The importance of service providers in corporate venturing

Diario del capitán, fecha estelar d166.y38/AB

Business Corporate Venturing Startups VC
Àlex Rodríguez Bacardit
Fundador & CEO
The importance of service providers in corporate venturing

Last week, at a CTecno roundtable I was invited to present and moderate, I spoke up for the role of service providers in Corporate Venturing and how we can be a very powerful partner for both startups and corporates. Why? Keep reading!

For the uninitiated, Corporate Venturing is a practice whereby big companies and corporations invest in smaller ones, often statups.

Corporate Venturing happens for many different reasons: some want to diversify their portfolio, some want to foster innovation outside of their own company (looking at potential future acquisitions, mergers or partnerships), while others just want to invest in the companies that might disrupt them and drive them out of business in the future.

There's a correlation, backed by big studies like the Atomico and/or Startup Genome global ecosystem reports, between the level of maturity of a given startup ecosystem, and the number of operations in corporate venturing. Corporate venture investment climbs higher throughout 2018, as reported by Techcrunch and Crunchbase, recently.

Whatever the reason for a big company to go into corporate venturing, I am convinced that service providers play a big role in such relationships.

We, technology consultancies, dev shops, lawyers, marketing agencies and so on, can become a strong partner to both sides, corporates and startups, because of the following reasons:

1. We bridge both worlds

Most service providers work for very different clients. In our case, we both for big corporates and startups alike, from multinationals to companies with only a couple of employees. Likewise, lawyers get to review IP documents and partner agreements for newly-founded startups.

Throughout the years, most service providers build a network of past clients, providers and partners they can revert back to when needed. For instance, even though we've never worked directly with Atomico, we have a very good relationship with them through our Startup Grind events, and we send some interesting deals their way.

Investing in good relationships in the industry is key, especially when you work for third parties, and that is a big part of my job at MarsBased.

Moreover, we see often the case of big corporates wanting to venture into the startup world. If it's their first time, they're absolutely clueless and don't know how to operate, so they rely on well-known actors in the industry, like the leaders of communities or the so-called "connectors".

The same happens for first-time entrepreneurs. When it comes the time of scaling up and talking to corporates and big players, they have no connections to them.

That's where we come in: we're an open door to both industries. By talking to and working with and for both worlds, we make cross-pollination happen.

Last, but not least, a good partner will help with introductions provided they bring value to both sides.

2. We see the future

The startups of tomorrow come to us to cost up their ideas or to speed up their development pace. Since their resources are limited, in both time and money, they often require external help.

Service providers, therefore, can thus benchmark the market and see what will trend in 6-18 months from now. We know for a fact that only a few of these startups will survive, and even fewer will make it big, but that's good enough to create a trend in the industry.

These trends will elicit interest from investors, who will then propel the whole movement even further, and if the right conditions are met, this will create a boom in the market.

For instance, circa two years ago, half a dozen companies in the last-mile delivery industry came to us in the span of six months to ask for quotations. Now, the scene of last-mile delivery is thriving, and some of these companies have received significant funding.

The same thing happened with fintech five years ago. We're now seeing it with the eHealth/wellness industry, proptech and insurtech.

Therefore, corporates should rely on their providers to share their insights of what's going on in the startup industry. Conversely, startups should regularly ask their providers what are the corporates they work with interested in or looking at.

3. We build the new companies

While I can't speak for every development agency out there, nor any service provider for that matter, I can say that the stuff we build at MarsBased is solid & scalable. I have absolutely no worries whatsoever about the technical soundness of the products we develop for our clients.

However, that's not always the case.

I'm impressed at how VCs and investors invest in flaky/unproven technologies or stuff that's been built by real amateurs. By talking to VCs and investors alike, I am disheartened by the fact that almost no one out there audits the companies they invest in by inspecting their code and architecture.

In a couple of occasions, we have worked for companies that received big amounts of funding but their product was nonexistant or partially simulated. In other occasions, we've audited code that was a total mess and would be problematic in the near future.

Part of our job is to deal with that mess and to fix it, but the real question is would the investor have invested in the project had he/she known this?

"Will it scale?", most investors will ask. And most likely that company can scale, but how many times will it break in the process?

Investors should take a look at who built the product, as it in some cases will be better taken care of than in-house.

Àlex Rodríguez Bacardit at the CTecno roundtable about Corporate Venturing
At the CTecno roundtable about Corporate Venturing, with Mobile World Capital, Schibsted, Worldcoo and Ship2B

4. We bring trust

Even though we're a 100%-bootstrapped company, we get along really well with investors. We have developed a good relationship with some of them, and we invite them to our events as VIPs or even as guest speakers to learn from them.

It is a well-known fact that most investors aren't precisely tech-savvy. These ones, however, always have someone they can trust to help them to compensate for this lack of knowledge of this field.

Some investors will only invest if we’ve developed the project or if we’re invested into the project in some capacity either through investing, advising, having a partnership or being active mentors.

Startups, on the other hand, can leverage this to attract bigger & better investors: "hey, Mr. Investor, I have developed this with the help of MarsBased, please give me your money". In fact, we always allow startups to include us in their pitch decks if they think this will increase their success in fundraising.

We're happy to say that some of our favourite investors have invested in our startup clients partly because they know that we have developed the whole thing, or a big chunk of it.

In a nutshell, service providers can help to reduce the risk for investors knowing that, in our case, the tech part is in good hands.

5. We're an active scout

We can be a pair of extra eyes in the market, for both startups and corporates.

Every company receives new opportunities on a daily basis: new meetings, contacts, or even sales pitches. While some might be good for your own company, others might only be useful for one of your clients.

Because of the visibility we have in Barcelona, as one of the most active actors in the tech & startup scenes, we are contacted by all sorts of companies and initiatives. Sometimes, we just need to do the matching.

We become ambassadors of the people we work with. We're always on the lookout for new opportunities to help our clients (investment, press, exposure in events, M&A, etc.) and send deals to our favourite VCs/investors.

For instance, Schibsted contacted us to be their scout for new startups. We have got many new interesting startups in the Startup Grind community, and we will introduce them to Schibsted if we think they're a right match for them.

Another example: we've recently gotten a lot of press because of the big events we organise. That allowed us to become friends with some journalists, who are always willing to tell a good story, and will take intros to some of our clients, provided the latter have got a good story to tell or a big announcement coming up.

To sum up, a service provider can be a great partner for both corporates and startups because:

If the points above sound right to you, and you're looking for a technological partner for your company, let us know. We've collaborated with and worked for companies like CaixaBank, Schibsted, Generalitat de Catalunya, Atomico, 500Startups and Ajuntament de Barcelona, among others.

Let's take the first steps together, get in touch with us!

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