TYPES OF COLLABORATION BETWEEN STARTUP AND CORPORATION

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Essentially there are 2 methods in which startups and corporations collaborate.

The two formulas respond to different interests in terms of the objective of the partnership for both parties:

• Customer - Supplier Interest.
• Acquisition Interest.

CUSTOMER - SUPPLIER INTEREST

It is the formula for collaboration most common. This is how the corporation agrees to contract the Startup's products/services (B2B) in exchange for financial compensation. The terms of the agreement depend on the type of solution offered and the agreement reached during negotiations between the two parties. We are talking about purchase agreements, provision of services, sale of software, etc. 

The client (the corporation) pay the supplier (the Startup) for their services.

ACQUISITION INTEREST

It occurs when the corporation is interested in acquiring the startup or incorporating it into its portfolio of services/products. In the same way, the start-up must be interested in being acquired and, therefore, in achieving an exit.

For this to happen, the objectives of both parties must be aligned:

CORPORATION

• The acquisition deal has a clear return on investment and a payback aligned with its investment objectives.
• It is able, once embedded, to make it work in alignment with its culture and processes.
• Once incorporated, it is able to keep the start-up running with or without the help of its founders or after substantial changes in the teams.

STARTUP

• It aims for Exit, understands that it has brought the startup to an optimal point of growth and is aware that in order to continue to grow it needs to be acquired.
• Its founders, partners, investors, guarantors are aligned with the sale.

These are just some of the questions to be answered when valuing an acquisition. These are operations quite complexbecause, in addition to price, the cultural and capacity values of both parties come into play to run the business after the purchase.

There is a possibility that the corporation does not acquire the start-up but takes control of it through investment. Depending on the percentage it acquires, the corporation will be able to direct or at least influence where the startup should develop its growth or what its roadmap should be. This direction, will logically be aligned with corporate interests.

In addition to these two forms of collaboration, there are other alternatives that can be implemented with more sophisticated corporations. An example would be the Acceleration or Corporate IncubationFor them, corporations must have structures in place to develop these processes. Another example would be the investment in ticket as an investor, without the corporation being able to benefit from the startup's solution, but for the sole purpose of investment.

Although, surely, your target collaboration is customer-supplier, it is good to keep an open mind and understand that collaborations can grow as the startup continues to bring value to the corporation.

There may be a third type of collaboration, which is the agreement to go to market together for specific clients or certain types of industries. This can happen with technology or business consultancies that do not have their own tool created. In these cases, you will have to prepare your collaboration model, pricing, sales support, etc... And also understand that the timescales are often much longer, as your solution is part of a larger package.