Garching near Munich, March 05, 2020. The study on “Corporate start-up activities” conducted by UVC Partners provides new insights on B2B start-ups. By working with start-ups, established companies gain access to new technologies and can diversify their portfolio with additional revenue streams. Start-ups considered most viable for collaboration not only bring strong technology and intuitive products to the table, but also a dedicated customer focus with a quick turnaround time. When partnerships do falter, it is most often due to a product’s failure to thrive, either from premature launch, lack of product market fit or insufficient technological performance. However, capacity constraints at the partner company can also be the culprit.
UVC Partners and UnternehmerTUM, the leading center for innovation and business creation, conducted a survey on “Corporate start-up activities” by polling mid-size and large companies from their network. The results showed that the majority of the surveyed established companies (78%) already work with external start-ups. A smaller percentage (63%) have in-house start-up projects that could develop into spin-offs. All survey participants not currently working with external start-ups have plans to do so in the future.
Start-ups with potential to expand or improve existing product portfolio are most popular among companies
Speeding up innovation and gaining access to technology are the most compelling strategic reasons behind established companies engaging in start-up activities. These may include pilot or prototype projects, customer relationship management or investments. Immediate or mid-term top-line financial impact was usually not a primary goal of these activities. Consequently, start-ups that promise innovation within the product range of the company are more sought after than those that seek to optimize processes or operations. Of the study participants, 90% either desire to work with or already work with start-ups that have potential to add new products to their range and/or achieve improvements to existing products. The processes most likely to be addressed by the companies using start-up solutions include logistics, supply chain, maintenance or technical service followed by production or sales. The areas of business intelligence, intralogistics, cyber security, procurement, market intelligence, knowledge management, marketing, HR, staff management, communication, collaboration and customer service all came in at a range significantly under 25% likelihood to use or seek a start-up solution, in some cases even at 0% of poll results.
Groundbreaking technology and intuitive user interface are strong USPs
UVC Partners also asked the companies which particular USPs and strengths counted the most in their consideration of a start-up. Topping the list is access to new technology that would not otherwise be available to the company. In particular, a start-up providing technology considered to be cutting edge or with a high level of technical differentiation garners high regard from potential partner companies. After the technology aspect, the list of decisive criteria for start-up solutions is as follows: potential to increase turnover, intuitive interface and/or an exceptional user experience, high level of
customer orientation, timely project start and conclusion, and potential to increase efficiency within the company. Features such as possible cost savings, the quality of the working relationship (e.g. the personality of the founders or the willingness to customize products), a more advanced stage of development (measured by turnover, reference clients from the same industry or existing VC investment), a low price point, modernization of existing procedures (e.g., through automation of manual processes) or easier communication or collaboration were not as heavily weighted and more neutral factors in the decision-making process.
Lower product performance than expected often causes termination of collaboration with start-up
The survey also probed the reasons contributing to the end of collaboration with start-ups. One of the common reasons on the company’s side of the equation was a lack of internal capacity to contribute to the project. However, most often collaboration broke down due to the actual start-up product. Concrete reasons included missing the mark on product-market fit, the lack of depth and experience of an early stage start-up, or an insufficiency in the level of technological performance. High price point and high costs also play a significant role. More seldom the situation arises where the actual working relationship between the established company and the start-up is troubled, either due to subpar communication between the two, or due to a lack of professionalism on the side of the start-up. Similarly rare were problems with shaky financing of the start-up, project targets set by the company that were too complex or the inability of the start-up product to meet safety or certification standards.
A minimum of 8 to 21 weeks to customer contract
The most important start-up activities for the study participants were pilot projects, customer relationship management and investments. For pilot projects and investments, companies reported a best-case scenario timeline of 6 to 12 weeks for a decision. For customer contracts, the decision timeline tends to be between 8 an 21 weeks. These estimates all assume smooth sailing; however, it is common for processes to run into additional internal delay.
“This study shows the very high potential for innovation through collaboration with start-ups by forward-thinking tech corporations or medium-sized companies. Based on our results, start-ups can set themselves apart with strong technology, proven product-market fit and intuitive product design,” states Dr. Anne Kreile, investment associate at UVC Partners and the project lead on this study. For the “Corporate start-up activities” study, a total of nine medium-sized companies and corporations from the UnternehmerTUM network completed a standardized questionnaire on the subject.
UVC PartnersUnternehmertum Venture Capital Partners (UVC Partners) is a Munich- and Berlin-based early-stage venture capital firm that invests in technology-based startups in the areas of industrial technologies, enterprise software and mobility. The fund typically invests between € 0.5 - 3m initially and up to € 12m in total per company. Portfolio companies benefit from the extensive investment and exit experience of the management team as well as from the close cooperation with UnternehmerTUM, Europe’s leading innovation and business creation
center. With over 240 employees and more than 100 industry partners, UnternehmerTUM can draw from many years of experience in establishing young companies. This cooperation enables UVC Partners to offer startups unique access to talent, industry customers, and other financial partners. The portfolio includes investments such as Blickfeld, Carjump (Free2Move), FlixBus, KONUX, TWAICE and Vimcar.
Europe’s leading Center for Innovation and Business Creation
UnternehmerTUM is a unique platform for the development of innovations. UnternehmerTUM actively identifies innovative technologies and initiates new business through the systematic networking of talents, technologies, capital and customers.
UnternehmerTUM offers founders and startups a complete service from the initial idea to IPO. A team of 240 experienced entrepreneurs, including scientists and investors, supports startups with business creation, market entry and financing – also with venture capital. For industry partners, UnternehmerTUM is a central platform for cooperation with new companies, and for expansion of their innovative strength and culture.
Founded in 2002 by the entrepreneur Susanne Klatten, UnternehmerTUM is the leading center for innovation and business creation in Europe with more than 50 high-growth technology startups every year - including Celonis, Konux and Lilium.