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Moon Memos

Should large corporates invest in startups?

By February 25, 2021No Comments

According to Get2Growth, it is estimated that approximately 305 million startups are created each year, of which 1.35 million are based within the tech sector. To fuel their growth and conquer the market, startups need companies’ venture capital. In recent years, investments in startups have been a fundamental part of large corporates’ business strategy as they allow them to keep up with innovations, explore new emerging technologies and new business models.

Let’s analyse together.

First of all, investing in a startup that offers an innovative product can bring strategic advantages for the company. It is also a faster and more reliable source of innovation than traditional Research and Development teams. By investing in startups and putting their potential competitors on their team, large companies can continue to maintain their competitive edge in the market.

Do you think companies and startups should compete with each other? 

The answer might seem obvious, but it isn’t. According to the Harvard Business Review, they shouldn’t compete but rather collaborate to improve their success rates. This is because both companies and startups have different, and equally integral, skills essential to excel in the market.

On the one hand, startups excel at bringing to life successful ideas and concepts that respond to real market demand. In fact, according to Forbes, around 58% of startups successfully understand a clear and real market need.

On the other hand, large companies are much better at successfully scaling proof of concepts and have significant benefits in sourcing, distribution, manufacturing, sales and marketing. Therefore, only by collaborating and integrating their skills, both companies and startups would be able to gain the best benefits. Companies should pay more attention to startups by investing in them to improve their strategic advantages. 

Besides, according to L’Oréal Canada’s Chief Digital Officer, Martin Aubut, startups can help established companies move faster in a world that the company can imagine but isn’t always equipped to do it on its own. For example, a company might get somewhere, but it will take much longer due to large organisations’ bureaucratic nature. A business + startup partnership can, on the other hand, go faster thanks to the energy, passion and entrepreneurship that a startup brings to the equation.

In conclusion, you should start looking at startups not as a threat but as an opportunity to create a valuable relationship for both of you. If you are interested in investing in our startup, contact us. We can discuss a partnership that will be mutually beneficial.

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