Why Corporations Should Collaborate With Startups
The quick answer by Startup Wise Guys co-founder and lead investor Herty Tammo is: because old economy corporations can benefit from collaboration with new economy startups and vice versa. But let’s read more.
There’s an ongoing argument in Estonia (and throughout the world economy) about whether we need more startups or large corporations.
In reality, collaboration between old and new economy enterprises can lead to increased productivity and innovation. Both parties benefit, furthering economic growth and success.
This viewpoint stems from my experience as an owner and a founder with both classical ‘old economy’ industrial enterprises and modern-day startups.
It’s my hope that I’ll be able to help other industrialists understand the characteristics and business models of the new economy — and also why large companies shouldn’t be scared of startups, but rather see them as those to collaborate with and benefit from.
The Benefits of Corporate-Startup Collaboration
For more than 20 years, I’ve contributed to the development of industrial enterprises that include T-Tammer, Estanc, and Sarkop.
In recent years, I’ve concentrated my efforts on scaling a fast-developing tech company called Ridango and expanding Startup Wise Guys accelerator.
I can affirm that success stories happen only when the best characteristics and opportunities of old and new economy are skillfully combined. Simply put, one world cannot function without the other, no matter how strong the efforts.
At T-Tammer for instance (an industrial enterprise which produces metal doors), we recently invested several millions in a new robotics system and warehouse automation. We modernized all the IT-systems that control the production and sales processes.
We believe these updates will give us a chance to increase our EBITDA by more than 50% and improve our competitiveness. Competitive advantages arise from smart production, which is not possible without integrating new technologies that are often designed and developed by startups.
What’s a Startup?
A startup is a group of people looking for a repeatable and scale-able business model. This can take quite a long time — profits are usually not made until many years out. The end goal is to make an exit at the right time so as to start working on the next scale-able business model. That’s how innovation is born.
Today, tech startups are run by the same people, who otherwise would have worked on starting new projects in the R&D and product development departments of old-economy companies. The only difference is that these persons want to have a larger degree of independence and flexibility in their actions, and thus have chosen the entrepreneurial path.
Instead of being fearful and apprehensive of startups, large enterprises should see opportunities in them. Startups are able to provide innovative technologies and new product development solutions for corporations having outdated business models and technologies.
Startups and industrial enterprises are not competing for the same profits, but rather for public attention. That could be a big reason why some old-economy entrepreneurs see startups as opponents.
What’s important is that these two parties find a common language since both sides can actually benefit from one another. After all, it’s the technologies created by new economy companies that help to improve the competitiveness of industrial enterprises.
