Venture capital helps large corporations’ love-hate relationship with startups
Big companies concerned about not being agile enough are moving closer to venture capital and finding partnerships with early-stage startups to help them solve corporate problems.
Stoic Venture Capital Partner Geoff Waring said venture capital’s role aligning large companies with startups could contribute significantly to a post COVID-19 economic recovery.
“Corporate executives find it hard to deal with accelerators, hackathons and internal research and development departments. Partnering with startups is proving to be the most feasible way to solve corporate problems,” Dr Waring said.
“Companies are often focused on satisfying the immediate needs of customers. Partnering with startups allows companies to investigate and accelerate innovative offerings that anticipate their customers’ future needs.”
The benefits for early-stage startups are manifold. It enables these growing companies, which otherwise do not have access to facilities or a sufficient customer base, to test their prototype with customers.
“These collaborative arrangements are a good way to test the feasibility of their model to solve specific company problems in a cost-effective and controlled environment,” he said.
“Large corporations worry a startup will fail, not be focused nor have shared goals,” Dr Waring said. “Venture capital firms (whether independent or a corporate venture arm) can play a vital part alleviating their concerns by bringing legitimacy and finance to their start-ups, keeping them on track with milestones and introducing them to corporations with similar goals.”
The niche of venture capital is managing the phase between an unproven startup concept to where it is a company a large corporate customer will partner with then eventually acquire, Dr Waring said.
“Company employees have little incentive to take on risk lest they are responsible for a project failure. Partnerships with startups enable them to outsource risk management but internalise innovation while avoid facing a new disruptive competitor in the market.”
Healthcare and pharmaceutical corporations are among the organisations most successfully using this method of startup partnering to internalise innovation.
Digital health platform Cardihab recently partnered with the Tasmanian Department of Health and Royal Flying Doctor Service Tasmania to provide digital cardiac rehabilitation services in public hospitals across the state.
This enabled Cardihab to demonstrate how its solution improved access to critical cardiac rehabilitation programs for patients recovering from cardiac events and living with heart disease in regional and remote areas.
It followed Cardihab’s agreement with Medibank to enable more people to access cardiac rehab during the COVID-19 pandemic.
In other rapidly transforming industries such as agritech, companies like Agerris have partnered with farms to demonstrate how their field robotics, artificial intelligence and intelligent systems can dramatically improve on-farm operations.
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