make them understand what you are looking for. On the other hand, you have to understand the corporation to find the right person internally, convince various stakeholders and put a startup process into the big picture of the company’s strategy. If you are bilingual, don’t expect others to be as well. Especially in the first meeting between the business unit and startup, it is very important for the scout to be present. As a scout we must translate the internal abbreviations and inside-jargon for the startup while explaining to colleagues what seed financing or minimal viable product means.
It’s not over yet
In the best case scenario, your company is ready for scouting, you found a relevant solution, boom the magic happens. But the job is not over yet by a long shot. ! The toughest phase just started. Again, in an ideal world, you can just put the two parties, the internal business representative and the overly motivated startup founder, at the table and let them create innovative businesses. A co-worker described this once as a marriage. Make the wife pretty (internal business) and find the best groom (startup) et voilà it is love. In reality, it takes the scout as a fairy godmother to foster this relationship. In my experience, there is always a gap between a large corporation and a startup. Even when the corporation has refurbished their offices with colourful yet uncomfortable chairs and puts free coffee in the corners, let them not trick you in believing that they are as agile as a startup. There will be tons of rules, procurement regulations and sometimes legal back and forth just to sign the first proof of concept.
The management of expectations are key
When the first meeting is held, both parties need to understand where the other one is coming from. Yes, we might have flown the startup to our headquarters, but this does not necessarily mean we are convinced about their solution and that we are ready to sign a contract. On the other hand, don’t treat the startup just as an interesting solution that you are curious about, but that it is clear that you prefer an established supplier. Treat them as the serious entrepreneurs they are!
After having selected the best startup
Be careful not to overheat certain colleagues. Yes, you successfully found a relevant startup and a pilot is about to start. Don’t just come with the next startup to the very same person. Their capacity is probably already way above their day to day job with the first startup project. It is important to find other colleagues that show the willingness to collaborate with startups as well,and that can assist in absorbing the workload. In a way, you have to manage your internal stakeholders. Find ambassadors for innovation and use them well to widen your company’s open innovation horizon.
Scouting is no cure for everything that might not work in a large corporation. But with the right strategy and goals for a collaboration, big corporations can profit from these external sources of innovation and speed. Even though most of the collaborations are tough to elaborate or take a lot of energy to create. Once the magic happens , those shiny potential unicorns can be so much fun to work with.