New Game Strategy: Corporates join forces with start-ups

That India is a global hub for start-ups is 2017 news. What is trending right now is a novel partnership between start-ups and corporates, both within and between sectors, and this trend is expected to gain a lot of momentum. In India, it is already a widespread phenomenon termed as ‘corporate venturing’.

It would not be an exaggeration to say that most start-ups cherish an ambition to become a sector leader or evolve into a corporate house. Indeed, many global conglomerates today started out as a family start-up. However, the road to becoming a corporate house is long and arduous, and if there is an opportunity along the way to establish your presence, why not take it? This is precisely the thinking being adopted by many start-ups in India now to withstand the many changes in the external environment and become a well-oiled self-sustaining business operation at every stage of growth

Start-ups are founded on the premise of providing solutions to market demand where gaps exist and creating markets for accessible solutions. This premise makes the advantages for a collaboration with corporates abundantly clear: partner with a market leader who has no dearth of capital or resources. Whether you are a start-up or a corporate, innovation and new markets are key, and start-ups can offer corporate these avenues. Collaboration can take on multiple forms — a direct client-service provider relationship, a structured programme with many start-ups on the same problem, providing grants to relevant start-ups, etc.

For corporates, collaborating with start-ups helps them navigate an ever-changing landscape and try out newer business models while their own proven business models may not have yielded desired results. Such partnerships also help them explore newer solutions on a smaller scale, maintain their leadership position, and also offers them the competitive edge by partnering with the innovation leader in their sector. 

Market leaders such as M&M, Unilever, Viacom, Axis Bank and HDFC Bank have already been working with a number of start-ups under different arrangements or programmes. For example, M&M has partnered with Ola and Scoot Networks (US-based). M&M will provide 40,000 cars over two years to Ola, which means lower acquisition costs and expedited scaling up, whereas, for M&M, Ola offers the competitive edge to stay close to the market disruptor. Tata Motors has also partnered with a couple of start-ups such as Mobiliya and MapMyIndia. YES Bank has partnered with wallet start-up, Phone Pe, a Flipkart company, opening itself up to the 70 million plus customers of Flipkart and associated companies. Speaking of structured programmes, HDFC Bank chose some 30 odd start-ups from a bunch of 105 to offer market-linked innovative solutions in marketing, quality assurances, and payments, sparking an ‘Appathon’ from rival ICICI Bank to source fintech partners as well. HDFC Bank’s Partners include Senseforth Technologies, NotifyVisitor, Bug Clipper and Tapits Technologies. 

These partnerships help start-ups refine their business models and access bigger markets while also potentially getting regulatory help from the corporate market leaders who know the regulators and are already aware of the nuances. Let’s also not forget that some, if not several, of these start-ups initially sourced their top brass and investors from market leaders, which is now a coup for them when it comes to establishing contact through a visible and trusted face with the corporate house. 

What is absolutely clear is that corporates cannot afford to ignore learning about what start-ups in their sector are producing or innovating, and would be better off collaborating rather than being taken by surprise by losing a share of the market.

The writer is managing partner, Unicorn India Ventures