There is something brewing in the way corporations interact with new technologies. Rather than pour millions of dollars innovating through internal R&D departments, corporations are putting their R&D efforts on the market and discovering new technologies through acquisition, investment in startups, and participation in accelerator programs like Y-Combinator and Plug and Play.
When a corporation, an accelerator, and a startup company work together, something amazing happens – EVERYBODY wins. To understand how this is possible, we need to look at what quality corporations, accelerators, and startups are looking for. Let’s start with corporations.
Good corporations have great management, right? From the CEO down to the customer-facing representatives, every process is planned and executed with precision. In other words, they are logistical geniuses. But operating at such a large scale comes with a cost – process makes it very difficult to act nimbly. Corporations struggle to innovate simply because they cannot test enough new ideas in real life situations. What they need is stake in a laboratory where 1,000 slightly different ideas run by 1,000 slightly different teams can all try their hand in the market. Instead of spreading thin their R&D investments, they could devote larger amounts to the most promising “experiments” after seeing what actually works.
Good startups have great products, right? They’ve isolated real world problems and discovered novel solutions. They’ve tested their products in small circles and iterated based on user feedback. But remaining nimble means breaking a lot of the process rules that large operations require to stay afloat. As startups’ businesses grow, they struggle with large scale operations. It’s one of the differences I see between startups and corporations – a corporation generally has to survive on revenue from its customers, whereas a startup can go for years on raised money if they show exciting growth potential or the possibility of massive market penetration. The kind of inefficient processes that could squeeze the narrow competitive margins that corporations make can go unnoticed at startups.
Accelerators need their investments to succeed. At the end of the day, Plug and Play invests in startup companies. Everything we do is designed to further our value as investors. Though the cash is helpful, our real value comes in connecting our 250 portfolio companies with our 150 or so corporate partners. We do this through a number of ways – we have two Venture divisions committed to sourcing, reviewing, interviewing, and vetting over 3,000 startups every year. Our complimentary Corporate division develops relationships with corporate partners then acts as an evangelist for the needs of those partners, constantly checking in with the new prospects from the Ventures department. When a strong startup is solving a problem that a Corporate Partner has expressed, an introduction is made. We held over 200 of these meetings last year. We also host over 300 networking events per year, giving all parties a place to mingle and network.
Here’s where it all comes together. We review thousands of startups to find the diamonds in the rough. Corporations spend a fraction of their R&D budgets to have our entire team researching and vetting startups for them. Startups piggy back from our office space, network, and funding. When a mutual fit is found, the three of us get into a room together – the company gets first access to cutting edge technology, the startup gets access to potential business, licensing, or acquisition partners, and Plug and Play’s portfolio gets stronger.
Plug and Play holds a quarterly pitch competition where our best portfolio startups, accelerator candidates, and international startups pitch to a room full of our corporate and investor partners. It’s a rapid, fast-paced version of the business as usual that goes on in these halls and if you’ve never been it’s one hell of a show. The best part is, it’s happening tomorrow, Thursday, March 27. Details and registration can be found here.
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