How Corporates Can Engage Effectively With Innovative B2B SaaS Startups

In my last article, I discussed the critical importance for corporations to match the agility and innovation of startups. Over the years, corporations have increasingly sought ways to engage with external innovations. 

However, it is equally vital to attract and engage startups by highlighting the benefits and opportunities of collaborating with larger enterprises. Building symbiotic relationships can drive mutual growth, fostering a culture of innovation that benefits both entities.

This article covers how corporates can attract innovations to work with them and the means of engaging with them.

The focus of this article is towards B2B SaaS startups, hence the external innovations I am referring to are B2B SaaS companies. I use ’corporates’ and ‘enterprises’ interchangeably in this article. I am also using ‘innovations’, ‘startups’ and ’B2B SaaS startups’ interchangeably.

Here Are A Few Proven Ways For Corporate-Startup Engagement

Meetups

Conducting meetups is straightforward, but the choice of topics, quality of speakers and the way the meetups are marketed are key to attracting the right audience. Speakers can be internal or independent subject matter experts. It is useful to choose topics around open standards rather than proprietary corporate technology and products.

For example, if a company is offering solutions for managing and monitoring cloud container instances using Kubernetes as the underlying standard, it can arrange meetups around topics such as the basics of Kubernetes, what to expect in the roadmap and the complexities of managing large Kubernetes deployments. To those unfamiliar with Kubernetes, it is an open-source orchestration system for automating software deployment, scaling and management for containers.

Hackathons

Hackathons are events, typically lasting several days, where developers form teams to solve a problem presented by the corporate. Hackathons usually conclude with the teams developing a prototype for the problem statement and presenting it to a jury.

Hackathons can be physical or virtual.

Physical Hackathons: When held physically, a hackathon event can last from 2 to 5 days. Here, the developers gather at a designated location, form teams and develop a solution for a business problem presented by the corporate sponsor. In the final hours, the teams present and demo their creations to a panel of judges, typically consisting of corporate executives, venture capitalists and subject matter experts in the relevant area.

Virtual Hackathons: When done virtually, the developers work on the problem statement remotely and submit the artifacts of their work along with its description. In some virtual hackathons, the teams also submit a 3-5 minute video demonstrating the basic flows in their application. Initial curation is done by a panel formed by the corporate and the finalists are selected. The finalists then present their solution on the final day to a jury constituted by the corporate.

One of the large private banks I was advising on engaging with innovations opened up its hackathon event to both developers and startups. It turned out to be the biggest hackathon in India in 2016.

Hackathons are more relevant for engaging with developers. Some corporations prefer to engage primarily with developers, especially if they are in the PaaS space. The motive behind this engagement is that if developers adopt their tools or solutions, it facilitates easier adoption within startups or enterprises. These developers can be employees working in startups or corporations, or they can be college students. There can be a format for startup teams to participate in Hackathons.

Accelerators

Accelerator is a program that supports early-stage startups through education, mentorship and/or funding (funding can be optional). 

Corporates can either run their own accelerator or partner with external accelerators. While many large MNCs have their own accelerator (internal accelerator) and many others partner with external accelerators, each approach has pros and cons.

Running An Internal Accelerator

Running an internal accelerator requires separate teams for operations, marketing & branding and a larger budget compared to partnering with external accelerators. However, it allows for better control over branding and messaging.

Here are few things to keep in mind while running an internal accelerator program:

• Have a clear end goal: When engaging with startups through accelerators, corporates need clear criteria for areas of engagement, methods of engagement and end goals. 
• Communicate the right message: It is imperative to have the right messaging communicated to the startup throughout the process. Without this, the effort might become just a PR exercise.
• Focus on nurturing the startup cohort: Once startups are part of the corporate accelerator cohort, they may go through a series of sessions covering topics such as product-market fit, legal considerations, marketing, distribution, pricing, finance and HR. The specific sessions emphasised depend on the corporation’s expertise or the availability of external trainers.

For example, a cloud-based CRM provider can engage with startups that have solutions built using the data provided by the CRM, or which integrate with the CRM solution to provide better value to customers. They can engage with such startups by opening up applications for them to apply and the corporates can screen the applications based on a preset criteria.

One of the end goals of engaging with startups could be having the startup’s solution certified as a partner solution for the company, potentially leading to a joint go-to-market (GTM) strategy with the corporation at the end of the engagement.

Corporates can also focus on engaging with startups from day one by running a pilot within their business unit. In this model, there would be a business sponsor from a corporate division who would work with the startup(s). The business unit would collaborate with the startup(s) to achieve mutually agreed-upon end results.

Partnering With External Accelerators

For partnering with external accelerators there can be two approaches. One is to engage with an independent accelerator who can run a separate program for the corporate within their overall program. The second approach is to work with an external consultancy who would bring in their own team to set up and operate the accelerator for the corporate.

This approach has its own pros and cons. Pros include that the corporate can focus on the overall efficacy and engagement of the startups with their business units. Additionally, the number of employees needed for the accelerator will be less compared to running their own full-fledged accelerator. Cons could include the limitations of the external accelerator, if any and less control over the branding and messaging.

Running Startup Challenges

Corporates can run startup challenges where they set criteria and ask startups to apply. For example, a large hospital chain can ask startups in the HealthTech space to help improve their existing internal processes or deliver more value to their customers.

The corporate can form a jury to evaluate the startups based on specific guidelines. The jury can be a combination of VCs, successful entrepreneurs, SMEs and corporate representatives. There can be 1-2 screening rounds for the applications before the finalists can present to the jury.

The selected startups can receive the following:

1. Prize money, which could be cash or credits for the corporate’s solution offering
2. Engagement with the finalists in various modes described in the first chapter and exploring partnership opportunities

Significant effort needs to be spent on building the brand of the startup challenge and marketing it to the right audience. The quality of the startups applying for the challenge is crucial. Partnerships with accelerators, VCs and media companies for outreach help immensely.

I have done this extensively when I was working with a corporate, which was massively successful, with many startups that I had identified now going beyond Series C and many being acquired.

Have Their Own Venture Arm/Corporates Venture Arm

Corporates can form their own venture arm to invest in startups. This provides flexibility in setting investment criteria aligned with corporate goals and strategies. However, it requires significant effort and resources to set up the right team to understand corporate needs and make investments accordingly.

Invest In Venture Funds

Corporates wanting exposure to startup investments can invest in venture funds focussed on B2B investments. Venture funds have their own deal flow and rigorous selection processes before investing in a startup. Corporates can leverage this to engage with portfolio companies and potentially co-invest with venture funds.

This approach requires less capital and is a good starting point for corporates to understand innovation trends and engage with startups.

Setting Up Intrapreneurship

Corporates can set up intrapreneurship programs with themes that would be of interest to the organisation. These themes could be based on adjacent business problems that the company is seeing in their respective markets. 

For example, if the company offers project management solutions, the theme could be to have a solution that provides Devops observability by integrating with tools like GitHub, Jira & Jenkins and feeding the detailed insights of application development progress into the project management solution.

For an intrapreneurship program, a corporate can ask employees to form teams and apply for the themes chosen by the corporate. The corporate can form an internal panel (which can include external people) to evaluate the teams. The panel can decide on various parameters for evaluation, such as team composition, initial product features they envision, the product roadmap, etc.

Alternatively, corporates can ask employees to submit ideas on areas they feel will help the company and also have good market potential. A panel can be formed to screen the ideas and teams and select them based on the criteria they establish.

Once a team is selected, they can start working on the different aspects of the solution they envisioned. Corporates can assign mentors to the teams and it might be beneficial to have external mentors as well. 

The teams can take guidance from mentors in various aspects of product development, technology, marketing, sales, etc. A new company can be formed and the corporate can take an equity position in the newly formed company. The team members can use resources such as office space, cloud infrastructure and other software licences of the corporate before they hit the market.

Acquire Startups/Companies

Many large corporate often have a separate arm for acquiring companies or startups. They acquire companies that have synergies with their existing businesses. Startups engaged through accelerators or corporate venture funds or external funds invested by them can act as feeders for acquisitions, allowing corporates to observe startups over time and consider acquisition if appropriate. For a B2B company, acquisition is one of the exit paths for the founders and investors.

Sponsorship

Corporates can sponsor events related to startups or developers, communicating their offerings to the startups or the developer community. This approach requires minimal effort from the corporate.

Understanding Startup Motivations in Corporate Collaborations

Corporates need to understand why startups would engage with them. Some main motives for B2B startups include:

• Potential customer acquisition through the corporate or joint GTM opportunities
• Credits for cloud, GPUs, software usage, API calls, etc.
• Access to core IP owned by the corporates
• Prize money, if substantial, can facilitate the operations of the startup
• Pro bono mentoring from corporate subject matter experts

Understanding the motive of the startup helps corporates effectively design their engagement program, increasing the success rate of startup engagement.

Importance Of A Business Sponsor

For any engagement with startups to be successful, it is extremely important to have a business sponsor from the senior leadership of the corporate.

The role of business sponsor is even more crucial whenever there is a need for collaboration between the startups and various business units of the corporates.

Summary

Collaboration with innovations, especially B2B SaaS companies, is a strategy that corporates should consider. First, corporates need to identify their category: Producers, Consumers, or Partners. Next, they should understand the objectives they aim to achieve by working with B2B SaaS companies.

After this, they can plan and execute their modes of engagement with these innovations. Following these steps, as outlined in this article, will help them achieve their end goals.