4 things to know before partnering with a big company

By Sean Adler, CEO of GZI. He is a mentor at the Founder Institute and an expert on major networks such as GLG, Guidepoint and AlphaSights.

Corporate innovation can boost the growth of your startup. A large company can take on the role of many smaller private counterparts like private equity firms, venture capital firms, and startups if you find the right business partners. It is important to keep in mind the structure, scale, timeframe and role of each respective company if the goal is mutual benefit. Here are the ins and outs of navigating through vertical and horizontal relationships with the black and white knights of the corporate world.

Management structure

The management structure is very different from startups. Instead of dealing with a few key people who can move quickly through the system, you'll likely be funneled into multiple departments. The larger the company, the more infrastructure is needed to keep operations running smoothly. Small businesses are more agile and can pivot without having to run operations through multiple departments with segmented management.

In this case, the big business is the facilitator and the small business is the orchestrator. Smartly negotiated revenue-sharing agreements between large and small companies can increase the margins of the enabling company while the organizing company drives growth. A large enterprise infrastructure gives small businesses a myriad of integration options that don't exist otherwise.

Startups are also reversing traditional management hierarchies within large corporations. There is no need to take something and pass it between multiple departments. This creates a different type of management dynamic within Fortune 500 companies since agile companies are now associated with large departments within a given organization. When you take a company accustomed to lean operations and pair it with a large corporation, it can create true hypergrowth in ways that traditional private investors can only imagine.

Scale and Risk

Corporate gods can do everything private investors can do and more; it's just a more complex process. Mergers, acquisitions and divestitures are the preferred finish line for startup investors. Since scaling laws demonstrate decreasing growth at large sizes but work in favor of small businesses, partnering with big business is both a fresh start and a sign of the finish line. Large public companies are accustomed to more steady growth over longer periods. This creates mutually beneficial engagement when you combine this with the explosive growth of startups.

Venture capital partnerships are very competitive in private equity, but less risky for large companies that do not depend on limited partnership agreements. This presents you and your team with a golden opportunity if your business reaches a seven-figure valuation, as startup teams running them are highly coveted and larger companies are less familiar with the go-live process. scale.

Companies hire specialists for individual departments within a defined hierarchy. Startup founders are often good at several overlapping areas, but tend to operate from a single specialty at first. This can have a dramatic effect on C-suite management in large companies with traditional hierarchies, as young companies tend to have flatter hierarchies. Onboarding founders who are used to jumping between domains can drive innovation across multiple departments with less effort.

Timeline Variety

Business innovation exists to create a symbiotic relationship by lending existing resources to startups that can develop a new product in a different way. Startups are used to working with shorter deadlines structured on an annual or bi-annual scale. Large companies have an existing budget and market, which makes them accustomed to less agile deadlines. Combining the high-risk profile of a startup with that of larger, more conservative companies balances scale, allowing the two to scale in tandem. For example, blockchain was used in small tech startups long before the corporate world embraced it, and alternative data is beginning to emerge as a similar development.

Comparing the life cycle of a startup to that of a large company is like comparing the human...