What are the secrets to a "lasting love" partnership between startups and large corporations?

This article is presented with the supervision of Mr. Noriaki Okada of Dentsu Inc . BX Creative Center, based on content originally published in "Design Mind," the design journal operated by frog.

Strategic partnerships between startups and large corporations can yield remarkable results when successful, but they can also end in failure, causing significant pain. We introduce key points both startups and large corporations should be mindful of, and how to "stay true to each other's love."

For startups seeking access to resources, funding, and corporate growth, partnerships with large corporations hold significant appeal. While large corporations may lack the flexibility and agility of startups, they possess customer reach and assets to compensate. By joining forces, startups and large corporations can rapidly and at scale execute strategic pivots, team development and hiring, and launch entirely new businesses.

While both startups and large corporations stand to gain much from partnerships, their worlds are vastly different, and this disparity surfaces in various situations. The process of forming a partnership often involves conflicts and disputes over procedures and vision. Without support from a third party—often a consulting firm—clashes in organizational structure and corporate culture can ruin what initially seemed like a promising relationship.

It seems true in the business world that opposites attract. In 2020, Vodafone partnered with legal tech startup Sparqa Legal to enter the consumer legal tech market ( see reference ). Schneider Electric, a global electrical equipment manufacturer headquartered in France, partnered with Greentown Labs, a climate tech incubator, to identify promising startups in the energy sector. For startups and large corporations to innovate together with an eye toward the future, both must learn how to communicate and collaborate effectively.

Signs to watch for when building partnerships

Common sources of friction in partnerships between startups and large corporations include the following:

Speed: Startups make critical, mission-critical decisions pragmatically on a daily basis. It can take large corporations six months to a year to make similar judgments.

Process: Startups lack the formalized processes common in large corporations. Incompatible work methods can eventually lead to major problems or critical errors.

Purpose: Large corporations manage extensive portfolios and measure mission success incrementally. Startups, however, often prioritize disrupting the status quo.

Risk Level: Generally speaking, the risk levels faced by startups and large corporations are not equivalent. Startups are making a significant company-wide bet on the partnership. However, large corporations typically do not view it as such a large bet.

What's Needed to Build Relationships

For startups, establishing that initial contact with a large corporation is often a difficult step in itself. When reaching out to large corporations, it's crucial to have not only a cutting-edge idea but also a solid business foundation.

Sylvain Grivel, Head of the Innovation Lab at Sanofi, a pharmaceutical company in Lyon, France, states: "Startups must reach a certain level of maturity before beginning partnership discussions with large corporations. Demonstrating the concept's validity alone is insufficient; they must thoroughly consider both the business potential and the strategies to realize that potential."

It's not uncommon for startups to question the intentions of potential partners. Among the startups frog has supported, many were reluctant to sell their businesses, clinging to their vision and believing they couldn't entrust their company to the wrong partner—even when they were ready for a sale. Considering the startup's objectives, selling the business carries the risk of being fatal.

Greg Sorenson, CEO of DeepHealth, a Boston-based company developing machine learning software, states, "If a large corporation wants to fully integrate our company, they have no choice but to acquire us." Alexandre Andre, who supports startups at Incubator Manufactory, a Lyon-based entrepreneur support service, has also seen many startups anxious about acquisitions. "Many startups aim for acquisition, but they fear that if acquired, they'll simply be absorbed and overrun by the larger company, leaving them with no benefits."

Maintaining "love" through a partnership requires trust between both companies. To build this trust, ongoing communication is crucial regarding intellectual property, shared success metrics aligned with common goals, and a clear exit strategy. These are precisely the areas where a third-party company can act as a "translator," understanding the language of both startups and large corporations. This role helps keep both parties in sync and provides a neutral space to experiment with new ways of working.

Timing for Third-Party Support

To bridge gaps in corporate culture and operations, third-party support may be required throughout the entire partnership lifecycle.

1. Feasibility Assessment
During initial assessments, third-party firms act as matchmakers, helping identify common ground for both parties in a competitive environment.

2. Facilitating Discussions
The third-party firm designs plans for strategic collaboration and a shared future vision while listening equally to both parties' perspectives.

3. Relationship Building
For startups and large corporations to join forces and build a larger ecosystem, mutual value must be clearly defined. The third-party company supports building mutually beneficial relationships from a neutral position.

4. Accelerating Innovation
Rapid innovation demands a thorough customer-centric mindset. Third-party companies accelerate innovation that enhances customer experience by advocating for customer voices.

5. After Partnership Termination
Not all business partnerships endure. Reports indicate that 70% of partnerships are short-lived. Third-party companies act as mediators when partners part ways, safeguarding both companies' value and reputation. Think of it not as a "painful divorce," but as a "conscious uncoupling."

To Sustain Mutual Benefits and "Romance"

Post-COVID business will increasingly require continuous innovation to respond to rapidly changing customer needs. Startups and large corporations would be wise to form healthy bonds, looking ahead to this future and tackling the challenges that lie ahead head-on.

Achieving a happy ending requires consideration and cooperation from both partners, and sometimes external support. A successful match creates a win-win relationship. Even if it fails, it doesn't mean one party ends up devastated.

As with all partings, the lessons learned become a source of hope for the future, applicable to the next partnership. No one knows what the future holds. Perhaps the next partnership will be the real thing.

This article is also published in the web magazine "AXIS".