Big companies collaborate with startups on vibes alone

This is also a consultation I get often.

First, this kind of consultation only ever comes from large companies. That’s because in most cases startups know exactly what they want, and if they find out they can’t get it, they withdraw immediately. There’s not much room for agonizing over it.

Large companies, on the other hand, very often move forward into a collaboration on vibes alone, without ever clarifying what they want to gain from the startup, how much they should reasonably expect, or what they themselves should be offering in return. One or two of those points, or in the worst case all of them, remain unclear.

Let’s unpack the issue above and think it through below.

First, what to gain from it. A typical pattern of collaboration is “helping a startup get into the market.” In that case, the story usually goes like this: the large company has an overall position in the industry, and by having itself or its affiliated companies adopt the startup’s product or service early, it can promote itself as having introduced an advanced service ahead of others, translating that into promotion to its own users or into tangible profit.

Here, be honest with yourself.

Isn’t what you actually want to gain the details of the product the startup is working on, or the know-how behind its service? Even if it’s not stated outright, isn’t there some part of you thinking about converting that into your own company’s products or services? Make this dividing line clear. It changes how you should engage with them.

Next, how much to expect. It’s quite common that the technical details and know-how of a startup, of the kind mentioned above, turn out to be completely unusable in practice. In other words, excessive expectations are dangerous. Have you drawn that line clearly? Are you spreading rosy stories internally without basis? A capital relationship changes the picture, so that boundary also needs to be made clear.

Finally, about what you yourselves should offer. This is simple, because in most cases there’s something a startup clearly needs, and if you remember that, it’s easy. As I’ve mentioned in another section, the top item is QA and CS. Next after that comes the production line. QA and CS are areas where the required period tends to be relatively short, and the resources needed can fluctuate sharply depending on the situation. For a startup that’s chronically short of resources and can’t easily draw on temporary backup from other departments, this is a treacherous area. What’s more, these areas demand a wide range of experience and disciplined, organized behavior. On the other hand, they don’t require deep understanding of the underlying technology that makes up the product. In that sense, this is an area perfectly suited for external support, especially from large companies. Startups obviously lack money, but investment carries several other sensitive factors, so it’s not necessarily the case that the startup needs to take money from you.

If you’re on the large-company side, has this given you a somewhat more concrete image of what collaboration looks like?

From my perspective, you need a clear strategy. If your ultimate aim is to bring the startup itself into your fold, you should build a foundation of shared fate through a capital and business alliance, and on top of that, adopt a strategy of giving the startup whatever it asks for. Alternatively, if you’re simply exploring whether they’re promising or whether the market is promising, the strategy becomes one of managing risk to minimize your own burden and sacrifice, while giving the startup what it needs to the extent necessary to extract as much information as possible from them.

In the former case, whether the startup accepts or rejects your offer becomes clear early on. If it moves forward, it moves forward; if not, it ends there. Either way, neither side wastes time or effort. In the latter case, both parties establish a consensus to engage with each other in a way that minimizes risk as much as possible. Neither side expects much from the other, so there’s no need to get worked up over a lapse in communication or a lack of progress from either side. The relationship may also simply fade away naturally. In a sense, this too minimizes time and effort.

I’ve seen confusion arise in various places because companies bring up collaboration in a vague way without even settling on this minimal stance. In the end, the startup wastes effort and time that could otherwise have gone toward something else, while the large company ends up disappointed after having had excessive expectations but failing to recoup sufficient results. It’s an unproductive outcome for both sides.

Originally published in Japanese at https://clazytech.com/2021/08/568/. Translated with LLM assistance and reviewed before publication.