Why Corporate-Startup Partnerships Are The Route To Resilience

By Cristina Tamayo

The world is throwing all sorts of adversity our way, and business hubs—no matter how developed—are not immune to the turbulence. Natural disasters restrict supply chains, political unrest forces companies to close stores, and cybersecurity failure comes with high-cost infrastructural improvements.

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These are just a handful of possible crisis scenarios, and they reinforce the need for businesses to make contingency plans now to maintain stability during inevitable future shockwaves.

How? One of the strongest solutions is also the simplest: with a partnership. More specifically, a startup-corporate partnership.

A crisis demands that companies of all sizes dissect new issues, magnify the value they offer, and bridge what’s missing. But stop-gap approaches like one-off discounts and media-jacking campaigns only get companies through the current storm, not protect them from the gray clouds on the horizon.

It’s no coincidence that pharma giant Pfizer and German startup BioNTech teamed up to create the now globally distributed COVID-19 vaccine. The partnership has the unique blend of corporate R&D efforts to manufacture a vaccine and startup agility to deploy it in a short space of time.

With that in mind, here’s why corporate-startup partnerships are a natural (and necessary) smart step along the increasingly precarious business road.

Find your ecosystem footing

A Deloitte survey found 75 percent of startups consider partnerships with corporates to be very important. Having a corporate partnership is like having someone hoist you up a ladder during a flood—and the higher up you are, the less likely you are to drown when it rains again.

Corporates have the muscle to scale startups faster, as well as reach a level of stability so they aren’t thrown off if (or when) the ladder is shaken.

A great example is the outsourcing company BMA Group, which partnered with the startup TalentTank to ensure new hires were a match with the company culture. The two (each with offices in Puerto Rico) found one another through the business development team at accelerator parallel18, part of the Puerto Rico Science, Technology and Research Trust. The reach and resources of BMA Group enabled TalentTank to expand its team and branch out into different markets much sooner than if they’d worked alone, while BMA Group improved client retention and satisfaction.

Likewise, internet marketing service and fellow parallel18 alumni Infopáginas paired with AI security solutions startup Guardian Systems to introduce COVID-19 symptom detection systems for its client database. The new partnership gave Guardian Systems huge exposure across a range of industries, while boosting Infopáginas value offering to clients.

Partnerships not only establish a solid foundation for both companies to grow, they also facilitate the development of the ecosystems that the companies operate in. Tighter corporate-startup relations in a space mean a more diverse group of people are served on a longer basis.

Catering to broader audiences tends to attract greater investment and bring more experts to the region, which ultimately gives companies more resources to optimize their partnerships and brace themselves against crises.

Share expenses, cut the social cost

As crises become an expected reality, and not solely a “worst case” idea, more corporations are dedicating a chunk of their budgets to social responsibility—which has lately moved away from merely philanthropic actions to investing in smaller organizations. Corporations are searching for startups to point them in the direction of the most pressing societal issues and to give them the on-the-ground knowledge to create impact.

For instance, Microsoft is working with startup International Trust Machines Corp. to develop blockchain solutions for Taiwan’s largest energy provider. In attempts to track renewable energy sources in the country, the partnership focuses on recording solar power data generated by smart meters.

Crises are expensive. Whether making up for lost sales, paying for heightened employee care or paying out for legal fees, startups are especially vulnerable to the sudden costs of a crisis. A corporate partnership can help them recover faster in adversity, notably by funding startups’ R&D stages amid choppy waters. Volkswagen, Samsung, Intel, Microsoft, Roche, Novartis, Johnson & Johnson, Google and Merck are among the 10 biggest R&D spenders worldwide, and all of them choose to work with startups.

With access to larger budgets, startups can continue developing products during a crisis as well as give discounts or extended trials to demonstrate extra value (and humanity) to users. This financial flexibility means startups don’t have to compromise the quality of their product and can retain more users for the long run.

Balance today’s necessities with tomorrow’s innovation

Corporates may have millions of dollars to spend on R&D, but their solutions sometimes take years to be shipped. This kind of delay is problematic in emergencies when people need solutions immediately. On the other hand, startups have a higher-risk mentality and are more willing to put into action early plans for products today, not just tomorrow.

Secure ecosystems need a combination of the two: The fine-tuned and vetted services of corporations and the quicker, ready-to-iterate tools of startups. Startup-corporate partnerships can therefore reap faster customer feedback and insights, and familiarize themselves with the changing scenarios of users. This understanding arms partners to make more sound predictions about how customers react both in crises and in calmer times.

Take startup Leena.ai, which worked with the world’s largest cement manufacturer LafargeHolcim during the remote shift. In just a few days, Leena.ai established a COVID-19 helpdesk for LafargeHolcim employees to improve teams’ experiences while working from home. Had LafargeHolcim partnered with another corporation, the integration would have taken months and possibly lost LafargeHolcim its handle on employee sentiment at a crucial time.

It’s time to move away from the outdated attitude of David and Goliath businesses and embrace the complementary aspects of corporations and startups. Corporates have the deep pockets and standing to help startups weather future storms, and startups have the malleability and a finger on the pulse to keep corporations afloat in changing tides. Both can be a life jacket for the other when things take a turn.

Cristina Tamayo is business development manager at parallel18, a performance-driven international startup program working to position Puerto Rico as a unique hub for innovative businesses and technology. It is part of the Puerto Rico Science, Technology and Research Trust.