To fully meet the challenges of today in a manner that increases efficiency, streamlines processes and creates opportunities for growth, established businesses are turning to startups for inspiration, partnership and much more. With sustained supply chain issues and labor shortages slowing down some aspects of business, connecting with a startup has provided the innovation necessary to create workable solutions.
These are trying times for many businesses, particularly established companies that weathered the coronavirus pandemic but now struggle to cope with a labor shortage, steadily high inflation and a supply chain in crisis. To find solutions to these problems, and to promote innovation from within, established businesses are turning to their startup compatriots.
Two common misconceptions about working with startups
Some established businesses may feel hesitant to put their trust in newer, younger companies because they’ve been led to believe some falsehoods about startups. Two common startup misconceptions include:
1. Startups don’t have the same level of expertise or service as established businesses.
- Reality check: As startups typically have far fewer clients than a business that’s operated for years, if not decades, they tend to place a bigger priority on client satisfaction. After all, if an established business loses a client, it’s unfortunate but not likely to cause a huge impact on its bottom line. Startups, whose profit margins tend to be a lot thinner, generally respond faster to customers’ issues.
2. Startups are less reliable.
- Reality check: Because startups rely so heavily on their client base, they typically go above and beyond to ensure the products or services they offer meet their clients’ standards and arrive when and as expected.
What is so appealing about startups?
There’s something about startups that can’t help but appeal to well-established businesses, despite their many differences. Part of an established business’ success originates from its longevity. They’ve used that time to create a set of entrenched processes that work for their market, staff and bottom lines.
While this may have been successful in the past, when disruptions like the pandemic hit, these processes can trap companies within their own rigid structure and make innovation difficult to achieve. It’s a risk to change proven methods that have always worked for your business, and risky behavior isn’t something established businesses are exactly known for.
Startups, on the other hand, can be a lot less risk averse as they have fewer resources, both money and people, to work with, thus a lot less to lose if their gamble goes awry. Being smaller and more agile than a larger business with years of experience, startups were better able to withstand the challenges brought on by the pandemic. Startups are generally able to withstand sudden industry shifts and change operations on a dime, something established businesses struggle with.
Immersing yourself in a startup environment as an established business allows you the opportunity to work with industry innovators. This can set the stage for vendor relationships, partnerships and even acquisitions that benefit both parties.
How can established businesses enter a startup environment?
Connecting with a startup whose product or service aligns with your company’s mission can take time, but knowing where to look is half the battle. Visit a startup incubator or attend the presentations or speeches of startup founders to familiarize yourself with the local startup scene. Events geared towards startups, such as meet-and-greets, conferences and summits, can help put you on the path to learning about new strategies, methodologies and tools startups are using.
Another tactic for immersing yourself in the startup environment might include joining a coworking space already occupied by a startup. This is ideal for smaller, experimental groups to work on a skunkworks project — an innovative project developed by a small group of people. Energy can be contagious, so working in the same space as a startup can help inspire more innovative ideas.
Connecting with startups in a more meaningful way
If you’re looking to form a closer relationship with a startup, either through acquisition, possible partnership or investment opportunity, consider joining a local angel investment group. These groups typically meet quarterly or monthly to hear pitches from two to four startups. This is a more nuanced and targeted approach than simply attending, for instance, the weekly local startup happy hour and hoping a startup in your industry shows up.
Acquiring startup talent is a game-changer for both sides
Working in the same space or chatting with startup founders over drinks isn’t the end goal, however. To solve today’s complicated business problems, a further step may be necessary, but at least it’s one that pays off nicely for legacy businesses and newly launched startups alike. There are numerous ways for these two types of companies to combine forces, including as a joint venture, a vendor relationship or through acquisition. Startups benefit from the security an established business brings while the latter can regain that spark of entrepreneurial spirit it possessed in its early days.
The first step to this process will be determining where in your company lies the biggest need and ascertaining whether a product or service from a startup can be integrated into that specific vertical of your business. A good fit could lead to improved sales, increased client satisfaction and reduced redundancies and inefficiencies.
Anders CPAs + Advisors works with startups and entrepreneurs on their financial needs so they can focus on what they do best. Learn more about the Anders Startup Group to discuss capital raising options for your startup.
Every day at Anders, we serve as a catalyst for those striving to achieve their highest potential, and carry this mentality on to our clients and community. Through a collaborative approach and a combination of tax, audit and advisory services, we help our clients achieve their goals.
Dave Finklang has wide-ranging, specialized experience in tax planning and compliance, startup services and consulting, and accounting services. As a tax partner and leader of the firm’s startup practice, Finklang enjoys working with entrepreneurs and emerging companies by helping them raise capital, structure their businesses and minimize their tax burdens.
