All the main film studios are located in Burbank City, Los Angeles county, while live entertainment agencies and production firms are crowding in Beverly Hills, and advertising and other creative agencies and talents – in West Hollywood and Downtown LA. Silicon Beach on the Westside is the home to headquarters or regional offices of technology firms of large and small size, with young technology professionals living around Santa Monica (with its overcrowded pier) and Marina del Ray with its picturesque sunsets.

That makes LA a very specialized place for everything entertainment. VC funds are mostly founded and funded by movie or music stars, mainly interested to drive innovation for the industries present in LA. UCLA with UCLA Anderson School of Management , University of South Los Angeles are the main educational forces in LA, while professionals mingle around the West coast, moving from San Diego or San Francisco to Los Angeles, or vice versa, in that way mixing the knowledge pool that LA can offer.

In LA, you would not feel that everyone knows everything about all technologies, venture capital, or growing a multi-billion company in 3 years starting from parents garage. That makes it more challenging to those just wishing to network and find possible co-founders for anything the one’s knowledge can work for (think Bay Area), or a technology firm working with, say, autonomous driving and looking for investment or advise.

At the same time, LA is a perfect place to innovate in everything content, media, live scene, and almost anything related to the large entertainment industries with loads of funds. Use of AI to help Youtubers monetize? A technology that allows to save 20% of time for a very specific phase of video production, say flaming? Something that most of the rest of the world would not know even exists. Here you go! There are multiple VC firms that would happily fund you and help with intros, Will Smith’s & Kosaku Yada‘s Dreamers VC to mention one, with all the opportunities to test out the new solution with their affiliated Westbrook – an entertainment production company founded by Mr. and Mrs. Smith (nothing to do with the movie starring Brad Pitt & Angelina Jolie).

But, wait, it is not like you step into LA and everyone’s willing to work with you, if you are in the space the majority of Angelenos are. The LA’s industries are exclusive, and so is the ecosystem. You do not tap in casually as you would do in Silicon Valley, nor you can network into the ecosystem easily.

So then how do you get into the exclusive ecosystem?

Best, you have to be already in. Within its industries, locally, nationally or internationally, or knowing many enough well connected insiders that can help with intros and infos. Entertainment industries are… entertainment. They are meant to get your attention, take your time and make you daydream. As Netflix states, its main competitor is our sleep. What it means is you can end up connecting with more b*it people than elsewhere, trusting their entertainment stories. Everyone is an actor, agent, or producer in LA, even if their day-jobs are an Uber driver or In-N-Out Burger waitress.

Yes, the movies are not lying again, the ones telling the stories about upcoming and wannabe stars taking any job to cover their living in the city of angels and dreams (think La La Land). Take Arnold Schwarzenegger. He was already a bodybuilding star, but before building his legacy as California’s governor and one of the biggest movie stars, he was ensuring his heritage in LA in another way – by building brick walls and paves. He was literary paving his way to Hollywood. Will Smith was a successful turned broke rapper from Philadelphia whose bodyguard helped him network into Hollywood. That was a consistent and persistent process, a long one, of attending often dull events, shaking hands, trying to impress and remind everyone of his hit songs, and ending up getting his first shot – a challenge he took and succeeded.

This is how Will Smith’s Hollywood journey began. Funny enough, he now owns a mansion in Bel Air, the place known for the Billionaire Row and even a house called “Billionaire”.

Consider that noone will throw money on just an idea so that it would hopefully grow. In LA, it is all about efficiency. Making movies cheap and fast but exciting and big. Creating ads with low-budget but impressive and catchy. You got the idea.

The verdict? Los Angeles county is one of the best places to tap into entertainment & content innovation ecosystem, if you are concentrated, focused, and persistent enough. You have to be 100% sure about your capabilities, preferably know someone who can help you tap in, and keep focus on why you are there, to not get lost in the big city and its popular streets, restaurants and beaches.

While this song by Kanye West, Jay-Z and Rihanna was set out in New York City, it fits perfectly with LA.

Now, a bit about life in Los Angeles.

Commuting.

As you can already guess or know, LA is a big city, and a big county. What makes it even bigger is its challenging transport system. Or absence of one. The city is investing in new public transit lines – trains and metros, there are some buses and trains, but, as locals say, only criminals and homeless people use them. Another truth from movies – everyone drives in Los Angeles. It is nowhere that popular to drive in a big city as in LA. Though the drive is somewhat enjoyable at some moments. If you do not commute daily from Downtown or Pasadena (North LA) to the beach. Forget about residing anywhere in the city and going to the beach for sunsets, or staying next to the beach and visiting, say, Hollywood, daily.

At the same time, if you know what you want, and can carve your path, you would soon realize that everything is actually arranged efficiently in terms of the distance as well, to fit the previously mentioned somewhat limited ecosystem. An example? Live Nation Entertainment, world’s biggest live entertainment production and touring company, and Creative Artists Agency, one of the world’s largest talent agencies, are neighbors in Beverly Hills. Meaning, if you work at one, you can ping your neighbor and invite for a coffee break to discuss a partnership from the both office terraces.

As a European, after getting over the fact that I should forget about the public transport commutes, I see cycling lanes and figure out I could cycle. I remember a German guy – one of the young tech professionals working at a tech company serving big advertising agencies – whom I met while enjoying the friend’s boat. The guy had a leg cast as he said that drivers here are too… relaxed. A truck driver just did not recognize the guy on a motorcycle.

Anyways, I get a $100+ bicycle from Walmart on the next day and start my ventures. I soon learn that almost noone (except for some Europeans and other strange people) cycles here, and the lanes are just a spill of paint on (car) driving lanes. Still, I survive, and manage to enjoy the rides. Though my idea of using the bicycle to go to meetings and networking events anywhere within LA collapse after the first full day trip from West Hollywood to Santa Monica (which is next to the beach) – around 12 miles or 20km one way, with traffic & traffic lights. Would I recommend cycling especially if you have a family, and very young family members? I am not sure, but you can.

It is not without reason that whenever you want to meet someone, you should start with checking at which part of the city, or which city or town – part of LA county – does your connection reside. Without that, your productive days and time in LA will be doomed to inefficiency.

Eating in & out (and drinks)

Los Angeles is one of the most diverse places in the United States to eat out. I absolutely love its food scene, from Mexican taco stands to the special Neapolitan pizza. Yes, you can get burgers and all the American as well (and I appreciate that LA has the San Francisco native In-N-Out Burger). The prices are set in very wide range, too. The average price level is not among the highest in the United States, while you should plan some $20 for 1 person or $60 for a small family dinner. If you are used to the Texas or Finnish size dishes, then double your budget.

Cocktails and beers are on an average price level of the U.S. You can get cheap places with a $3 beer (something you would never find in Miami), but usually be ready to spend between $10-18 for a cocktail at a decent place.

I will skip the grocery part as it is very similar all over the U.S., with very wide range of offerings depending on your preferences (think everything bio vs cheap canned food) and your preferred grocery store, but what I always appreciate in the U.S. is that you do not need to read an ingredient list on each new package, something that I always do in a new country. Regarding alcoholic beverages, California is a friendly place for wine-sippers as you could guess (California is one of the biggest wine producers in the world).

Free time / nature

In California in general, people love nature. Californians are concerned about anything that impacts our future, our planet, and life on the Earth. California is mainly liberal state, while Los Angeles is less than, say, SF.

Many Californians spend their early mornings or late evenings running or hiking, and on weekends, they drive to nature parks, mountains, and villages. I loved one such town, Big Bear Lake, especially. Set around 2h drive away from the central LA, it provided the weather that I was missing while away from Europe or Northern parts of the U.S. It was October, chilly, the trees were in colors, and sun was shining. The people were open, inviting, and talkative. The same always busy people from Los Angeles.

Celebrities

Can you meet celebrities on streets? Yes you can. Often, when walking the streets or sitting at cafes, I saw familiar faces from movies, the ones you know they are popular but you do not recall their names. I also run one night in Jason Statham while walking the Sunset Boulevard. He’s actually one of my favorite actors, but I realized it was him only when we passed each other. What helped was also the fact that the English star insisted on passing me from the RIGHT side.

Another way to spot stars is attending movie premieres or some of the first days of the movie screening. You can also meet them casually while hiking in parks and canyons. My favorite hiking spot is Runyon Canyon. I am blessed with no obsession to stalking stars, so I just enjoy going anywhere and am just excited to see familiar faces.

One of my favorite spots to work at, while in Hollywood, was at Starbucks next to the Directors Guild of America. What I recognized there was not a bunch of popular movie directors (think Steven Spielberg) but absolutely perfectly looking young people sipping their matcha lattes for half day and staring around, hoping to catch their key to the Hollywood dream.

Things to consider

While absolutely packed on daytime, very touristy parts of the city (think Hollywood Walk of Fame, Santa Monica Pier or anywhere in Santa Monica, Venice beach) as well as the financial district at Downton LA are turned into the homeless people camp at night. While Santa Monica is inhabited by many European expats, the Downtown is quite empty during the night. Venice beach is more a hippy place so does not feel uncomfy as long as you do not mind smelling the green cloud everywhere around you. There are blocks around central parts of Los Angeles which I would strongly not recommend to walk alone at night (think near Koreatown). Well, I did walk, but I always try to be too uninteresting to anyone.

Thanks for reading my Los Angeles notes, first in the series of takeaways from my 5y. exploratory journey across the United States. Next up, is a city on the other coast. Another place, shrouded in prejudice. If you have not, please read the intro about the series. I hope these articles will serve the purpose and help you navigate your innovation and growth path in or with the United Sates. If something is missing, please comment.

First, I have not explored all the innovation ecosystems in the U.S., just some of them, and reflect on these only. I acknowledge there are many more, especially the upcoming ones.

Second, my takeaways have not been impacted by any external party, sponsor, or stakeholder, apart from myself, my connections, business partners, clients, endeavours and my close-ones.

And, finally, here is why. Why this story?

I want more smart, capable and honest personalities and organizations to succeed. Less time burned on b*it. United States is a place of opportunities. But, to succeed, you need to know what you want to achieve, then figure out how, and then get to the action. And be brave.

I want to help you escape some biases, marketing traps or old truth which might not be true anymore. When working with or hearing about non-American individuals, organizations and companies wishing to innovate in or develop their operations in the U.S., I see too many unreasonable and ungrounded activities driven by misinformation or wrong information (I intentionally avoid the term disinformation here as it has too bad touch nowadays), leading to wasted resources and unrealized possibilities. The same applies to the U.S. individuals and organizations, too, when biases kick in or someone has zoomed-in too much. I will appreciate if the both Americans and non-Americans read my story and comment, as that will widen and deepen the image. Let’s begin!

West coast vs. East coast

My image of the West coast vs East coast was generally limited to the popular culture’s impact on me, same as with most people across the globe. Yes, I had a light blue Backstreet Boys t-shirt and Britney Spears’ poster on when I was a child.

Yet I had dealt with both coasts – New York and Los Angeles respectively – in my previous ventures, especially when booking international acts for the live entertainment company I was running before. But that was a very limited, niche look at the both coasts. Another outlook to the West coast, Bay Area specifically, was provided to me through the lens of Stanford University.

The limited and fragmented image of the both coasts took more understandable shapes when I started more frequent travels to the U.S., which grew into longer stays, and finally swung from visiting the U.S. from Europe, to vice-versa in the past year. That provided an opportunity to get to know the United States during different times, starting from the optimistic Barack Obama era, all the way through pandemic, complex geopolitical trembles, and the country’s economic, social and political challenges.

Whenever anyone talks about or refers to the United States as one experience, by generalizing very limited observations, I want to remind that the size of the United States is over 2x the size of the European Union. If you are from, in or have had enough contact with Europe, you will know that different parts of it provide very diverse experience, starting from culture and food to safety, wealth and values. The U.S. is even more stretched than the whole Europe, as it is 5h difference between the main hubs of the West & East coasts, or 7h with Hawaii and Alaska stretching far in the West. So different parts of the U.S. can be literally as different as day and night.

Americans have their biases about the country’s states or cities. While Florida is a home to the bursting Miami and upcoming innovation hotspots as Orlando or Fort Lauderdale, for many Americans, it is still a place to retire. Detroit? Crime, shooting! And cars. And Eminem. Houston? NASA – National Aeronautics and Space Administration (“Houston, we have a problem!”). San Francisco? Hippies and tech billions.

Not having these biases has helped me before when exploring the United Kingdom and developing, first, my clients’ businesses and partnerships, and later on the operations of the group of companies I manage. It has been sometimes funny, sometimes annoying to learn and repeatedly listen to people sharing their biases of different parts of the country.

Hey, but let’s focus back to the United States and the innovation ecosystem hotspots from a European’s lens. I was actually planning to write one article about this, but learned in the process that this is becoming too long and exhaustive, so ended up deciding on series of articles.

On the next article, I will start exploring the West coast. Subscribe to my articles if you have not yet.

Here is the first one: Los Angeles.

While a start-up founder might think that it is so easy for a corporation to innovate and introduce breakthrough innovation that can disrupt industry, a corporate executive would think of an opposite. They both would be wrong and they can be right.

A start-up, or young, innovation driven enterprise, can move efficiently through innovation loops, validate or fail fast, and be agile, while a corporation can use its expertise, financial resources, partnerships and customer-base to develop, roll out or test a solution quickly, and all the necessary tools to push it in the market and sell.

A start-up usually lacks resources, such as time, money, HR, connections, or manufacturing facilities, while a corporation always struggles with its stakeholders and board’s inability to be flexible, agile, test out something that is not yet ready, and be OK with letting that something go, if it does not prove to be viable. Or to allow for a possible disruption of an existent cash-cow.

With these challenges, there come many opportunities. Opportunities to collaborate, innovate jointly, and help the other “party” so that each party’s strengths can cover the other one’s weaknesses.

Let’s take it step by step.

1. Pace

A start-up is always more quick in moving through innovation loops and early stages of the product-market fit validation. A corporate, in most cases, does not have processes in place for that. Same with a start-up. The difference is that the latter does not need to work out the processes across departments and get them approved by many stakeholders, and is not kept accountable for outcomes of the process, in opposition to a corporate’s C-suites, VPs, Directors, Board, tons of employees, shareholders, and more.

2. Expertise

A start-up might have a strong drive and its founders could possess deep knowledge in a specific topic, while lacking all the other technical, product, or business skills required to develop, test, or roll-out a product successfully. A corporation has a wide pool of expertise to pick from within its HR, but might not be that flexible in rotating team members from other, more fundamental departments, especially if just temporary.

Corporations have been trying to solve this by renting and borrowing teams or individual members between departments, making things easier for financial and HR departments, as well as the departments’ leaderships.

Corporations as Bosch have advanced the start-up engagement, and are doing well at involving their inhouse expertise powerhouse to help start-ups further develop their innovation, by allocating dedicated technical, business, legal, and other mentors or even temporary team members to the startups.

3. Humbleness

A start-up is humble. Usually. At least until it becomes over-funded. Being humble is something that a corporation is not meant to be. A start-up can, should and usually does start small, and is keen to admit mistakes, learn and move on. A corporation can’t afford that.

A start-up usually has a minor team of founders and possibly some early employees, and can go out and talk with prospective clients, existing customers, partners, and other parties. A humble experience of learning, passing information and connecting. A corporation’s C-suite has zero-chances of having a humble, open and honest conversation with its product’s end-user, or a minor supply-chain partner, or a competitor’s client.

A corporation has shareholders and other stakeholders to please. And the please is usually big. As Clayton M. Christensen discusses in his book, The Innovator’s Dilemma, when Apple was going through its development and growth phases, it was a big deal for the small Apple Inc. back in 1977, just 1 year after releasing its first product, to release and sell 43 000 units of its Apple II computer. Coming up with Newton, then a groundbreaking innovation, 16 years later and making it to 140 000 items sold, over 3x more than the Apple II success, was a failure for the big, public Apple corporation the company had become.

Start-ups are meant to be humble, corporations are not. Any reasonable management of a large company will see value in leaving the humbleness with start-ups, and engaging in low-key experiments with unpredictable results, while contributing with its resources, whether knowledge, connections, channels, or other, discussed before.

4. Ego

Something that is often unifying to all CEOs, whether behind a large corporation’s wheel, or a start-up team of 3 or 10 people hungry for success. While, according to Fortune magazine’s research , it is becoming extremely popular for the world’s largest companies to look for empathetic, somewhat down to earth, and selfless top management team members, the majority of those with the largest power in the corporate world are the ones endowed with an inflated self-confidence, unwillingness (or legally limited) to admit own mistakes, and incapable of distributing the power equally.

Some level of self-importance is of necessity for the survival of a start-up founder and its top management (in most cases the only) team. For a start-up, there is nothing more in the early days, apart from the big idea, rigid trust in themselves and the vision. Without that, the team would break and the start-up would die at first hardships, first “NOs” or first moves of a potential partner’s power-play.

5. Risk-taking

A corporation does not want a problem. A start-up loves problems. Any corporation wants to avoid problems. Both within itself as well as the outside world. If there is a problem, it means the corporation has to experiment, risk, and stress its staff. For a start-up, a problem means an opportunity to look for a solution, test it out, and try to scale it. When facing an inner problem, a start-up’s team sees it as an opportunity to grow, personally and professionally. A start-up life is a problem – solution path.

A corporation can leave the problem-solving risk-taking with a start-up, while supporting it with its knowledge, market data, connections, and funding. Much less funding than it would require for itself to solve the problem, and with much less risks of losing its face.

There are more similarities and differences to discuss, that make a reasonable fit for the both to work out a joint path, but let’s consider these 5 first. I will appreciate if you comment, add to the list, or oppose. If you are a start-up with an experience of working with a corporation, or vice-versa, I would love to learn your experience. Please reach out or leave your comment below.

As sad as it is. What’s with all the EU funding being thrown into creating or supporting ecosystems to make innovation thrive?

Having immersed in an innovation ecosystem concept and digging deeper daily to understand the phenomena, I can see why.

Tom Nugent at Sifted (https://sifted.eu/articles/15-fastest-growing-university-spinouts-in-europe) lists fastest growing university spinouts in Europe, with the UK and Switzerland taking the whole chart, but it misses an important deal of the story. And the story is on “Why”. What is that making University of Cambridge ETH Zürich King’s College London and likes the European leaders in coming up with innovation that scales into fast growing business?

I have a privilege to learn from some of the most developed and long standing ecosystems across the globe, Silicon Valley where I am engaged with Alchemist Accelerator as its judge and sales coach, and Boston area, where I have committed to a half-year-long run of online and in person programs and workshops at Massachusetts Institute of Technology, on the engagement of Corporates, Policy Makers and Universities in Innovation Ecosystems.

When discussing innovation ecosystem engagement, MIT’s professor Fiona Murray and Dr.Phil Budden set out different founding principles of universities and whether the university is a scientific research or real-world application oriented. While it might seem obvious that a university’s mission and the whole its (team) spirit should go to either innovation or inventions, or fundamental research to clearly communicate to the world its principles, values and reason for existence, that would attract like-minded people from across the globe, the example of the University of Cambridge and the number of high growth spinouts speaks against the hypothesis. U of C is among the world’s leading research institutions generating a large volume of high impact publications and publishing its own academic journals (over 400!). Such universities do not necessarily, or usually, lead the innovation scene for the real world.

Now, let’s have a closer look at the U of C case. Located just an hour’s drive from London, one of the world’s financial, business and innovation growth powerhouses, which leads the innovation and entrepreneurial landscape with all the open data strategy and developed investor and corporate – startup ecosystems, allowing anyone to get involved in solving daily to large problems, U of C has its foot on the ground with the whole world. Being able to attract many of the world’s brightest minds and making its brand speak for itself, the U of C can afford playing in numerous fields, in this case, contribute to the science and allow for some venturing.

If you are that rich (U of C’s annual budget is over 7 billion British pound, seeing revenues over 2 billion (close to $3b), you can afford teams that do both engage with innovation ecosystems AND science magazines & conferences. Holding one of the world’s most powerful databases of knowledge (the university’s libraries hold approximately 16 million books, plus all the online databases) allows for a great deal of knowledge to be used for the sake of future innovation without spending years on background research. After an in-depth research on the U of C, MIT states that the one of the world’s most powerful innovation hubs, the University of Cambridge, generates around 50 billion pound (over $60b) worth of high technology economy around it. That is much more than Estonia’s GDP, or almost equal to Costa Rica’s!

How do you make such an impact, without lots of public funding as it happens in the EU, and being based on an island located off the coast of the continental Europe? Let’s have a look!

1. No EU funding. False. The companies now showing these numbers are still often EU-programs funded. While the UK Brexited a while ago (who knows what is the exact date), it still benefited (and still does in some cases) from ongoing EU programs, and institutions, companies and individuals were able top participate in calls or finish what was confirmed for long-term.
2. Smart use of resources. Understanding that resources are limited and any resource was given by someone or somewhere (natural resources, taxpayers, etc.) make you think of how to apply them in the most efficient way. Governments and regional organizations along with universities and innovation driven enterprises should do best to assess the amount of resources required and how to use them for the desired outcome. The countries hosting universities with the fastest growing innovative enterprises are known for their ability to focus. While an openness to wandering is nice in many cases, keeping one focus helps to use resources efficiently and see outcomes soon enough.
3. Founding principles, or WHY the university exists. Whether the university was founded to

• serve science,
• generate number of people with diploma,
• use national funding to make a university,
• or support societies,
• or fill gaps of what’s necessary for industries,

determines the institution’s and so its ecosystem’s interests, capabilities, strengths and weaknesses. As discussed before, MIT groups all universities in 2: theologically or technologically founded. Universities are trying to balance between the both, and their ability to do so defines their success in both, the high impact publications created and innovation driven enterprises created or supported.

4. Equity ownership. Not all universities are interested in keeping an equity in a spinout. The report (https://www.ifm.eng.cam.ac.uk/research/uci-policy-unit/uci-news/uci-report-on-university-approaches-to-spinout-equity/) by U of C’s UK Policy Evidence Unit for University Commercialisation (UCI) emphasizes the effectiveness of a university keeping an equity in a spinout. The report’s authors have found strong evidence that the ownership motivates universities to further support the enterprise, through its channels, partner networks, and public image.

5. IP rights sharing. It is common for universities and research institutions across Europe to protect IP rights and sell them. How do you think how does the motivation of employees of the research centre differ depending on whether the university keeps full IP rights, share them with employees behind the potential invention, or grant full IP rights to individuals while keeping a stake of an outcome – an innovation driven enterprise coming out of the lab? There is a loud debate on who should keep the ownership of an invention in Europe https://sciencebusiness.net/news/universities-voice-concerns-about-european-innovation-councils-ip-regulations.

5. Process defined. Universities love researching, but do they know how to make money with what has been found or invented? Does a university sell the invention, the information leading to innovation, an IP, or support creation of companies and growing them to a particular stage, at a university’s incubator and further accelerator program?

Or the university does not have any process defined, and each case is just a result of wandering of individuals, and some luck.

Anything else would you add? If you are a part of one or another university among those leading the fastest growing innovation driven spinouts, or your university is not on the list, or if you represent a startup firm that has tried or has successfully collaborated with a university, please share your thoughts.

Our employees get 4h a week to spend on their own ideas

Or, within the corporation, there might be attempts to facilitate hackathons followed by in-house incubators. grow platform, A Bosch Company, Area 120 by Google, SAP.iO Venture Studio by SAP, Ericsson One by Ericsson, InGenius by Nestlé are a few examples.

Internal hackathons – 24h or 48h sprints of brainstorming and trying to put together something that would showcase and help test idea’s potential is another attempt to support or force new business ideas to be born within corporations. Often, with a follow-up support of an internal business accelerator. Meta, parent company for Facebook, Instagram and WhatsApp, is among champions in running internal hackathons and trying to innovate in-house. However, its most successful and long-living products, apart from Facebook itself, were acquired from outside. Meta Platforms, the corporation lead by its founder and CEO Mark Zuckerberg, had enough funds and human resources to experiment and try building its virtual reality and economy, metaverse related products and solutions, even its own digital currency for past few years, but none of this has seen daylight for now, and much of the efforts were frozen or abandoned in 2022-2023 in the wave of the economic slow-down in Silicon Valley and the tech space worldwide.

Facebook has reportedly attempted to invent, train and introduce its AI-powered chatbot, BlenderBot, but pulled it down soon after testing it with first audiences, as the bot tried suggesting silly and sometimes even dangerous ideas to those trying it out. Meanwhile, Microsoft teamed up with ChatGPT AI, an AI chatbot created by a startup OpenAI, and while it is not perfect, this has become the biggest and loudest attempt to introduce AI to wider audiences, forcing Microsoft’s stock price to pleasant heights.

Corporate accelerator, formed to host ideas born within a corporation, or the internal business accelerator, is among other attempts to drive innovation and its commercialization in-house. Why wouldn’t it? A corporation has seemingly everything it takes: connections, human and financial resources, market intel, equipment, even distribution, marketing and sales channels. All that most start-ups do not possess and spend hours, days, and even years trying to obtain for their growth.

In most cases, what all those attempts are missing is passion, combined with the right deep knowledge, or the totally opposite – the lack of a specific knowledge that would make abandon the idea too soon (“I know it will not work”) or that would have encouraged for wandering that allows for coincidences to take place (as Will Smith puts it in his book, Will, don’t block the Universe!), too narrow focus forbidding from seeing a use-case for an innovation outside of the corporation’s scope.

Start-up is naive, 

its founders have some knowledge, in many cases, especially with more experienced co-founders in their mid- or late careers, the knowledge is very deep in a specific topic but limited in everything else, or it is solely a combination of tech knowledge which allows to experiment and build something that might work, or a scientific knowledge powered with limited lab facilities, to transform the written knowledge and findings into an MVP. Start-up has nothing to loose except its founders’ time and some money, or larger money meant for wandering and taking risks, and hopefully achieving what’s been ideated and conceptualized.

Start-up is flexible. 

It does not have one corporate stakeholder to be responsible to (except for a founder’s wife or partner), it does not have a 4-hour per day limit to work on the idea, instead giving all the time in the world someone can crave out of a night sleep or weekend.

Start-up is fast. 

It does not have to wait for a quarterly meeting of a board or a bi-annual open-door day with a corporation’s CEO to present an idea of a pivot. It does not have to book in hours or days of the corporation’s engineers months in advance to work on some R&D tasks. Instead, a start-up might not have engineers at all. Or it is formed of engineers only.

Start-up can. 

No matter how, it can. Whenever you ask if the start-up can deliver what you are asking, you get a yes. And then the team figures out, how. Or does not figure out and fail. But it can, always.

Start-up is entitled to say no. 

It is not accountable to its parent corporation to deliver a specific solution to a specific need it has promised, or to go in the direction it align to. If something might not be for good for a start-up, its mission and call, and founders see it, they will say no. They will keep the mission and reason saint. They will be able to focus. And pivot.

Start-up has a mission and reason. 

If it does not, it dies. The reason is not 4 hours a day provided to employees by the corporation to wander and try build something that would increase the corporation’s stock price, or improve its public image. 

Unilever‘s former CEO, Alan Jope once said if its brand does not have a mission and stance, it might be about time for it to go (as per Bloomberg Businessweek, If a “brand can’t find its purpose,” he’d consider putting it on the chopping block). 

At the same time, same Unilever has gotten in too many arguments with the brand and company it acquired years ago, Ben & Jerry’s, leading to the brand suing its owner, and the owner forcing the brand for its products to be sold in specific markets (Israel, after withdrawing following to its geopolitical and social stance), or even its somewhat limited brand-name along with a recipe being sold to another firm to work as a separate company, without the brand board’s confirmation.

In the book Creativity, Inc., Edwin C. (Ed Catmull), Pixar Animation Studios co-founder and President at Walt Disney Animation Studios, carries readers all the way to the Steve Jobs building in Emeryville CA where its first HQ was based, and introduces to Pixar’s early environment. Its founders and first employees, a computer scientist, an animator, an entrepreneur among them, all young souls, were seeking their way to make feature animation movies, and put their everything in the early projects. 

As years passed and Pixar grew bigger, it had to reimagine its creative process. It faced what all start-ups turned large firms to become corporations face. It was everything that kills creativity, willingness to take risks, try out, pivot, and move forward. There were annual and long-term plans in place, budgets, forecasts, HR planning, production pipelines. All that a normal company has in place so its C-execs, investors, co-owners, and partners, as well as VPs, Managers and teams can plan and act accordingly. Everything that almost made Pixar’s creativity fade away forever. As per Ed’s story, the company managed to save it from loosing its image, its reason and mission, but we can see today that Pixar is a part of Walt Disney’s Corporation, working hand-in-hand with its parent company on its projects, along with its somewhat independent projects.

Ok, you got it. If you believe the thirst of start-up founders is something you can not or do not want attempt to replicate, it is obvious that to introduce a possibly viable innovation, you might want to get strategically engaged with a start-up.

How would you engage with a start-up?

The options a corporation has include fully or partially acquiring, investing, creating a joint venture, or establishing another strategic partnership, as joint-selling, or develop or become a part of a B2B2B or B2B2C chain involving the start-up.

Full or partial acquisition of a start-up

First, to be bold, this is something start-ups do not seek. Start-ups are created to scale. A start-up founder’s dream is to grow a unicorn (over 1 billion worth firm) and then sell or bring it public. The founder’s mission is to change the world. It is not to build a product and sell it off. But things happen.

Large corporates tend to speak with start-ups from their giant power positions.

We own the market, we know the audience, we own supply chains, data. We have 100 year experience. You can go with us or risk vanishing in a year or two. 

Show your cash-flow! Right, you don’t have one!? 

What’s your runway? Oh, you don’t know or don’t want to tell? 

O.K., let’s speak in a few months (when your company will be dying and you’ll be starving).

Start-up founders hate that. Start-up founders are brave, proud (of what they’ve built and can achieve in future) and dreamy. Some or many of them would better close down than sell to someone squeezing their egos. Some of them just left similar corporation or exited another unicorn, and don’t buy in to tricks. Some of them don’t recognize the trick but would (almost) never consider the idea of selling the young firm or its shares. They would sell shares to VCs, and VCs do not enjoy having a corporate share-holder with its own interests (see the story on Ben & Jerry’s v. Unilever above).

The idea is clear. If a corporation wants to acquire a young tech firm, it has to make it clear for its founders and management that they are and will be respected and valued, and make the offer attractive enough to help or make give up individual dreams and be willing to make sacrifices for the firm’s good.

As an example, Facebook, now Meta, acquired Instagram over 10 years ago. The transaction was a combination of the company’s growth support plan offer, cash and Facebook’s shares, along with keeping Instagram’s management and even involving it in Facebook’s management.

Investment in a start-up

A corporation willing to engage with a start-up and participate in its success can invest in it rather than acquiring part or the whole of it. What is the difference between investing and acquiring a portion of it? Not much in terms of a transaction. One party sells a part of the company to another party.

Everything else is what differs. Investment means believing in a firm, its dreams, goals, plans, and intended path, not just getting it or its assets. An attempt to set valuation is also unlike. In one case, it is assets, cash-flow, revenues, income, customer base, and intellectual property that sets value. In another, investment scenario, especially in early stages of a start-up, it is everything else. The team, the promise, the dream, the potential. 

As an investor, a corporation can chip in funds meant for start-up’s future growth or a product advancement, along with helping to test what’s been built or starting to scale. The investor has a clear exit plan, as well as possible further considerations of a follow-up investment in future rounds, to increase its presence and further support the firm.

Investing in a start-up does not exclude possible future acquisition. Investing and getting to know the firm and vice versa will allow for both parties to consider future transaction based on trust being built, or destroying any trust that might have appeared, along with any joint future plans. It is easier to split in an investor – start-up relationship through future rounds, buyback (rarely), or management buyout of the shares owned by the corporate investor.

In a deal announced by Microsoft & OpenAI in January 2023, it is hard to distinguish whether the follow-up injection of funds from the internet giant Microsoft in the fast-growing firm owning Chat GPT was an investment or a partial acquisition. While the both companies communicate clearly this as an investment, buying a noteworthy amount of shares in a company for some ten billion dollar and integrating the young firm’s product in all the main Microsoft solutions is not a usual investment example.

Forming a joint-venture with a start-up

Bidding on a start-up is never 100% safe. Setting up and announcing a joint-venture to develop and introduce a new product is a commitment a corporation should consider twice. While bidding with just cash, by investing or acquiring a company, is a significant move, and especially an acquisition requires significant additional resources, to transition the firm to becoming a part of the corporation, a joint-venture is what requires from the corporation high levels of trust and excitement about what the young technology firm has achieved, and what both can create and achieve together.

Though any big-enough acquisition or investment (but why to invest or acquire something insignificant) can impact the corporation’s stance, stock price, and long-term relationship with its shareholders and directors, it is a joint-venture that can leave a mark on these factors the most.

What if the start-up runs out of money?

What if the young firm’s solution does not work?

What if the founding team of the technology firm decide to give up and do something else?

Is everyone 100% committed and willing to work together for the joint-venture, without looking for other pivotal paths for one party’s possible good?

These are all questions the corporation’s C-suites could be asking themselves and their directors and managers when evaluating the possible venture. Along with reconsidering its own human resources and market readiness for a possible ground-breaking product offering of the venture.

JOANN Stores – large handicraft equipment and accessories retailer in North America, and SVP Worldwide, brand owner and manufacturer of Singer, Husquarna Viking and Pfaff sewing machines entered into a partnership in 2022, to introduce a sewing machine with a built-in projector and sewing pattern customization app. JOANN brought in the deal young technology firm, Tailornova, which it had partially acquired, to develop the app. JOANN – a strong retailer, SVP Worldwide – an acknowledged hardware manufacturer, and Tailornova – a promising software developer. Ditto launched in early 2023, after a repeated change of management in the venture and product development challenges seemingly overcome. Jo-Ann, which had become publicly traded company by that time, saw no positive impact on its stock price on the day of the launch or after it, instead significantly losing its value from 4.6200 in Feb 2, to 3.500 by Feb 14, with a further drop in its price for another month.

A joint-venture can be a huge opportunity but also a trap. A joint-venture involving various parties should be well-considered, taking into account existing supply chains and sales channels, market readiness and opportunity, human and capital capabilities, partner risks, and any impact on to existing business relationships.

Entering in a sales or marketing partnership with a start-up

Joint-selling, co-selling, joint-marketing and other ways to introduce start-up’s offering to the corporation’s client base can be a cautious way of testing out the product and its market fit, possible closer partnership between the two parties, and the capacity of the team and technology.

Such a partnership can become a standalone activity of a corporation to work with a start-up, without any future plans to capture the young firm, too. Adding another revenue stream without much of risk (joint and co-selling), showing its customer base the corporation is innovative and open enough, helping its customers by suggesting (co-marketing) them a product or solution that fits their needs might turn into something bigger in future, but can be totally enough to start.

In some cases, a large corporation can not be flexible and fast enough to be able to engage with a promising, young tech-firm in any other way, even if its top management wants that. The larger the corporation, the more stake-holders are there to get sign on before the management can make and confirm decisions on an acquisition, investment, or a joint-venture. Starting to work with a firm is something that allows to keep the desired company around, help it thrive, and let the corporation’s decision-makers see and believe in the probability of the success of the possible future deal.

For a technology firm just initiating its business development, such a partnership can become a game-changer, opening for large groups of its target audience and providing a source for product feedback, cash-flow, data, and encouragement for further growth.

Mimi Hearing Technologies, Germany headquartered innovative firm scaling and advancing its technology to improve one’s detailed hearing from various smart devices without increasing volume, partnered up with Philips to include the technology in the latter’s smart TVs. The Dutch home appliances maker does not purchase from Mimi. Instead, as soon as the technology is activated on the device by the device’s user, Mimi is entitled to an agreed fee.

Similarly, car-makers can partner up with technology providers for vehicles, especially nowadays, when BMW Group, Toyota Motor Corporation, Tesla, Volkswagen AG and other automotive companies have started switching from “what you purchase is what you get” to “when you pay is what you get”, meaning, your car might have back-seat heating included technically, but it would work only if you start subscribe for this comfort feature.

Product companies are becoming platforms enabling for innovators to sell through them. Service companies have enabled such an opportunity for long.

Large money and effort are put into enabling, boosting, and supporting innovation within corporations and making the ideas thrive and see the daylight. The reasons are obvious. Control, rights, demand, necessity, and resources speak for themselves. It seems much easier to build something in-house than try to acquire from outside. Still, as with many good things in this world, it is very hard to replicate something that happens naturally in uncontrolled and unforced environment. It is the openness, readiness to collaborate, and preparedness that defines whether the corporation will succeed in introducing the innovation to a corporation’s future growth, regardless of the source. 

In further stories dedicated to corporates working with start-ups, we are going to discuss more in detail on

1. How partnerships between corporations, large companies and young innovative firms can work.
2. What’s next after starting to work with a young technology firm.
3. How to connect with start-ups.
4. How to assess and determine the best way of working together, and whether it is a good idea at all.
5. How to negotiate a future deal between a corporation and a young technology firm.