Collaborations between startups and corporates: Challenges and how to overcome them

Let's be honest: collaborations between startups and corporates are a total clash of cultures.

As a startup, you'll probably find yourself confronted with bureaucratic roadblocks, rigid processes and gaps in communication. Corporates are often overwhelmed by the agile and flexible mindset that young companies bring to the table. Whichever side you are on: it's exhausting and time-consuming - but it's also worth it. Startups benefit from access to resources, expertise, customers and, of course, funding, while corporates want a shot of the innovative technologies that lie in a startup’s DNA.

‍That’s why we’ve put together a collaboration’s most common challenges - and how to overcome them with simple tricks for both startups and corporates.

Collaborating is an amazing way for both startups and corporates to leverage the strengths on both sides and create a positive impact for everyone involved.

However, collaborations also come with challenges: In the past six years more than 200 accelerator programs, digital labs, hubs and incubators have been set up by German companies alone. Most of them have lasted less than two years - which goes to show how many programmes try to integrate as many startups as possible into the corporate structure – and fail in the process.

Of the remaining collaborations, only a handful actually pay off in terms of what the corporate groups had hoped for from their involvement - not to mention the often unfulfilled needs and wishes of the startups. Generally speaking, the players involved rarely realise how different the two worlds are and what a deep understanding of each other is required in order to establish a successful collaboration.

These are some of the most common challenges faced by startups and corporates during a collaboration - and some recommendations how to overcome them:

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Challenge 1: Complex data protection procedures

Data protection is an important topic for corporates looking to partner with startups. Varying data protection regulations and rules on how to handle sensitive information can make collaborations complicated. 

To bridge this gap, corporates often put complex agreements in place that outline how data should be handled, shared and protected. 

‍How startups can overcome the challenge:

Startups are encouraged to store data on European servers and accept data protection forms or contracts the corporate suggests. It can be very useful to have a data flow chart ready that is ideally adjusted to the specific project. Thus, the approval process can be accelerated by months.

‍How corporates can overcome the challenge:

Corporates should make very clear what they expect from their partners. It helps to provide a simple playbook that summarizes the ideal IT setup from a data protection perspective. Depending on the certificates, the infrastructure and the amount of processed data, some startups are very grateful to receive data protection consulting.

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Challenge 2: Lengthy approvals of the workers council

Obtaining approval from a workers' council can lead to negotiations and potential delays in the collaboration process. This can be challenging and slow down decision making.

‍How startups can overcome the challenge:

Startups should be aware of how lengthy the approval process can be and that it is completely normal. As the workers council is familiar with the challenges, you can ask them for support when preparing for the project. Sometimes a pilot is a good way to start without tracking to much employee related data.

‍How corporates can overcome the challenge:

Corporates can put simpler applications in place for the collaboration with startups and thus enable faster approval. Whoever is in charge of the data protection topic, should be involved very early in the process. 

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Challenge 3: Unsuitable contracts

Contracts drawn up by the corporate for partnerships and collaborations are often long and complicated. The contracts were usually put in place for long-term partnerships with other larger corporates and are not suited to collaborations with small startups.

‍How startups can overcome the challenge:

Startups should be aware of the legal limitations that might occur during the process. As the contracts are usually provided by the corporates - and it’s often a standard procedure - you should define the negotiable and non-negotiable topics before you get in touch with their legal departments. In case of doubt, it helps to ask for professional legal support that is often provided by accelerators or startup hubs.

‍How corporates can overcome the challenge:

Corporates can draw up new contracts adapted to the conditions of startups that are less complex and enable faster decision making.

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Challenge 4: Obstacles in becoming a supplier

Integrating a startup into complex corporate structures can be extremely complicated. Startups will often need to apply and even pay to be listed as a corporates’ supplier. 

The long time frame from lead generation to purchase order is often lamented by startups.

‍How startups can overcome the challenge:

Startups are encouraged to fill in the forms as quickly as possible to make time for a possibly lengthy process. Also, be aware that companies with less than 100 employees aren’t legally required to put anti-corruption measures in place. 

Also, startups need to consider certain listing fees and required payment periods. For instance, the Wayra Fast Track enables 30 days instead of 120 days, as well as the opportunity to save the listing fees. 

‍How corporates can overcome the challenge:

Corporates should put fast track purchasing in place for startups by eliminating a tender and reducing listing fees. You can also help startups by reducing the payment period from 120 to 30 days.

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Challenge 5: Lack of contact with relevant stakeholders

Another challenge for startups can be the lack of communication with the right people inside the corporate. Being able to speak to relevant resources is crucial for maximising the strategic benefit for startups in a collaboration.

‍How startups can overcome the challenge:

Consider which stakeholders are relevant to place the startups’ solution within the corporate. Accelerators or innovation hubs as Wayra can be really helpful as they bring you together with the right people in every department. This can help you short-term and long-term when it comes to finding the relevant decision maker for your process. 

‍How corporates can overcome the challenge:

Corporates should make sure to connect the startup with relevant contacts and establish a network within the corporate. Project managers and decision makers should be involved very early in the process - from workers council, data protection, procurement, budget owner or controlling.

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Challenge 6: Differing mindsets and ways of working

Startups and corporates have a very different culture and mindset, which can be challenging in a collaboration. Both sides bring different strengths to the table, so accepting each other’s way of working is important.

‍How startups and corporates can overcome the challenge together:

Both startups and corporates must try to understand the other perspective. Mediation and regular check-ins with both parties are helpful in learning to communicate as equal partners and building an understanding of each other.

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How innovative venture firms can help startups and corporates collaborate successfully

As seen above, trying to integrate startups into large corporates is the wrong approach and robs both parties of their strengths and potential. Instead of trying to forcibly connect both worlds, a translator is a good way to ensure that both can play to their strengths. 

This is the purpose of innovative venture firms like Wayra: Identifying the needs of various stakeholders and their customers and finding the right startup to fulfil them. In a concrete, paid project, the sponsoring corporate is brought together with the startup and supported in further scaling. Wayra is also guiding startups through a “fast track” that accelerates certain processes within Telefónica, enabling both parties to start with the collaboration in a faster and less bureaucratic way.

Both parties benefit from the results: functioning innovations for the corporate and a solid basis for further growth on the part of the startup.

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