How To Navigate The Corporate and Startup Dance

By Carl Doty at Forrester Research and Nader Ghaffari at Venture Scanner

Successfully engaging with the startup community will not only give corporations a competitive advantage but can also mean the difference between future relevance or demise. As a result, corporations of all sizes are launching innovation programs. The corporations’ objectives are chiefly to understand the innovation trends, identify potential disruptions in their markets, and find startups to partner with, invest in, or acquire. These efforts are typically run by a head of innovation, a chief strategy or digital officer, or a corporate development function.

So how should corporations engage with startups and what pitfalls should they avoid? Based on our interactions with corporations of all sizes and from all industries, we see engagement models that work well and others that leave room for improvement. We summarize our key findings in three themes here.

  1. EDUCATE: Gain a broad understanding of an emerging market’s scope and activity and define your corporate objectives in response.
  2. ASSESS: Research the startups that compete in the market and create an unbiased shortlist of candidates based on your corporate objectives and investment parameters.
  3. ACT: Engage with the best startups that align with your corporate objectives and desired business outcomes.
How to Navigate the Corporate and Startup Dance
How to Navigate the Corporate and Startup Dance

1. EDUCATE: Gain a broad understanding of an emerging market

Often times when a corporation looks to make an innovation play or a financial investment in a particular category, the immediate impulse is to reach out to startups that they have seen repeatedly in the media. Similarly, the corporate “scout” might reach out to venture capitalists or an accelerator in their network, which by design leads to biased referrals. Other paths may include sponsoring an incubator or arranging a Silicon Valley tour.

All of these tactics limit your exposure to the startups within your network and thus cloud your view of the market as a whole. And while they may help spark some innovation inside an enterprise, they by no means remove the hard work needed to gain a complete picture of an emerging market. The absence of that broad perspective will introduce risk into your process, whether you’re looking for M&A, equity investments, or strategic partnerships. When done right, this step with foundational market intelligence sets the stage for the mission critical decisions that follow.

2. ASSESS: Define an unbiased shortlist of startups

Understanding an emerging market is one thing but narrowing a field of hundreds – if not thousands – of startups down to a manageable shortlist for your objectives is hard to do. The key to the shortlisting process is to avoid bias. The inputs into this step should include your unique corporate and product strategy, as well as the startup characteristics that will best align to that strategy. As part of this filtering process, it’s wise to conduct interviews with startup candidates to gain a deeper understanding of their product roadmaps and sources of differentiation. Most organizations are not well resourced for this, so an objective partner is invaluable. The output of this step is a shortlist of startup candidates based on an unbiased process that brings to the forefront the companies that have the strongest strategic fit. Once a firm shortlist of startups has been established, it’s time to move into the action phase.

3. ACT: Take meaningful action that drives results

At the core, corporations and startups have very different cultures. Large companies are typically process heavy and exhibit an overabundance of caution. To a startup, large companies can seemingly spend an enormous amount of time and resources on analyzing, while showing little to no signs of acting. On the other hand, startups are resource constrained, so they must invest those resources only in places that can lead to immediate traction as measured by revenue, customer growth, or the next round of funding to keep their nascent business afloat.

Therein lies the major challenge. In order for startups to justify spending time with a corporation, they will want to see skin in the game. Whether it be by becoming a paid customer, engaging in a paid proof of concept partnership, or some other commercial relationship, a startup will take the corporate partner who takes real action seriously and will be quick to shy away from those who want to spend endless hours in meetings without taking action. Corporations that make early bets on startups will gain the loyalty of the startup as their company and product mature. Startups will treat such corporate partners like family, for they not only took a risk, but they did so with skin in the game that did not guarantee a future return. The common ground in these situations is typically the “fail fast, fail cheap” mantra.

So, if you think you spot a startup that can give your corporation a competitive advantage, think through the three steps above and answer these key questions: Are you sure you’re starting from a broad understanding of the market? Are your information sources unbiased and credible? Are you willing to engage with a sense of urgency and take meaningful action? These are critical considerations as you attempt to drive profitable innovation inside your organization.

The future success of incumbent corporations across all industries rests on their ability to successfully monitor, assess, and engage with an increasingly chaotic startup and innovation ecosystem. We are excited to announce that Forrester and Venture Scanner have formed a strategic partnership to help you in every step of the process. To learn more, join us at our upcoming Podcast in November, or reach out to Carl Doty (cdoty@forrester.com) and Nader Ghaffari (nader@venturescanner.com).

Virtual Reality (VR) Funding Trends – Q2 2017

The following graphs highlight recent trends in the Virtual Reality (VR) startup funding activity. The graphics include data through March 2017.

VR Funding By Year Q2 2017

The above graph summarizes the total funding raised by VR startups for each year. 2016 has the most funding to date at just under $2B.

VR Q2 2017 Vintage Year Funding

The above graph summarizes the total amount of funding raised by VR companies founded in a certain year. Companies founded in 2011 have raised the most funding at around $1.5B.

We are currently tracking 688 VR companies in 13 categories across 49 countries, with a total of $6 Billion in funding. Click here to learn more about the full Virtual Reality report.

Virtual Reality Funding Trends – Q1 2017

The following graphs highlight recent trends in Virtual Reality (VR) startup funding activity. The graphics include data through early October 2016.

VR Funding by Year

The above graph summarizes the total funding raised by VR startups for each year. 2016 is the best year with just under $1.6B in funding. 2014 comes in at second place at around $0.75B in funding.

VR Vintage Year Funding

The above graph summarizes the total amount of funding raised by VR companies founded in a certain year. Companies founded in 2011 have raised the most funding at over $1.4B.

We are currently tracking 626 VR companies in 23 categories across 45 countries, with a total of $4.6 Billion in funding. Click here to learn more about the full Virtual Reality report and database.

Venture Scanner Case Study Series, The Retailer

This is the first of a series of posts on how our customers in different verticals are working with Venture Scanner to power their innovation scouting efforts and identify trends and companies that could add strategic value. To honor confidentiality, in some cases the respective customer will be unnamed.

We begin with a global fashion retailer who was interested in learning about trends in retail personalization (both online and offline), discovering companies innovating in the space, and identifying a shortlist of companies to meet with to explore piloting their services.

Our process included:

  1. Creating a comprehensive landscape scan of the retail personalization sector and identifying major trends across companies.
  2. Shortlisting companies based on data, insights, and the retailer’s unique needs.
  3. Connecting the retailer with selected companies.

retailer comic

Step 1: Creating a comprehensive landscape scan of the retail personalization sector and identifying major trends across companies.

Leveraging our database and technology, our analyst team identified 228 companies innovating in the retail personalization sector. The team then segmented the companies into 5 categories and enriched the data to build the sector landscape scan for retail personalization.

Screenshot of Retail Personalization Scan
Screenshot of Retail Personalization Scan

Analyzing the unique offerings across the companies scanned, we identified 3 major trends in retail personalization.

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Step 2: Shortlisting companies based on data, insights, and the retailer’s unique needs.

After building a comprehensive landscape scan of the retail personalization sector and identifying the major trends across companies, we set off to shortlist the companies that should be highest on the retailer’s radar. We did so through an evaluation rubric that took into account our data, insights, and the retailer’s specific needs.

Slide12
Shortlisting Evaluation Rubric

Through this process, we evaluated all 228 companies and we were able to narrow the field down to a shortlist of 10 companies that the retailer considered as candidates to meet with.

Company Evaluation Scorecard (names blacked out)
Shortlisting Scorecard (company names blacked out)

3. Connecting the retailer with selected companies.

After the shortlisting process was completed, the retailer selected companies they were interested in meeting with. Venture Scanner then arranged for the retailer and the selected companies to meet and begin exploratory discussions for pilots.

In the end, the Venture Scanner process enabled the retailer to feel confident with their innovation scouting process. They knew the full lay of the land, understood trends in the retail personalization sector, and found the partners best suited to their unique needs.

Venture Scanner enables corporations to research, identify, and connect with the most innovative technologies and companies. We do this through a unique combination of our platform, data, and analyst services. To learn more check out venturescanner.com or email info@venturescanner.com.

Apple’s Acquisitions

The following infographic summarizes Apple’s acquisitions and which areas their acquired companies reside in. The infographic illustrates that, out of the 62 companies that Apple acquired, Imaging & Video companies make up the largest portion at 19% (12 companies), followed by Hardware & Display companies at 18% (11 companies). To see more data and insights on any sector or market, contact us using the form on www.venturescanner.com.

Apple Acquisitions
Apple Acquisitions

Venture Scanner enables corporations to research, identify, and connect with the most innovative technologies and companies. We do this through a unique combination of our data, technology, and expert analysts. If you have any questions, reach out to info@venturescanner.com.

Industry Funding and Median Age Breakdown

The following infographic summarizes all the industries covered by Venture Scanner, as well as their funding and median age. The area of the box is proportionate to the industry’s actual funding amount, and the shade of the box indicates its median age relative to other industries. Connected Car and Future Of TV are currently the industries with the highest median age at 7 years. Connected Car also has the highest funding at $21.4 Billion. To see more data and insights on any sector or industry, contact us using the form on www.venturescanner.com.

Funding and Median Age Graph
Funding and Median Age Graph

Venture Scanner enables corporations to research, identify, and connect with the most innovative technologies and companies. We do this through a unique combination of our data, technology, and expert analysts. If you have any questions, reach out to info@venturescanner.com.

Introducing the Cannabis Technology Sector

The legal cannabis industry has seen significant growth over the past few years, with many companies receiving big rounds of funding from investors such as Founders Fund, DCM Ventures, and 500 Startups. We are currently tracking over 168 companies across 7 categories in the Cannabis Technology sector. The sector map is attached below. To see the full list of 168 companies in the Cannabis Technology sector, contact us using the form on www.venturescanner.com.

Cannabis Visual Map

Venture Scanner enables corporations to research, identify, and connect with the most innovative technologies and companies. We do this through a unique combination of our data, technology, and expert analysts. If you have any questions, reach out to info@venturescanner.com.