Embracing the startup culture has become something in between a buzzword and a mantra for large and middle-sized corporations over the past few years. Moving fast, breaking things, and being lean is often perceived as the solutions of the traditional corporate problems—sluggishness, bureaucracy, and general lack of innovation.
That word – innovation — is the centrepiece of every corporate’s roadmap that outlines the ways of embracing the new ways of working. Startups and entrepreneurs play a huge role here as well, being seen as the source of fresh ideas that can revive and rejuvenate an older company.
In the Netherlands, corporates employ a number of different strategies in working with startups. The approaches include growing startups inside the company or partnering with existing ones, running acceleration programs or investing in early-stage projects, etc. In this overview, we haven’t looked at the fintech sector that appears to be quite active in bridging corporates and startups—that’s a topic big enough for a separate story.
It’s also not realistic to compile a full list of things the Dutch corporates do with entrepreneurs, since the landscape here changes by the day. It might not be that important after all, though. The question is which way the startups can get as much value as possible, without giving up too much of their freedom or equity.
Working with accelerators
Arguably the most straightforward and least expensive way for a corporate to enter the local entrepreneurial ecosystem is to partner with an existing accelerator, or commission and sponsor a whole acceleration programme.
Most of the existing Dutch accelerators have corporate partners, which open up their pool of resources, mentors, and network to aspiring startups. The value for corporates here is also quite obvious: to have a keen sense of the pulse of the startup ecosystem, be able to partner with startups before someone else does, as well as size up potential acquisitions.
For startups, especially those aiming at markets traditionally dominated by large players, working with corporates early on can be quite beneficial as well.
“A good example is Canard, a startup from one of Startupbootcamp’s recent programs,” said Lars Crama, chief commercial officer at InnoLeaps and Startupbootcamp’s e-commerce mentor. “They looked at the problem of navigational aid lights calibration at the airports, which has to be done every couple of months. So they came up with the idea of doing it with drones. Even for a senior startup team of Canard, it would be difficult to get permission for a test flight on an airport, but since the Schiphol airport was a partner of the program, it was really easy to make a connection. Right after joining the program Canard did a pilot at the Lelystad airport that’s owned by Schiphol.”
Alternatively, corporate players can commission a whole acceleration programme, which would be run by an existing accelerator as a kind of white-label solution. A good example of this approach is the Renew the Book programme ran by Rockstart together with the General Publishers’ Association of the Netherlands.
The programme which is aimed—unsurprisingly—at startups working in the publishing industry had graduated its first batch of startups in December 2015, and is about to open applications for the next run early next year. It will be held in the Rockstart offices in Amsterdam and take 40 days.
“The normal acceleration programmes are investor-funded,” said Jan Paul Grollé, program director of Renew The Book. “This means that you’re purely looking for startups that have good growth potential. When you’re working with corporates, that objective slightly changes. In our case corporates don’t invest, the programme is free for startups; what the corporates in our programme want to take from it is called ‘open innovation.’ They want to be exposed to interesting ideas and to another way of developing business.”
The last year’s winner, Bookarang, received €15,000 in prize money to further develop its book recommendation engine based on the actual content. Most of the other solutions on the market use the behaviour-based model, i.e. recommend users new products based on what others bought before them.
Participating in the programme didn’t only bring the startup a bit of financial support, but also helped a lot in partnering with Dutch bookstores and libraries.
“We definitely met some very interesting people, and one of them is now in our advisory board,” said Bookarang CEO Victor Bergen Henegouwen. “When we won the prize and media started to write about us, people started to believe that what we’re doing actually works. It was kind of a stamp of approval. And that really, really helped.”
Out of the other four programme participants, at least two are still working, while the other two haven’t been active in their social network accounts for months.
Startup programs and venture arms
Another approach employed by many corporates across Europe is to create a separate department that works as an interface between the company and startups, as well as to establish a venture arm to invest in the most promising ones. A notable example of this is KPN, one of the Netherlands’ largest telecommunications companies.
Not falling for the charms of traditional accelerators, KPN created its own New Business department and appointed Marie-José van den Boomgaard the liaison manager for startups and incubators last year. The tasks of the unit are to be there for entrepreneurs interested in working with the corporation, and guide them through the whole communication process.
“We don’t run programs with external startups,” Van den Boomgaard explained. “We do matchmaking and deals. What we try to do is if the startup has a good idea or product, we try to see if we can invest in them through KPN Ventures, or do co-creation, which is combining of assets of KPN and the startup together. For KPN, becoming a launching customer could be a match as well. Another option is that KPN can be a distributor of the product.”
KPN New Business started by scouting for interesting startups, is receiving about 15 applications per week, and also organizes events for startups around the country. In addition to the New Business department, KPN launched an investment arm KPN Ventures in the summer 2015. Since then, it has invested in three companies and one fund, Cottonwood, via which it also invested in one more company. The fund focuses on Series A and B funding rounds from €500,000 to €2.5 million for companies working with IoT, smart homes, cybersecurity, e-health, cloud computing, and data analytics.
Business vs. innovation
One of the startups that has benefitted from KPN’s New Business initiative is Vita.io. Its product is an app that learns what makes a person happy at the workplace, and then tries to help them do more of that to make them happier. KPN has become the Vita’s launching customer, with a pilot run for 2,000 people starting soon.
“When we first came to KPN, we worked with the HR department,” Raymond Hannes, CEO of Vita. “But then I learned about New Business, and they helped us to go through the process or procurement and everything, because it’s quite difficult in a big company. They helped us through the maze of rules and regulations.”
Another startup, Ubiqu, has been working with KPN for three years, but not through the New Business department. It works in the security space and collaborates with the telecom giant on the DigiD 2.0 project.
“There are a lot of companies in the Netherlands that have innovation departments,” said Guus Stigter, product manager of Ubiqu. “They all want to talk to you, to meet you, to know which topic you’re busy with. But the next steps are very hard. I’m a more fan of a process when you can really solve a problem for them. In this case, you can go to the business part of the company, and not the innovation part.
“For example, imagine that you sell cookies. The business part of the company would buy a thousand cookies from you. But the innovation part would rather help you to find customers to buy a thousand cookies.”
When looking for the first entrepreneurial spark to power your corporate routines—why not look inside? That’s another approach taken by a few industry behemoths across Europe, which send locally formed teams to go through a special tailor-made programme and come back to put their new knowledge to work.
In Amsterdam, one of the accelerators of this kind is Innoleaps, a spin-off business of the “traditional” startup accelerator Startupbootcamp. So far it has worked with more than 40 internal teams from Unilever, Philips, Liberty Global, and Vodafone, as well as a few banks.
“The model we’ve developed over the past three years is that we find “intrapreneurs” and ideas from the organisation,” Crama said. “There’s plenty of ideas in big corporates, but what we’re looking for is the right combination of the team — usually of three to five people — and the idea. We usually select three teams from the corporate to start with, we profile them, then try to predict using data analytics whether or not they can be successful.
“Once they’re in, we bring them into our corporate accelerator programme, and they kick off with two days of a warm-up. […] Then they have thirteen weeks to validate the idea they had, build a prototype or an MVP. We guide the teams in the process, we teach them the lean startup principles and so on.
“After that, the teams have a demo day and present their findings to the whole organisation. Then they go back into the mothership—and after working in a startup environment for three months they meet legal, IT, procurement, all the departments that won’t help them in getting their ideas forward. What we do [to avoid this] is we invite some 25-30 people who work around the team for a five-day master class. In those five days, people will understand some of the concepts the team has come through. In addition to that, there’s also a one-day executive session that makes sure the senior stakeholders know what’s going on.”
This approach doesn’t really involve working with startups from outside the company, however it could bring more new ventures to the market. Some teams that went through the acceleration programme with Innoleaps did eventually spin out from the corporate entities they represented to experience the startup life outside the greenhouse.
“Startup life is difficult, and usually a corporate can give a landing spot for a good startup idea,” Crama said. “Corporates have two things that startups don’t. One is money, and the other is customers. So most of the innovations would go back to the organisation, and they would scale them internally.
“There are examples of cases when people spin out. What we’re trying to achieve with corporates now, though not all of them are there yet, is to give the intrapreneurs the opportunity to start their own business like this, where the corporate would take 20 percent of equity and give the entrepreneur some leeway. […] “We’re still looking for corporates with that kind of empowerment, though.”
Corporates: beyond buzzwords
Overall, it’s safe to say that engaging with corporates in any way can only be beneficial for a startup if it knows exactly what it wants to receive from the partnership. Obscure concepts of mentoring and exposure to corporate knowledge won’t necessarily bring much value, however having a large company as a pilot client definitely would.
On the corporate side, it’s becoming clear that more and more ecosystem players, from top consultancies to freelance advisers, will be trying to capitalise on the companies’ urge to be closer to entrepreneurs. That’s not necessarily a bad thing, but some healthy skepticism would definitely be helpful not to fall for buzzwords instead of actual innovation.