Expert talk about cooperation between start-ups and SMEs
In today’s expert talk, everything revolves around cooperation between start-ups and small and medium-sized companies. Attorney Carsten Lexa from Würzburg is available for information. He specialises in company law, so he is familiar with the legal design of cooperations and contracts between companies and start-ups. Also represented is Christoph Baier, from the innovation consultancy Ambivation, which specialises in how to bring start-ups and medium-sized companies together in an optimal way. The two experts will answer the moderator Christian Erxleben all questions regarding cooperations, their challenges and advantages.
Christoph, you have specialized in the matchmaking of SMEs and start-ups. What exactly can we imagine this to be?
Christoph: It’s about looking at what needs there are in the company and which start-ups there could be accordingly. The challenge is to establish contacts that fit as closely as possible. This is basically the task, but not to be underestimated is how important it is to create a corresponding sensitization in advance. After all, companies and start-ups often don’t get along with each other naturally, as they differ greatly in their culture and working methods and are often separated from each other. Therefore it is important to first bring both parties together and build a bridge. We show how the start-ups work and how the companies work – from the moment you understand each other, you can work well together. After matchmaking, collaboration management is often important, because the path of cooperation can contain some barriers and pitfalls that need to be overcome.
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Now you have already pointed out a few problems that could arise in a cooperation between SMEs and start-ups. Can you give a few concrete examples?
Christoph: A typical theme is cultural difference. You can’t understand each other and can’t understand why the other partner works completely differently. For example, start-ups use a lot of Anglicisms, which is less common in medium-sized companies. On the other hand, expectation management is extremely important. Young founders often have great visions, but have not always clearly defined what expectations they can meet. Medium-sized companies, on the other hand, usually require commitment and concrete expectation management, which holds the potential for conflict. But I think one of the biggest challenges is to find the right partners. Support through Startup scouting, for example, can be useful here.
Carsten, what is the legal situation, what are the challenges and advantages of cooperation and what should be considered?
Carsten: Both parties have good qualities. SMEs have structures, a certain name, and knowledge in sales and marketing. They may also have experience of what works and what doesn’t in a certain market with a certain product. This is often what start-ups lack. But they bring other advantages, flat hierarchies, direct contact and enormous enthusiasm, so very positive. The challenge now is to bring the two together, to match them in a way that is mutually beneficial. Legally speaking, it is often the case that start-ups are very relaxed about this. The contracts of the small and medium-sized companies are therefore signed in a relaxed manner. If there are problems in the cooperation and the medium-sized companies refer to the contracts, the startups are not so relaxed anymore. These are challenges that have to be brought together so that both are on the same level of understanding. As Christoph has already mentioned, the matching must be interlocked in such a way that there are common benefits for both.
What is the optimum case in the drafting of contracts and what are the most important points I have to pay attention to?
Carsten: First, the expectations of both parties should be defined. That sounds succinct, but in reality it is not always as clear as one thinks. It is also important to agree on what happens when positive successes such as money or contacts are achieved and to whom they belong. And of course – how do you release yourself from a contract if the cooperation does not work in practice? Which termination options are there, or are there automatic exit clauses, milestone regulations? There is much more, but these are already some important points.
If a cooperation is about to start, how do I find out on the one hand my expectations as a founder, but also on the other hand my expectations as a medium-sized company?
Carsten: I can only say something about this from a legal point of view, from a business point of view Christoph can advise best. I would actually look at what the mindset and expectations are like, and really go into this in depth. I would not formulate anything approximate, but really sit down, perhaps even with a consultant like Christoph, and work out a concrete concept that can be presented to the contractual partner afterwards. That way, they can determine whether they can provide the desired service. This is important, because legally, in the event of a dispute, a judge is guided by what both parties have agreed. If there is no agreement, jurisdiction is of course difficult. Christoph, maybe you can shed some light on this topic from a business perspective!
Christoph, what does a roadmap for cooperation look like from a business perspective?
Christoph: Carsten has already presented this ideally, the first step is always to start with the need. That means the company must know what it wants to do and do its homework, so to speak. Sometimes we also support the identification of needs, which can also be a process. Especially in the field of new technologies, expectations are often high, but nobody has yet dealt with the details of how to achieve them, or there is a lack of expertise.
Once the need is defined, you start looking at who could support the company. For many topics, however, start-ups can play a major role, but they are not always the right people to contact. For some topics it may also be right to work with established management consultancies or large corporations. If the choice should fall on startups, one looks which potential partners there are. As soon as you have a rough selection, you have to evaluate them, reduce them to a manageable number and look at which are the most suitable start-ups based on the criteria defined in advance. This is not only about which startup is technologically the “best”, but often also about cooperation or language barriers. When getting to know each other, it is then important to get involved with each other, to see if you personally fit together and to understand the mutual situations.
The next step is typically to start with a pilot project. Before that it is important, as Carsten has already said, to define how the cooperation is to proceed and who will receive the results. Often a lot changes in the process, but you already have a first version on which you can work together. This results in a pilot project that typically takes three to six months. If this works well, the win-win that you have achieved in the collaboration can be concretized, finalized and used to build a good long-term collaboration. Unfortunately, it also happens that the business added value is not as great as one would have hoped, or the technologies are not mature enough, and then there is no long-term cooperation. The pilot phase therefore helps to reduce the risk for both sides a little.
Now you’ve already mentioned the risks. To come back to the advantages, can you give us an example of a successful cooperation?
Christoph: In medium-sized companies, the cooperations, which are public, are relatively manageable and are not communicated in such detail. This is something where medium-sized companies could still learn. A company from Baden-Württemberg is cooperating with the start-up company Robotic Eyes from Austria. The construction manufacturer was looking for a solution that would show the craftsman on the construction site how to install the product correctly and thus make fewer mistakes. The startup has now developed an augmented reality solution that uses a camera to detect whether the product is being installed correctly or not, and also how much the worker is allowed to deviate before a potential error occurs. This is a very simple solution, but at the same time it ensures the quality of the installation. At the digitalBAU in Cologne I could personally see that this convenient tool works perfectly. This is, for example, what successful cooperation looks like.
In three sentences, what is the one point you have to pay attention to in a collaboration between startups and companies?
Christoph: From my point of view, the most important thing is good expectation management, and understanding the partner in order to really understand what a win-win situation can look like. These two things together are the key tasks, but they are also not easy, because you really have to put yourself in your partner’s shoes to learn about him and his goals.
Carsten: With this Christoph has already anticipated an important point. Of course, contracts are important. Another important point, which is often overlooked in practice, is that it must fit humanly. The expectations are often different, which is often made even more difficult by the different types of people. To go into this again, to look how and why my partner acts, is extremely important in the context of cooperation. My answer from my lawyer is therefore that contracts are important, but in practice it means: pay attention to people. If it fits there, then you have a good basis to make the cooperation a success.
Link to Ambivation: https://ambivation.com/
Link to Basic Thinking: https://www.basicthinking.de
Link to Kanzlei Lexa: http://www.kanzlei-lexa.de
About Ambivation
Ambivation connects innovative companies and startups for cooperation and innovation partnerships. As an innovation consultancy and matchmaker, Ambivation promotes cooperation between established companies and startups within the framework of concrete customer, supplier and research partnerships. We support companies in the identification of needs, startup identification, startup evaluation and cooperation initiation with startups. Formats such as research on relevant startups, startup monitoring, strategic cooperation consulting or event formats such as startup tours serve this purpose. Our monthly newsletter also provides information on current examples of cooperation and events.
