How many startups are created every year? That's a number that is incredibly difficult to pin down but some suggest that it could be anywhere in the region of 100 million to 1.33 million. So, technically, sourcing these newly- founded companies should be easy – they are just so abundant that they must be everywhere.
The real question is; where can corporations find good startups?
Once your company has defined its innovation strategy, the technology interest areas come to light: it might be the Internet of Things, consumer analytics, or even artificial intelligence. At this point, it is important to understand the startups within that technology interest area.
AngelList provides search terms that can help you narrow in on your exact target group of startups. If you're looking into a popular industry, you might quickly be overwhelmed by what you find, but at least it gives you an understanding of the types of business models and technologies emerging.
Most good startups will have filled their AngelList profile with information that gives you a quick snapshot of their vision. At this point you can follow the ones you like, or, even better, mark them into a spreadsheet so you can dig deeper elsewhere.
Startup Spreadsheet / CRM
If you have a number of people at your organization that are passionate about the startup world, creating a database of companies that everyone can input into to is another great mechanism for discovery.
Your startup CRM is going to be a great way to pass information around to your peers, and eventually spark more interest from your seniors. The point is to create a collaborative environment that drums up excitement, feedback loops, and meaningful strategy.
The benefit here – over AngelList – is that the database will be purely related to your company’s business and your areas of interest. Your team is your best filter.
You should be looking to fill the list with startups that you think have potential and at that point your due diligence starts to take full flight. You are going to start looking for the following kinds of information:
– Date the company launched
– The USP or unique selling point
– Funding activity and quality of investors
– Analysis and track record of the team
– Traction or “Product-market fit” (i.e. users, revenue, monthly burn rate)
– Go-to market strategy (i.e. how do they reach their customers and how convincingly they do it)
– How the startup could add value to your business
Crunchbase began in 2007 as a part of the TechCrunch network – a way for the general public to get information about the entire startup ecosystem.
Crunchbase, like AngelList, is a hub for startup profiles, updated by the startups themselves and the community. The platform gives you a snapshot into the company’s team, their investors, useful links, and news mentions – it’s true value lines in the readily available funding news.
The value of Crunchbase extends beyond digging into startups – it is your first port of call for data on VCs, accelerators, entrepreneurs, and acquisitions in your industry. This makes for a great tool in your desk research arsenal, but hard to turn into actual progress.
Use Crunchbase to find the major venture funds and accelerators in the regions you are working from and where you will be going. These two stakeholders in the startup ecosystem will be the next major step in your journey…
Startup accelerators are the single best place for you to find startups. This is where you elevate from finding good startups, to finding great startups. If the accelerator is doing things correctly – they will be segmented by industry too, making it even easier for you to find companies applicable to your technology interest areas and pain points.
The best times to visit are on demo days, selection days, one-off pitch events, and mixers. You will want to see the startup’s most polished presentation to get a sense for how professional they can be, how clearly they understand their product offering, and whether the technology looks right for you.
The obvious choices are Y Combinator (where you will meet the cream of the crop for B2C startups, mentored by experts in the consumer-startup field), Plug and Play (where we source the world’s best startups segmented by 14 major industries), and other industry-focused accelerators like Startup Autobahn (a mobility and transport accelerator in the heart of Germany’s car manufacturing region).
One of the things we noticed early on was that simply watching pitches, shaking hands, and exchanging business cards often leads to no tangible outcomes. We give our corporate partners six private dealflow sessions a year – taking their exact technology areas of interest and matching them to the startups in our ecosystem. We have seen that this creates an enormous amount of proof-of-concept agreements that often lead to pilot projects and sometimes a full-scale commercial partnership.
This can be achieved if your startup scouts dedicate a lot of their time into creating structure, process, and a very consistent pipeline. A way to make this easier is to work closely with venture capitalists that are extremely knowledgeable, passionate, and active in your space...
Venture Capitalists (VCs)
A more difficult route to take is to buddy up with venture capitalists that are active and rooted in your space. VCs will welcome major corporations with open arms if they believe them to be open-minded to change, good executors of innovation strategy, and willing to boost their startup (i.e. their investment) through strategic investments or partnerships.
For VCs, if their startup can land a big partner, not only is it validation for their decision to invest, but it is also revenue that could eventually snowball into more revenue (i.e. more big name clients). This gives the VC much more understanding of their portfolio’s product-market fit, the security of their capital invested, and a much better reason to share resources with you.
There is no tried and tested way for corporations and VCs to join forces but the synergy is obvious: it’s a win-win.