Our CEO Lenz Hartung had an interview with cdf about accelerators, startup – corporate collaborations, and how businesses can overcome the current situation. Have a look at the interview below.
Our CEO in interview with cdf
I am Lenz and I am the founder of PEAKZONE. PEAKZONE is a startup accelerator based in Munich. We invest up to €300k and help the startup with operational and strategic support.
Can you tell us the difference between regular accelerators and corporate accelerators?
The first accelerators arose around 2005 in the US. They were built by successful entrepreneurs who knew how to build a business and wanted to give this knowledge back to new startups. They helped startups to grow fast and in return participated when a startup was successful.
In Germany, the first accelerators started around 2010 and, in contrast to the US, were often funded by corporates. We now have over 170 corporate accelerators and only a few independent accelerators. The biggest difference is that corporate accelerators are financed by the corporate and do not rely on an exit of the startups. Most of the corporate accelerators do not even take equity. The corporate accelerator is not seen as a profit center but rather as a cost center through which companies want to innovate.
When should corporates decide to work with a startup instead of solving a problem by themselves?
This is a tough question and must be answered case by case. It depends on the context, resources, and experience of the corporate. We see that digital business models and new technologies are often developed earlier by startups. We talked to several corporates and startups and our research shows that it is three times faster and ten times more cost-efficient if a corporate decides to have a technology developed by a startup than in-house.
What should corporates change when working with startups? What are the biggest mistakes of corporates and startups when they work together?
Corporates should decide upon the entire process and think about which internal stakeholders are involved. It is easy to identify startups and to run proof-of-concepts (PoCs) with them. However, it is more difficult to adopt the solutions after a pilot project and to utilize the benefits. Corporates often only think about PoCs and not about what happens afterwards which then leads to questions about the budget and responsibilities. If you stop after the PoC, you only create marginal benefits for your organization, therefore you have to create a process that includes the adoption after the PoC. To do so, you need attention from the top management and need to allocate clear responsibilities.
During the collaboration and development process, corporates should also be open for some workarounds and should be able to increase the budget if needed.
What advice would you give startups when working together with corporates? How can startups impress corporates?
First of all, startups have to identify the right person to talk to. They need to talk to the decision maker who can free the budget. It is also important to understand the internal processes of the corporate and the stakeholder that are involved in the decision-making process. We often see that startups should rather approach the business unit directly than the innovation department because the budget moves from the innovation department to the business unit which creates a barrier.
Besides this, startups also need more patience and need to act more professional than what they know from the startup environment. It is not a good approach to reach out to the corporate every day and to check if they received your email and have already made a decision. You should be patient but also be in charge of the process at the same time to guide the corporate to the next step.
Can you tell us about a situation where a startup-corporate collaboration almost failed but the founders managed to turn the situation around? What did they do?
Unfortunately, I do not have this kind of story where a project almost failed but in the end the founders were able to turn it around or used a great hack which other startups can apply.
In my experience, the collaboration normally works well on the operational level but the question arises what happens after the pilot project. At my first accelerator, we had a follow-up rate of 52% on the pilot projects but only a handful of these made it into long lasting relationships with the corporate. From my point of view, this is not dependent on the quality of the startups but rather with the processes and budget of the corporate as corporates often do not think about the role of the startup after the pilot project.
How can startups best approach corporates in the current situation?
Linkedin usually works very well. The people can see whom they are talking to and the history of this person. They can see where you worked, if you have industry experience and also which university you went to. It can really convince a corporate to talk to you. You can use LinkedIn also for your research and identify the right contact person and approach him directly. You will probably get an answer faster and will be able to have a quick call with them where you pitch your idea. From that moment onwards, you should try to set up a personal meeting at their office.
How do you mentor startups? Can you tell us one example from your past experiences?
We typically take several weeks to get to know the startups and to do our due diligence before we allow them to enter our program. We take a look at the team, technology, market and competition. Afterwards, we have an online test for the founders through which we assess their leadership skills. Based on this, we can already identify the strength of the team members but also red flags. We then invite the startups to our office and make a personal assessment which takes between 2 to 4 hours. Afterwards, we already know how the startup behaves in real life and what are potential pitfalls and challenges for the startup.
Based on this assessment, we know where the startups need help and how we should mentor them. We also check if they need support in sales, recruiting, marketing and product development. From that, we define OKRs and 90-days rocks and have weekly sessions and deep dives with the startup to work on their problem areas. We also support the startup on the operational level e.g. we help them finding and recruiting the right people or getting sales meetings with decision makers. We also support them in fundraising and investor relations.
What advice would you give to startups during the current situation?
First of all, startups should keep their budget under control. It will be hard to fundraise in the current situation, so they need to save money to survive and run their business. In terms of sales, startups should focus on existing customers, and try to retain them. They can also try to upsell their services to compensate for potential revenue drops. Besides this, focusing on improving the product and preparing content marketing makes sense to build their brand.