Until a few years back, large enterprises were mostly on the sidelines of startup action. That’s no longer the case. There are new generations of startups and developers driving cloud-based disruption and innovation across every region of the world. Last year alone, according to PWC/CB Insights, $164B was invested in more than 11,000 startups globally—up 50% from 2016. Enterprise interest in startups has boomed and corporate incubators and accelerators have mushroomed in every startup city worldwide.
So what’s with this new wave of enterprise interest in startups? At first glance, it isn’t obvious why enterprises would want to spend their time nurturing fledgling startups on shoestring budgets, seemingly crazy ideas and a 90+ percentage chance of failure. Even veterans in these enterprises are often left wondering why their mega corporations that earlier never worked with sub-million dollar entities, are suddenly so keen on engaging with startups!
My day job has me facilitating engagements between startups and enterprises. Through all these interactions, I see a common thread, and the reasons why these enterprises are keen to work with startups. Though there are many factors at play, but my picks for the top four comprise:
Cloud: One of the key reasons why enterprises have started engaging with startups, is the gradual move away from mega on-premises IT setups to automated cloud environments. A new breed of cloud native applications are being built with integration at their very core. So it’s far easier to partner with startups today than ever before.
Not small business: Partnering with startups is not the same as partnering with small businesses. Startups’ business plans, fundraising and teambuilding is all with the goal to go mega. While small businesses could be happy with organic growth, startups either grow exponentially or fail fast. Enterprises are far more comfortable working this newer form of business that strives to get to enterprise scale in quick time.
Innovation and competitive edge: Startups are passionate, focused, fast, hungry and capable of radical, out-of-the box thinking. Enterprises scout for such startups that gel well with the larger innovation story of the enterprise and can provide the ever so critical competitive edge in the marketplace. In today’s digital era, it is also at times easier, cost-effective & more prudent for enterprises to acquire innovation than to innovate in house.
Zero Baggage – open to pivot: With no legacy or existing products and portfolio to support, startups are nimble and can flex and move in whichever direction makes most sense at the time. With startups, chances are that almost nothing is carved in stone, including their core business model! So if there’s a strong business need for a startup to pivot, it’ll become a reality quickly.
If you’re a startup looking to join hands with an enterprise, now is the most opportune time. Are you ready to take the leap of faith, to think big and to think enterprise scale?