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State of venture client report

First Edition: April 2023

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A comprehensive snapshot of how companies benefit strategically from startups by venturing to buy their technologies AND how startups sell to Venture Client companies.

Foreword
by Gregor Gimmy

In 2014, I coined the term “Venture Client”. Back then, it was not used by companies, consultants, startups, venture capitalists or academia. A Venture Client Model did not exist, nor did Venture Client Units. There were no Venture Client job titles, or technology to support Venture Client activities. There was no book, no publications, no research. Consultants did not have a Venture Client services offering. Venture Clienting did not exist.

In 2014 I was working at BMW. In the innovation strategy department of BMW’s R&D headquarters. At the time, I conceptualized an approach by which BMW could benefit from better startups, more effectively, faster and at lower risk than possible through traditional means of corporate venturing, namely non-controlling, equity investments in startups, aka corporate venture capital.

My idea to overcome the inherent limitations of CVC: Become a user (client) of startups, instead of an investor. Buy, use and adopt startup technology, without needing investment as a precondition. Become a venture client, instead of a venture investor.
Of course, BMW had been a purchaser of startup technology for decades. Just like probably most other companies. Even if they were not aware of the fact.

So, different bottle, same wine? Well, not quite!
While I gave a new name to an activity companies had been conducting for decades, I created new capabilities to become a better venture client. I created a specific Venture Client process, I developed special Venture Client resources and I established a new value system by which decisions were made and which guided the way people thought about and valued startups.

The result was the BMW Startup Garage, the world’s first official Venture Client Unit. It had a dedicated team that did nothing but Venture Clienting. It had its own brand and website. It had its special Venture Client process by which it selected startup relevant problems, and problem relevant startups. The result was that BMW could more than tenfold the amount of startups it could gain strategic benefits from. 20 months faster. And at a cost often well below 50.000 Euros. That is x314 lower than the average as series A for a US-based startup (as of Q2 2021).

Today, 2023 all the above does exist. Companies all around the world practice Venture Clienting actively. With the State of Venture Client report we collect real-world data about Venture Clienting at companies to foster that is necessary to further research, ultimately resulting in better Venture Clients.

Acknow­ledgement

Academia

This study would not have been possible without the help of our academic partners. We would like to express our sincere gratitude to our academic partners, EBS Universität, ETH Zürich, INSEAD Business School, University of Passau, and WHU – Otto Beisheim School of Management for their valuable contribution to the development of this report. We greatly appreciate their support, expertise, and insights that have helped us to provide a comprehensive and up-to-date analysis of the current trends and future outlook of venture clienting.

We especially would like to thank Prof. Andreas König (Chair of Strategic Management, Innovation, and Entrepreneurship, Universität Passau) and Prof. Jörg Niessing (Senior Affiliate Professor of Marketing, INSEAD).

Thank you Andi! Thank you Jörg! You were the pioneers in the academic world that recognized that the Venture Client Model meant a breakthrough, re-thinking how corporations benefit strategically from startups. Andi recognized that potential in November 2015 at a conference at Nestlé in Lausanne, Switzerland, to which he invited Gregor Gimmy to talk about the BMW Startup Garage.

The conference was a pivotal moment that ignited the idea to delve into Venture Clienting, ultimately leading to the first academic publication on the topic in the prestigious Harvard Business Review: What BMW’s Corporate VC Offers That Regular Investors Can’t, by Gregor Gimmy, Prof. Andreas König (Chair of Strategic Management, Innovation, and Entrepreneurship, Universität Passau), Prof. Albrecht Enders (Professor of Strategy and Innovation, IMD), Prof. Dominik Kanbach (Chair of Strategic Entrepreneurship at HHL) and Prof. Stephan Stubner (Chair of Dr. Ing. h.c. F. Porsche AG).

Jörg published the first to business school case about Venture Clenting in 2018: How Corporates Co-innovate with Startups: The BMW Startup Garage, by INSEAD academics Joerg Niessing, Laurence Capron (Professor of Strategy), Nathan Furr (Associate Professor of Strategy), Pascale Balze and Julia Bodner. In 2021, the case was awarded the INSEAD Case Centre Best-selling Case in Strategy and General Management.

27pilots

27pilots is the leading Venture Client Solutions provider, helping companies like BMW, Bosch, Holcim, and Siemens gain competitive advantage from top global startups, and the startup ecosystem at large.

The 27pilots team is passionately driving the Venture Client vision – to bring this groundbreaking corporate venturing vehicle to companies around the world. This report is a testament to the unwavering dedication and hard work of the entire team.

27pilots has sponsored the resources necessary for the State of Venture Client research and report.

Startups

27pilots has been a Venture Client since the very first days in 2018. Buying and using startup technologies has been central to our success.

We are using startups extensively in all products and technology solutions that we are delivering to our customers. We also use startups to support administrative functions such as HR and Controlling.

Here is a sample of startups that 27pilots is currently or has been using: Mentimeter, Personio, OpenAI, Spendesk, WeWork.

Dube+

dube⁺ partner / Kreativagentur München is creative force behind the design and UX of the online publication of the report. Thanks for your very special efforts!

Prof. Andi König (Universität Passau)
Prof. Jörg Niessing (INSEAD)

The 27pilots team

Executive
Summary

A comprehensive snapshot of how companies benefit strategically from startups by venturing to buy their technologies AND how startups sell to Venture Client companies.

Table of Contents

01

The State of Venture Client Report

What are Venture clients?

According to Wikipedia, Venture Clients are companies that buy and adopt startup products to solve business problems, such as innovating a product or improving the efficiency of a manufacturing process. Many successful companies, like Apple, BMW, Google, Amazon, Siemens and Bosch, have been Venture Clients for decades. Even small and medium-sized companies and startups themselves buy from startups. Hence, just about any company is a Venture Client. And so is probably yours. Buying from startups and adopting their technologies is, however, no easy task for a company. It requires adequate capabilities, including a Venture Client strategy in alignment with the corporate strategy, an experienced team, special infrastructure and processes.

Goals

Despite the relevance of adopting startup technology for companies, there is little Venture Client-specific research. This reduces the ability of companies to learn and improve their ability to identify, transfer and adopt relevant innovations from startups. This research gap motivated us to launch the first-ever global State of Venture Client Survey. We launched this report in collaboration with prominent academic partners to provide a snapshot of the current venture client landscape. Naturally, this entails researching both startups and Venture Client companies. Therefore, the findings of this research draws on the data from two surveys: one for Venture Client companies that need startup solutions and the other for startups that target Venture Client companies with their innovations (see sections two and three).

In particular, the report seeks to answer the following questions: How are companies structuring their Venture Client process? In what areas and for what reasons are companies buying from startups? What resources are companies using to conduct Venture Client activities? Finally, what challenges are companies facing to accomplish their Venture Client goals?

Potential Benefits

With this research, we would benefit the growing community of Venture Clients and startups. Besides many other benefits and contributions, the participating companies in this survey are helping their clients to buy better and faster from startups. The startups, on the other hand, are able to articulate their needs and preferences when selling their products to companies.

The respective chapters include Key Takeaways, a summary of the most important points of each chapter, as well as so-called Insights+, a deeper interpretation of the results for each chapter subtopic in the context of the Venture Client Model. 

Enjoy reading!
02

Background of the Venture Client Report Study

Harnessing Startup Technologies for A Competitive Advantage

Changes in macro-and microeconomic conditions in a so-called VUCA-world (volatility, uncertainty, complexity and ambiguity) are fast-paced and consequential more than ever. As a result, the competitiveness of companies increasingly depends on their ability to leverage resources and technologies outside of their companies as products become more complex. Organizations, therefore, need a proactive approach to innovation with a focus on strategically leveraging outside resources besides internal innovation efforts. Today, both multinational and small and medium-sized enterprises (SMEs) begin to understand startups as a valuable competitive resource. The belief is that adopting startup technologies improves the competitiveness of companies by assisting them in accomplishing business objectives such as product and business model innovation, as well as process and cultural transformation. This boosts market share and revenue growth, reduces costs, and drives profitability.

Revolutio­nizing Corporate Venturing: Unleashing the Strategic Power of Startups

To harness such strategic benefits from startups, companies started to establish corporate venturing units in the 1990ies. These units operated based on the model of independent Venture Capital firms. With the difference that the primary focus was to accomplish a strategic benefit from the start, not a financial one. Over the last two decades, the number of so-called Corporate Venture Capital (CVC) units grew to about 1.000 globally. That is, about 5% of corporations with revenues larger than $1 billion. Today, CVCs contribute about 2-3% of the capital invested into startups each year. Despite the growth of CVC, however, the impact has yet to pay its dividend. Only 10% of startups in CVC portfolios enter into some kind of partnership with the parent corporation of the CVC, hence the Venture Client. (27pilots analysis based on CBInsights CVC data).

The Rise of Venture Clients in Corporate Venturing

The limited strategic effectiveness of CVCs sparked a re-thinking of corporate venturing at BMW in 2014. Instead of leaning on “financial” tools to benefit from startups, companies started to build on “procurement” and “innovation” methods. Instead of positioning themselves as venture investors in the startup ecosystem, companies positioned themselves as venture clients. According to Wikipedia, a Venture Client is any company “that purchases and uses the product of a startup with the purpose to obtain a strategic benefit”. 

BMW innovation manager Gregor Gimmy was the pioneer who coined the term Venture Client, created the specific “Venture Client Model” and established a dedicated inhouse Venture Client Unit that focused exclusively on gaining strategic benefits from startups: The BMW Startup Garage. (See INSEAD and HBR articles from Niessing et al. 2019 & 2021; Gimmy 2017). About ten years later, “Venture Client” has established itself as a new corporate venturing vehicle that is used in multiple corporations around the globe, and which is researched and lectured about in business schools around the world. 

Exploring the Venture Client Ecosystem: Unveiling Insights and Advancing Corporate-Startup Colla­boration

In this report, we attempt to capture a first snapshot of the Venture Client ecosystem. Our research includes companies with and without dedicated Venture Client capabilities, such as an organizational unit dedicated to Venture Clienting (example: the BMW Startup Garage). 

The research attempts to answer some of the most daring questions of Venture Client and startup companies. What resources are used, which activities are conducted and where are differences in processes, capabilities and challenges. As most companies are Venture Clients, but as of now there is little Venture Client specific research, we hope that this report contributes to improve Venture Clienting for the benefit of corporations, startups and the startup ecosystem in general.

03

Researched Venture Clients & Startups

The State of Venture Client Report presents data and insights from Venture Client and startup companies, including Airbus, BMW Group, Bosch Group, Holcim, Siemens AG, and Siemens Energy. In addition, the report draws on data from a global survey of companies and startups, as well as from multiple Venture Client advisory projects of 27pilots, a leading Venture Client Solutions provider.

Venture Clients refer to companies that buy, use and adopt startup technologies with the intention to obtain a strategic benefit. Researched Venture Clients include companies with and without a dedicated Venture Client Unit. As long as a company buys and adopts startup technologies, we categorize it as a Venture Client.

Startups refer to privately owned companies that own proprietary IP, based upon which they develop and market highly scalable products to Venture Client companies. Consultancies and providers of non-recurring engineering and IT/development services are not included, as these do not follow the definition of a startup. A startup is defined as a non-listed private company (= “legal entity”) controlled by its founding entrepreneurs (i.e. persons, not companies) that solves strategically relevant problems with a scalable product, created based upon proprietary and protected Intellectual Property (IP). Startup companies are generally VC-fundable, VC-funding, however, is not a necessary attribute of a startup (see Gimmy, 2022b).

3.1

Researched Venture Client Companies

For the State of Venture Client report, we surveyed Venture Clients across multiple industries and of different sizes. In addition, the report includes insights from Venture Client advisory projects conducted by 27pilots, a leading Venture Client Solutions provider, across nine industries in over 20 multinational corporations.

Most Venture Clients that participated in the survey operate in the manufacturing sector (29%). Second are those in finance and insurance (14%) and transportation and warehousing (14%). 50% of the participants are large corporations of more than 10,001+ employees. The survey Participants primarily hold management (60%) or top management (25%) positions. They mainly belong to innovation departments (32%), followed by business development (16%), venturing (16%) and R&D (11%) units.

A sample of companies included in this report are Airbus, BMW Group, Bosch Group, CAF, Holcim, Otto, Siemens AG, Siemens Energy and VW Cariad.

3.2

Participating Startup Companies

The large majority (96%) of the startups participating in the survey are B2B, B2B2C or B2G startups which are already selling their products to Venture Client companies. 26% have 1-5 Venture Clients, and 19% have over 50. The startups that were surveyed are primarily engaged in the information industry (19%) or manufacturing sector (16%), with a smaller percentage in Professional, Scientific and Technical Services (14%). Some startups also identified themselves with self-assigned industries such as “SaaS”, “Machine Learning for Engineering Data”, “IIoT Infrastructure, Edge Computing”, “VR”, “Food, Biotech, Ingredients”, “Automotive Software”, “AI Software”, “Waste Collection and Recycling”, and “Fabless Semiconductor”, among others. 43% of startups taking the survey employ 11-50 people, and 14% of startups have 51-200 employees. The participating startups received the first purchase orders from Venture Clients in the prototype stage of their products (62%). Most had raised pre-seed or seed venture funding (59%). Other than that, startups had no Venture Capital (VC) funding (24%) or no Series A funding (13%) when selling their product to companies for the first time. The volume of the first purchase order is between $ 1.001 and $ 10.000 for 31% of the startups. Another 31% have a first purchase order of between $ 10.001 and $ 50.000.

The participating startup’s investment stage is, in most cases, Seed funding (31%) followed by Stage A (23%), no VC funding (18%) or Stage B funding (12%). More than half (53%) of the startups that participated in the survey did not receive any CVC funding. In comparison, 13% received investments from 1-2 CVC funds, 20% received investments from 3-4 CVC funds, and another 13% received investments from 5 or more CVC funds. Beyond that, 80% state that they have reached a product-market fit, and 40% predict reaching the product market in the next 3-6 months. This partially explains that most of these startups are currently in an early market stage (52%) or growth market stage (37%). Only 11% are still in the prototype stage. 71% of the survey participants were founders/co-founders, and 20% were in top management positions. The positions most represented are business development (27%), executive management (20%), sales (11%) and strategy (11%).

04

State of Venture Clienting

In the results section of the report, we directly contrast the answers from startups and companies in 6 sections with respective data. Our aim is to provide interpretation of the data in the context of the Venture Client Model in order to reflect the current state of this corporate venturing vehicle.
4.1

What is a Venture Client Company?

Here we inquire and discuss if companies that venture to buy, use and adopt startup solutions know about and use the term “Venture Client” in their corporate venturing activities.
KEY TAKEAWAYS

“Venture Clienting” is gaining traction to describe a novel model of corporate venturing, but a unified and coherent Venture Client terminology has yet to be institutionalized

Terminology enables the articulation of specific and differentiated ideas and, when shared, helps to facilitate the conversation around an idea without repeatedly naming all the contextually important concepts like rules, functions, assumptions, and objectives. Hence, a shared language is vital for establishing a mutual understanding and enabling the proliferation of best practices, the performance of benchmarking, and collective action towards overcoming shared problems. Especially in a new and ever-developing field like corporate venturing, it further helps to differentiate a school of thought against adjacent concepts areas, thereby mitigating confusion and malpractice.

Against this backdrop of the importance of shared terminology and definitions, we asked both startups and companies about their awareness of the terminology “Venture Client” and “Venture Client Unit”. 

On the one hand, most companies surveyed are already familiar with the term “Venture Client” (47%), and 29% of participants confirmed that this new term is generally used in their company. On the other hand, 50% of participating startups have never heard about the term Venture Client and only 24% state that the term is used by the companies they target with their products.

 

Companies apply the terminology selectively, whereas the participating startups (49%) indicated to have 1-3 clients with a dedicated Venture Client Unit, and only 30% agree that none of their clients have a Venture Client Unit. We assume that the number of companies that actively use the Venture Client terminology will increase with the number of dedicated Venture Client Units.

Question 1
Have you heard about the term “Venture Client” before this survey? According to Wikipedia, Venture Clients are companies that buy and use startup products to solve business problems, such as innovating a product or improving the efficiency of a manufacturing process.

Venture client companies

No Data Found

Venture client startups

No Data Found

Insights

To learn more about the questions discussed in this section, have a look at our Venture Client Best Practices 5.5 Startup Culture

4.2

What is a Startup?

Here we inquire and discuss how Venture Client companies define startup companies, from which they aim to buy, use and adopt solutions.
KEY TAKEAWAYS
Why we need a clear definition of startups beyond their founding year.

For companies to be able to leverage startups as a strategic source of competitive advantage, it needs to know what a startup is. This requires a clear definition of startup that is easily understood and shared across the entire company.

With 65%, age is the most frequently selected characteristic to define a startup. 59% of participants also declare VC funding as a defining attribute. Furthermore, the controlling element of an individual over a company is essential for roughly 53% by agreeing that a startup needs to be founded by entrepreneurs, not a company. Around 41% of Venture Client companies agreed that a startup should be defined by its lean organizational structure and its scalability of the solution. Revenue growth and the team’s creativity received 35% of the votes for the defining elements of a startup. Product readiness and the presence of intellectual property received 24% and 18% of the votes, respectively.

What are, based upon your company´s understanding or definition, characteristics of startups?

No Data Found

Insights

To learn more about the questions discussed in this section, have a look at our Venture Client Best Practices 5.5 Startup Culture

4.3

Venture Client Strategies

Here we inquire and discuss the purpose companies pursue with venturing to buy, use and adopt startup solutions.

Firstly, we ask if and how often companies buy from startups. Here we found that 100% of companies participating buy from startups. Yet, for 0% of participants, buying from startups happens as a usual manner.

We then ask for reasons why a company ventures to buy from startups. Here we found a clear consensus that Venture Clients predominantly pursue product and process improvements with startup technology.

KEY TAKEAWAYS
Startups solve problems in product and processes areas, thereby increasing a company’s revenue and decreasing costs.

Next we investigate the primary reasons why companies interact with startups to shed light on what specific benefits companies pursue with startups. The answers from these questions clarify the strategic benefit pursued with startups.

Question to Venture Client companies: What are the reasons for your companies to buy from startups?

To solve problems we can't or don't want to solve

No Data Found

To improve products

No Data Found

To improve processes

No Data Found

To gain access to new IP

No Data Found

As due diligence for a M&A

No Data Found

As due diligence for a minority CVC investment

No Data Found

To change the culture of my company

No Data Found

To increase revenue of my company

No Data Found

To decrease costs at my company

No Data Found

Companies are strongly aligned on the main benefits: All indicate that they primarily buy from startups to solve problems they cannot solve themselves. As to what kind of problems they are trying to solve, above 80% of participating companies agree to target both product and process improvements with their venture clienting activities. 

Beyond that, companies see the strategic benefits of startups in improving their products and services. Both reducing costs (57%) and increasing revenues (60%) are drivers for purchasing startup solutions. Therefore, the data mirrors the main strategic benefit of Venture Clienting.

While an overwhelming majority of companies agree on the benefits of startups on products and processes, just 50% of respondents see startups as a way to gain access to new IP. This finding suggests that a significant portion of respondents do not view startups as a valuable source for accessing new intellectual property (IP). This means that 50% may not see startups as a viable source of innovative ideas or technology.

Even fewer participants (<20%) purchase startup solutions perform due diligence for a minority CVC investment or an M&A transaction. This indicates that purchasing from startups is unrelated to investment and M&A activities in the current state of venture clienting. This, in turn, suggests that purchases are generally of tactical nature.

Overall, this finding highlights potential challenges that startups may face when establishing themselves as a valuable source of innovation and solutions for companies.

Question to Startups: What are the reasons for your Venture Client companies to buy from your startup?

To solve problems of my clients they can't or don't want to solve

No Data Found

To improve their products

No Data Found

To improve their processes

No Data Found

To gain access to my startup’s IP

No Data Found

As due diligence for an M&A or minority CVC investment in my startup

No Data Found

To change the culture of my clients

No Data Found

To increase the revenue of my clients

No Data Found

To decrease the costs at my clients

No Data Found

The picture for startups is quite similar to the one of Venture Clients. Solving problems thereby improving products and processes as well as decreasing costs and increasing revenues are pointed out by startups as main reasons for why companies are interested in their products. Startups slightly focus more on cost savings (69%) whereas established companies have an eye on increasing revenues (60%). Both startups and companies need to pay more attention to the consideration of due diligence for potential M&A and CVC deals. The stereotypical “cultural change” through startups is not a main reason why companies purchase startup solutions, especially among companies with Venture Client Units. 

Insights

To learn more about the questions discussed in this section, have a look at our Venture Client Best Practices 5.1 Venture Client Strategy

4.4

Venture Client Process

Here we inquire and discuss how Venture Client companies structure the activities necessary to buy, use and adopt startup solutions. For this, the following questions were asked to Venture Clients and startups:

  • Frequency?
    How often do companies buy from startups?
  • Speed? 
    • Question to companies: How long does it take to buy from startups?
    • Question to startups: How long does it take to sell to companies?
  • Process tasks?
    • Question to companies: What steps are involved in buying from startups?
    • Question to startups: What steps do your clients follow to buy from your startup?
  • Decision makers?
    Who is involved in making a purchase decision?
  • Decision criteria?
    What criteria are applied to make a purchase decision?
KEY TAKEAWAYS
Companies buy rarely from startups, without a process designed to specifically harness the full strategic potential offered by the startup ecosystem.

Companies opt to be Venture Clients  to leverage startups to obtain strategic benefits… One of the key factors differentiating the Venture Client Model from other corporate venturing vehicles is its potential to benefit faster from more startups at less cost and risk. While CVC is, due to its high capital and operational expenditures, limited to a handful of startups per year, a Venture Client could benefit from hundreds of startups each year. With $2 million p.a., a company could buy from plus 100 startups, yet could only invest in two to three startups per year.

Therefore, a good Venture Client Process can revolutionize how companies benefit strategically from startups. However, the answers provided suggest that there still needs to be more focus and process excellence about how to buy from startups to fully harness the potential offered by the startup ecosystem. This is highlighted in this section.

70% of companies only “sometimes” purchase startup solutions. The answers further show that most of the questioned companies have not designed a dedicated process to buying from startups (see section 5.3 Venture Client Process) that also involves operational departments beyond procurement. Both these data points suggest that startup solutions do not have a high strategic priority. With the increasing relevance of startups, we expect that Venture Clients will work on improving their processes to be able to benefit from more startups at higher speeds.

Question to Venture Client companies:

How often does your company buy from startups?

No Data Found

Insights
Purchasing startup solutions and selling to Venture Clients takes time. Companies with a Venture Client Unit are able to shorten this timeframe significantly.

The buying process is at the heart of the Venture Client approach and needs to cater to the needs of the solution providers (startups) and seekers (companies). How are the startup purchasing processes designed and perceived at the moment?

One frequently cited critical variable is the implementation speed. As startup solutions are mostly tried out in a PoC phase, we expect startup solutions to be bought faster in the first purchase than other solutions of existing players.

About speed of Venture Clienting
Question to Venture Client companies:

How much time does it typically take your company to issue a purchase order to a startup? How many weeks pass from the first touchpoint with a startup to issuing a purchase order to that startup?

No Data Found

Question to Startups:

What is your average sales cycle? How many weeks pass from lead generation to purchase order?

No Data Found

When it comes to the purchasing process, it usually takes more than 4 weeks and in most cases 4-12 weeks for incumbents to buy from startups. In some cases (19%), it requires even more than 26 weeks before a startup solution gets bought. Contrary to this view, startups in the survey perceive the purchasing process as more time-consuming. Most respondents (39%) state that it takes 13-26 weeks from lead generation to purchase order. 22 participants indicate an even longer time frame of more than 26 weeks. Further investigations need to show why the perception of the purchasing/selling process diverges between startups and companies. In any case, a dedicated Venture Client process must be equipped to significantly shorten the purchasing process. We anticipate that more and more companies are expected to follow the pattern of 4-12 weeks in the near future if they adopt Venture Client activities.
Insights

To learn more about the questions discussed in this section, have a look at our Venture Client Best Practices 5.3.3 Buy Startup Solutions

Startup Solutions are deployed along the whole value chain, both in products and processes

As described in earlier sections, the Venture Client Process helps companies to solve their problems along the whole chain (product + process). This implies both processes as well as products. Therefore, this model affects all operational as well as support units within a company. This is a major advantage compared to traditional CVCs, which most likely invest only in startups that are product related. Hence, we would like to ask Venture Clients about the areas in which they are buying startup solutions. 

The most startup solutions are purchased in IT (75%), followed by manufacturing solutions (44%) and R&D (38%). These are all functions related to the core business of a company and at the forefront of their purchasing strategy. Yet, buying startup solutions in HR, Marketing, Logistics or Sales — which are often considered as support functions — are not the main focus. These results mostly align with the data from startup participants with a slight trend towards R&D and Manufacturing though. 60% of the startups from the survey agree to sell their products to R&D departments, 41% to Manufacturing divisions and 35% to IT units. However, we can see that also startups are able to sell to support functions of companies as they indicated with sales to the areas of marketing, logistics and sales. With more companies making use of a Venture Client setup a more balanced distribution between core and support functions both for startups and companies is anticipated.

Insights

To learn more about the questions discussed in this section, have a look at our Venture Client Best Practices 5.3 Venture Client Process

Applied steps before buying startup solutions

This section aims to answer which process steps are conducted by incumbents when it comes to buying from a startup in order to derive best practices for future Venture Clients. This would enable us to evaluate the maturity of the overall processes as well as the importance of dedicated steps.

Which of the following process steps do you conduct when buying from startups?

No Data Found

With over 92% agreement, there is consensus among companies that the Problem Definition (i.e., defining what problem needs to be solved by a startup) is at the heart of the buying- from-startups process (Venture Client Process). Companies prefer to conduct paid pilot projects (77%) over unpaid pilot projects (39%), hence eliminating fears of free-riding. Other important steps are the “Matching of startups with internal needs” (85%), “Scouting of startups” (85%), “Negotiating contract conditions” (77%) as well as the “Assessment of startups” (77%). From a broader perspective, we can assess that almost all listed process steps seem to reflect important activities for purchasing startup solutions, as most of them receive an acceptance rate above 69% (except “conducting paid pilot projects” or “collecting startup applications”). The overall selection also seems to be comprehensive as only 8% indicate other critical process steps. The steps that companies take when purchasing startup solutions align closely with their perceived importance. This means that the steps companies take are generally seen as relevant by participants. Matching startups with internal needs and defining problems accurately were seen as the most important steps for participants.

When asked for other process steps additional response added to the conducted process steps by a participant is “due diligence”. A major advantage of the Venture Client process is the leverage of VC capital without actually investing in startups. This also includes previously conducted due diligence by a VC. Hence, there is no strong need for a Venture Client Unit to assess a startup on the financial side as long as well-known VCs with a high reputation invest in this startup. The focus of the Venture Client Unit is the problem-solution fit and is referred to as “assessing startups” above. Although the assessment phase is an important step in order to align the problem definition and internal needs with the startup’s solution, one respondent regards this step as “irrelevant”.

Although most companies already utilize several and necessary elements of the Venture Client model in order to buy from startups, the process is not very structured and systematic. We offered the companies multiple starting points for the buying from startups. However, most of the participating companies agreed that their purchasing process is “sometimes” triggered by “A colleague requests to search for startups that solve a specific problem”, “I discover interesting startups at conferences or fairs” or “A colleague refers to a startup”. In contrast to a problem-centric approach, this suggests a focus on the startup ecosystem and pushing startups into the organization without a sustainable pull. The most accepted statement was “A startup approaches my company offering its product” (31%). Hence, we could not derive a clear pattern for triggers to buy from startups in the data at hand. There appears to be no clear way for a company to approach startups. The startup data confirms this hypothesis as most participants (47.76%) state that only 1-3 of their clients have a specific process for buying from startups, followed by 40% of the startup participants that do not have any clients with a specific purchasing process.

With the Venture Client Model, a company is not required to rely on startups approaching the company. Instead, the process is much more focused on solving the company’s process and product problems with startup solutions. As a result, the startups considered are solution-oriented and leading in their field.

All in all, the process steps conducted by companies in order to purchase from startups reflect single elements performed in the Venture Client Process, however, not in a structured manner. Although startups are becoming the most important external source of innovation (see MIT Corporate Innovation Research 2020), only one-third of the companies participating in the survey have an explicit purchasing process for startup solutions. All other company participants say that they do not have a specific process for buying from startups. These companies apply a generic purchasing process. Besides other activities (e.g. raising awareness within the organization), a Venture Client Unit is able to conduct these processes in a more structured, strategic and impactful way.

Insights

To learn more about the questions discussed in this section, have a look at our Venture Client Best Practices 5.3 Venture Client Process

Innovation through an external source: Incumbents gain an early adopter advantage through innovative startup solutions

Within the Venture Client Process the goal is to scout for the startup solutions for the best problem-solution fit. Inherently, these are not super early stage startups. Most of the time, these startups that received a decent amount of funding, have found a product-market fit and first recognizable reference customers.

As a part of the survey for Venture Client companies, we wanted to find out at what product stage the startups have when selling their solutions to Venture Clients. We see that the companies aim for an early adopter advantage as they mainly focus on startups that are in an early market (81%) or growth market (69%) stage. Only a minority of companies buy from startups in the prototype stage (38%).

We can see that the purchasing of startup solutions is a very user centric process because the final user of a startup product is also involved as a decision maker in most cases (77%). Beyond that, a direct supervisor of a final user of a startup product (54%) or a senior executive related to the user, are involved in the purchasing decision process (46%). Support functions, e.g. legal or procurement departments are not strongly involved in the decision making process. In addition, two respondents mentioned the Venture Client Unit as part of the decision making process in the “other” category.

Who is part of the decision to buy from startups? Mark all people / functional units that are part of a workflow to approve a Purchase Order to a startup.

No Data Found

These results reflect the Venture Client Process in the sense that the Venture Client Unit places the focus on the respective business or support units that deal with a problem (user centricity). The process is client or market driven: The end-user of a business/support unit with a problem can act as a trigger to initiate the purchasing of startup solutions if there is a suitable startup solution to solve the problem.

Insights

To learn more about the questions discussed in this section, have a look at our Venture Client Best Practices 5.3 Venture Client Process

Venture Client KPIs: Many companies are not able to assess the impact of their startup product purchases

Key Performance Indicators (KPIs) are state of the art amongst companies for quite some time. They capture the progress of strategic targets within a company and are therefore indispensable when it comes to measuring success. Based on this thought, there must also be several criteria in order to measure the success of the Venture Client Process/Model/Unit. We asked companies how they measure the success of their startup-purchasing process. 

Before the order intake, however, a company needs to apply certain decision criteria to select leading startups which are outlined in the next paragraph. 

By far the most common criteria applied by 100% of the participating companies in order to select startups is the stage of a startup’s product. 75% of participants agree to assess startups by the maturity of a startup’s product and whether a startup’s solution has the ability to solve the problem. With above 50% participant acceptance rate, companies consider the location of a startup (50%) as well as reference clients (58%) of a startup. In contrast to these product maturity data, financial data, e.g. Venture Capital funding (33%), investment stage (33%), the reputation of the VC firms (25%), are considered as less important. Although most incumbents purchase from startups in the growth phase (see above), the low acceptance rate for the investment stage seems surprising, as the investment stage is a good indicator of product maturity of a startup.

By posing the same questions to startups, we see a different response behavior. For only 11% of the participating startups, their investment stage is taken into account by their clients. Most important for their clients is the ability of the startup’s product to solve their problem (92%), whereas the overall maturity of the product is less prioritized. In an open-ended question, one participating startup points out the importance of pilot projects: “Usually there is a trial phase, a first small project or similar, that is used to determine if a product fits and we are reliable.“.

What criteria are you applying in your decision process to select startups?

No Data Found

After the selection of startups, how does a company measure the success of its startup purchasing process?

It is noteworthy that according to the data, most of the participating companies perceive the proposed KPIs as relevant but do not measure them internally. Despite not being measured, the most relevant KPI is the leveraged Venture Capital (83%), which is the Venture Capital invested in startups a company worked with. The number two spot (67%) holds the “time needed to issue a first purchase order to the startup“ which is only measured by one company in the sample. After that, the “time needed to identify relevant startup solutions”, “Amount of startups assessed” and “Quality of startups assessed”, are considered as essential by about 50% of the companies, however, only taken into account by a minority of participants. For the potential KPIs “cost reduction accountable to startup solutions” as well as “revenue increase accountable to startup solutions” we did not receive any data by the participants. The “amount of startups assessed” and “time needed to identify relevant startup solutions”, were not viewed as relevant by 42% and 38% of the participants.

Insights

To learn more about the questions discussed in this section, have a look at our Venture Client Best Practices 5.3.3 Buy Startup Solutions

4.5

Venture Client Resources

Here we inquire and discuss the resources Venture Client companies employ to conduct the activities necessary to buy, use and adopt startup solutions.

KEY TAKEAWAYS
Who is involved when strategically purchasing from startups? The need of a dedicated Venture Client Unit

Buying from startups involves several organizational units within a company. Taking a deep dive into this question, Venture Clients claim that the purchasing process is mostly conducted by innovation departments (50%). Other departments involved are business development (43%), legal (43%) and procurement departments (36%), whereas a dedicated Venture Client Unit is only existent at 36% of the participating companies and at 41% of participating startup’s clients. A major difference between participating companies and startups is that 73% of the startups are dealing with a company’s procurement department, whereas companies assign the purchasing of startup solutions to the innovation department. Moreover, startups put a bit more emphasis on the CVC, M&A and Venture Client departments.

In terms of decision makers for the purchasing process, Venture Clients heavily rely on the final user of the solution (77%), but a direct supervisor (54%) or senior executive (46%) are involved as well. Startups paint a similar picture with a slight tendency towards a client senior executive (70%), followed by the final user and direct supervisor (62%). In line with their answers about the involvement of the procurement department, 62% of startups consider the procurement department a crucial decision-maker in the buying process.

In the survey, startups have a modest preference towards clients with a Venture Client Unit. Over 45% of the startup participants believe in a faster process, better chances of accomplishing a long-term business relation and better feedback due to the Venture Client Unit. The most neutral responses are in the field of a possible M&A initiated through a Venture Client Unit. Many startups are not proponents towards one or the direction when it comes to better chances with a Venture Client Unit of being acquired.

Companies

Which organizational units are involved in buying from startups? Mark all that apply.

No Data Found

Startups

Which organizational units of your clients are involved during the purchase of your product? Mark all that apply.

No Data Found

The fact that only 21% of companies view the purchase of startup solutions as a potential element of the due diligence process for a minority CVC investment or M&A activity (14%), reflects the novelty of this corporate venturing vehicle. Cross-organizational connectivity is a major strength of the Venture Client Model, hence, piloting with startups could be valuable for strategic decisions in the context of CVC investments or M&A. Traditionally, support functions like the legal and procurement department must be involved in issuing the purchase orders, however, their involvement can partially also be controlled by the Venture Client Unit.

Insights

To learn more about the questions discussed in this section, have a look at our Venture Client Best Practices 5.2 Venture Client Structure

Companies do not need to do it alone. There is external and specialized support.

In terms of external support to buy startup solutions, companies make use of specialized Venture Client Solutions providers (42%) or Scouting / Sourcing services providers (33%). A quarter of the participants stated that they do not use any external resources. From the data, we can also assume that the purchasing process focuses on the scouting and assessment of startups and requires a lot of resources.

The response behavior shows that external sources for purchasing startup solutions currently are not a strategic field for companies. However, external resources can bring an added value. For example, Venture Client service providers provide a dedicated process to purchase startup solutions and solve companies’ problems. We might see an increasing number of external companies supporting companies adapting Venture Client solutions in the near future.

Insights

To learn more about the questions discussed in this section, have a look at our Venture Client Best Practices 5.2 Venture Client Structure

4.6

Benefits and Challenges for Venture Clients and Startups

Here we inquire and discuss how startups and incumbent companies benefit from Venture Clienting, and what challenges they see to better Venture Client processes and resources.

KEY TAKEAWAYS
Selling to companies is difficult: It takes time to find the right stakeholders and initiate the process. A Venture Client Unit helps to increase the speed, accountability and productivity of purchasing from startups

Purchasing from startups could bring many benefits as well as challenges for the main stakeholders — startups and companies. With this last section, we would like to provide a broader picture about the advantages and disadvantages of the Venture Client Model. In particular, we asked startups about their perception of the Venture Client Model when working with companies.
Moreover, 73% appreciate a quick decision-making process for their clients. A mentoring process, on the other hand, is not a major factor (27%). Feedback on the product (70%), as well as the amount of the first purchase order (42%) or if a startup has the chance of a potential future purchase order, increases its experiences with the client significantly, say 81% of the participating startups. Receiving a client’s CVC investment is not a very appealing factor for startups, but they also do not fully deny its potential attractiveness, as 51% see this factor as neutral. Beyond that, startups highly value if their IP is untouched by the company they are conducting business with (60%).
In terms of challenges when selling to companies, 58% of startup participants complain that it is hard to get access to the core stakeholders who will be the end-user of their product. Beyond that, 41% agree that gaining internal acceptance to pilot the startup’s technology is difficult. The procurement process (purchase orders, supplier number, pricing negotiation) is not considered as neutral by most of the participating startups (>=52%).

Even more than startups, companies also have problems with gaining internal acceptance for both piloting (58%) and adopting (62%) startup technology. Moreover, identifying the right problems that could potentially be solved with startup solutions is difficult for 58% of participating companies.

Insights

To learn more about the questions discussed in  this section, have a look at our Venture Client Best Practices 5 Venture Client Best Practices

05

Venture Client Best Practices

For best practices, the State of Venture Client report presents insights from Venture Client projects conducted by 27pilots since 2018 across nine industries in over 20 multinational corporations from 5 countries. These best practices refer to corporate Venture Client Units. Hence, the recommendations guide those companies that are setting up new Venture Client Units, and those that seek to improve an existing one.

27pilots is the leading Venture Client Solutions provider that helps companies build, improve and operate their in-house Venture Client Units with Venture Client specific advisory services, technology and data solutions.

5.1

Venture Client Strategy

  1. Transform the Venture Client Unit from a “startup-partnering” to a “startup-competitiveness” vehicle.
    We recommend to leverage the market power of your company as a “user/buyer/acquirer” of startup technology to evolve the strategic positioning of the Venture Client Unit to become a vehicle that makes an important contribution to the competitiveness of your company. Competitive impact of piloted/adopted startup solutions measured by cost savings and revenue growth. Come up with a dedicated Venture Client Strategy to accelerate your competitive impact. Define the Why, How and What of your Venture Client operations to become an excellent venture client. Competitive impact of piloted/adopted startup solutions measured by cost savings and revenue growth.
  2. Institutionalize the Venture Client Unit as a must-have strategic vehicle within your company.
    Given the strategic impact of startups for your company, the Venture Client Unit has the potential, even the obligation, to become more relevant as an organizational entity. It can achieve so through a broader and deeper value-offering (e.g., startup intelligence, adoption, M&A solutions for Business Units), its own brand, involvement of Board and C-Level into governance, a dedicated global internal network of the Venture Client Unit program managers, internal events, external events, specialized technology for the Venture Client Unit (to manage, monitor and measure startup impact) and by promoting the Venture Client Unit KPIs to become also corporate KPIs. State-of-the-Art Venture Client Units track both operational (time to pilot, number of assessed startups) as well as strategic KPIs (e.g. organizational reach).
  3. Boost the strategic impact of the Venture Client Unit.
    There are potentially hundreds of complex, pressing problems – throughout the entire company value chain – that startups have the IP and venture capital to solve quicker and better than your company alone. The Venture Client Unit has hence the potential to generate an impact of hundreds of millions of direct cost and revenue benefits p.a. for the company via startups. In addition, the Venture Client Unit can become an essential tool for prediction of relevant trends from the startup ecosystem. More impact is achieved primarily by scaling startups in reach (i.e., across all functions and Business Units) and in number (i.e., plus 50 PoCs p.a.). In addition, the Venture Client Unit should also harness advantage from startups with solutions for new markets of your company, e.g. through piloting early prototypes in your company labs rather than in Business Units.
  4. Apply a problem-centric approach to pilot the most impactful startups.
    Instead of a solution-based approach, apply a user-problem-centric approach similar to design thinking to identify the problems with the most impact. Thereby, discovering product as well as process-related problems, usually 60% process and 40% product-related projects is a reasonable project funnel ratio. Most importantly, determine the strategic impact of the problem on revenue/cost, and set the scope to source startup solutions efficiently.
5.2

Venture Client Structure

  1. Serve all your company.
    The Venture Client Unit’s startup mission is not limited to specific focus areas. The Venture Client Unit shall serve as a service center for everyone within the company whose challenges startups can best solve. In this way, the Venture Client Unit becomes a key tool to ensure that the company leverages cutting-edge solutions from startups. Increase strategic relevance through a broader and deeper value-offering, e.g. M&A solutions for business units).
  2. Business-oriented structure.
    To ensure the success of a Venture Client Unit, a strong interface towards the business units and a global perspective on the startup ecosystem is required. Therefore, the Venture Client Unit needs to be structured according to a company’s business units and their focus areas to provide a thorough understanding of the problem portfolio and sustainable support to the business areas, rather than having a physical presence in the startup ecosystems, often limiting the scope in startup scouting.
  3. Build a strong Network.
    The success of the Venture Client Unit depends significantly on the network to the business to establish a sustainable inflow of problems and discover the most relevant problems within the company in order to support the adoption of the startup solution after the first pilot project. Set up a network of connectors that allow the entire company to be reached instead of having a physical presence in the startup ecosystems. A strong, formalized network with regular inspiring engagement is key and should consist of venture client program managers within the Venture Client Unit and dedicated counterparts in the business segments.
  4. Establish dedicated roles.
    The variety of functions and required skills within a full-service Venture Client Unit requires a differentiated role structure. Therefore, the Venture Client Unit should establish a minimum set of roles (staffed with internal or external resources), focusing on Program Management, Startup Intelligence, Startup Adoption, Startup Culture and Strategy & Structure of the Unit. State of the art Venture Client Units outsource their operations to achieve scaling effects of their Venture Client operations. Whereas the internal Venture Client Unit team concentrates on defining the Venture Client Unit strategy, structure, and focus areas, external specialized solution providers execute and document the core activities of the Venture Client process. 
5.3

Venture Client Process

5.3.1
Discover Venture Client Problems
  1. Assess the quality of problems by quantifying impact, urgency and accuracy.
    It is of utmost importance for Venture Client Units to prioritize problems based on a standardized set of criteria focusing on the potential business impact, strategic benefits, the urgency of the problem and accuracy of the solution-related requirements. We suggest using a Problem Deep Dive Report in order to focus on above-mentioned problem analysis.
  2. Decide upon the quality of a problem before sourcing and reaching out to startups.
    Start with the problem – not the solution. Instead of mainly pushing startups in the Business Units, find out whether the problem can be solved through startups at all. Therefore, a structured assessment of the problem is extremely important in order to run an efficient Venture Client process and to enhance credibility within different Business Unit. Accept only a qualitative set of problems with significant business impact along the process to increase project quality and improve the leverage of the startup ecosystem. If startup sourcings are started before a problem is validated, the Venture Client Unit risks its reputation in the organization as well as in the startup ecosystem.
  3. Solve both product- and process-related problems through mature and leading startups.
    Distinct between process- and product-related problems in order to increase process problem adoption ratio (currently 10% of problems). Think about dedicated activities to approach process-related Venture Clients, e.g., awareness sessions with factory heads. Enable Venture Clients to think problem-based by sticking to a funnel of process & product problems and take ownership of assessing the leading startups to assure high adoption rates. Document it accordingly.
  4. Reduce startup longlist and present pre-evaluated startups to the Venture Client.
    The Venture Client Unit should enable the Venture Client to make a well-informed decision about the leading startup company throughout the Discover and Assess phase. Aim to find leading startups and stick to clear startup pre-evaluation criteria (e.g., funding, reference clients, technology readiness, scaling opportunities). Provide the Venture Client with a pre-evaluation of selected startups in terms of maturity and scaling potential. This will enable the Venture Client to make a more thorough decision about the technology fit of a solution.
5.3.2
Assess Startup Solutions
  1. Establish a structured approach to assess the strategic fit of startup solutions to the problem of a Venture Client.
    While the Venture Client Unit has presented a proven approach to identifying startup companies in the global startup ecosystem, it lacks structure in evaluating startup solutions as well as their maturity. Introduce a Problem Solution Fit Matrix and increase consistency in the selection process of startup companies according to specific criteria. Conduct Q-Checks with startups (w/o NDA) to quickly evaluate maturity as well as partnership readiness. Ideally, collect further information (e.g. product deck) that can be collected for the Venture Client as well as the Venture Client Unit. This would enable the Venture Client Unit to stay in the driver’s seat of the assessment and as a single point of contact for both startups as well as the Business Unit.
  2. Assess startup solutions in detail before setting up Product Demos.
    In order to ensure a sustainable decision about the leading startup company, the Venture Client must be aware of all existing technological approaches and available startup solutions. Conduct Product Demos only with leading startups and exclude companies that do not fulfill the Venture Client Unit’s requirements (maturity, startup definition) to increase the adoption ratio. Brief the Business Unit and the startup on the Product Demo so that only relevant use cases will be discussed.
  3. Document the startup assessment process by defining a set of coherent deliverables.
    Systematic documentation of the startup assessment phase is extremely important for sustainable decision-making and faster adoption. Be selective and enhance competitor analysis. The founding and investment stages are the quality assessment criteria of a startup. Startup VC funding functions as an externally leveraged R&D budget and often entails a higher product maturity.  Guide the end-user (= problem owner) seamlessly through all phases of the process and enable an informed decision-making process for the leading startup solution.
5.3.3
Buy Startup Solutions
  1. Standardize pilot scope definition.
    The definition of the pilot scope, deliverables, KPIs, and milestones needs to be standardized and conducted by a professionally trained person from the Venture Client Unit together with the Venture Client. Setting standard questions, requirements, and documents for pilot scope definition increases efficiency, takes effort off of business areas, and guides less experienced business areas in establishing excellent pilot projects.
  2. Guide the definition of a pilot project in accordance with the Business Unit.
    To ensure the Venture Client is able to make a well-informed decision on the adoption strategy, fundamental hypotheses need to be validated during the pilot project. Those include objectives and key performance indicators and can only be defined by the Venture Client. The Venture Client Unit shall guide the Business Unit throughout this process. Think about the MVP (Minimum Viable Purchase) Document in order to streamline the purchasing process with other departments with a focus on the technological feasibility of the PoC.
  3. Introduce clear PoC cost guidelines.
    As of now, PoC pricing often reaches the mark of 50k per co-funded pilot project (Business Unit+the Venture Client Unit). Introduce clear cost guidelines (e.g. hourly rates must be included, no payment for pure meeting time) and include rules to avoid IP generation in a PoC (e.g. ownership of prototypes, testing of existing technology, no consulting). Implement a budget limit, e.g. $25,000 (=approval threshold) for projects, and negotiate pricing with startups on a case-by-case basis based on their PoC proposals. A PoC cost ruleset will ensure that the Business Unit is financially responsible and is able to make strategic decisions based on the business impact of each project. Furthermore, include rules to avoid IP generation in a PoC (e.g. ownership of prototypes, testing of existing technology, no consulting). Think about the MVP (Minimum Viable Purchase) Document in order to streamline the purchasing process with a focus on the technological feasibility of the PoC.
5.3.4
Pilot Startup Solutions
  1. Focus on value-adding involvements during the pilot project phase.
    Rather than constantly engaging, the Venture Client Unit should focus its resources on standardized points of engagement during pilots, where their help is of value. Otherwise, the scalability of the unit and ownership of the project is at risk.

    Important Meetings: Project Kick-off, 2-3 Milestone Meetings, Evaluation Meeting, Conclusion Meeting.

  2. Document the pilot project by defining a set of coherent deliverables.
    Today, the Venture Client Unit lacks systematic documentation of the pilot project, which is extremely important for sustainable decision-making and adoption exercise. We suggest defining a standardized set of deliverables to document and prove the learnings, achievements, and success stories from pilot projects (e.g., with a pilot project report.

  3. Ensure your company’s progress in the pilot project by setting a clear timeline.
    Having dedicated kick-off, milestone, and conclusion meetings, as well as standard documents to fill in during and after the pilot project is crucial to collect all relevant data and setting the basis for fast adoption.
  4. Prepare adoptions at the right time.
    A clear adoption roadmap and stakeholder map help involve the right people at the right time. Often the success of the pilot becomes visible before the conclusion. Involving important stakeholders (e.g. purchasing, IT, legal) in kick-off and evaluation meetings is necessary to enable a smooth adoption. Increase the Venture Client Unit’s visibility by inviting a larger stakeholder circle (e.g. Business Unit Management) to respective PoC Conclusion meetings.Involving important stakeholders (e.g. purchasing, IT, legal) in kick-off and evaluation meetings of startup pilot projects is necessary to enable a smooth adoption.
5.4

Venture Client Technology & Data

  1. Implement Venture Client specific-software.
    Implement a set of Venture Client-specific software and data technologies to foster efficiency and quality, and to measure and monitor the Venture Client Unit impact and its operational quality. A specific Venture Client Management System supports the Venture Client process end-to-end, guiding the user seamlessly through all phases of the process and enables an informed management of the Venture Client Unit. This will increase efficiency in operations of the Venture Client Unit, increase the quality of all gathered data and improve the usability for the Venture Client Unit team.
  2. More than a reporting tool.
    Appropriate Venture Client technology provides guidance and supports the daily work of the Venture Client Unit team as well as serving as an interface to all other stakeholders within your company, e.g., problem owners in the business areas. Thus, the Venture Client Unit shall switch from reporting tools to more comprehensive Venture Client Management technology.
  3. Leverage Venture Client data.
    A Venture Client Unit needs to have a well-defined set of dedicated Venture Client data forming the basis of its processes. The Venture Client Unit shall define and gather Venture Client data from specialized data and/or service providers as well as along its operations. In addition, the Venture Client Unit should consider starting networking with other Venture Client corporations to leverage insights, such as startup ratings and performance metrics.
  4. Extend the Startup Intelligence portfolio.
    Using data gathered along the startup partnering process and data from the global startup ecosystem generates startup intelligence that enhances and extends the portfolio of the Venture Client Unit services for your company.
5.5

Startup Culture

  1. Create a dedicated Venture Client Unit Brand!
    Startup Partnering activities must be branded internally as well as externally to attract leading startups and identify impactful problems. This generates recognition and trust in the startup ecosystem and, even more importantly, within your company. Establishing a dedicated Venture Client Unit brand is an important vehicle to drive pull for startups from your company Businesses, and also, adoption of and impact via startup technology. The brand should clearly convey that Venture Client Unit is part of your company, to gain relevance in the startup ecosystem.
  2. Have an official definition of startups
    Use a set of specific attributes to clearly distinguish a startup from normal companies. Do not use “age” as a defining attribute of a startup. Use Venture Capital funding as a factor that determines the quality of a startup, but not as a defining attribute.
  3. Position your Venture Client Unit as a “Venture Client”!
    Brand and position Venture Client Unit specifically as a world-class “Venture Client”. This makes it easier for the internal and external audience to understand the value proposition of the Venture Client Unit. In the startup ecosystem, including VCs and startups, corporate Venture Clients have a very high standing and acceptance (“Client is King”). For other corporations, such dedicated branding has been a critical success factor (e.g., BMW Startup Garage, Open Bosch, Holcim Maqer).
  4. Create specific Branding & Promotion resources & program for the Venture Client Unit!
    Through a Venture Client Unit branding and promotion program, Business Units will gain better awareness of the strategic impact Venture Client Unit can harness from the startup ecosystem. The adoption quota and hence impact will also rise, as success stories can be created and told within your company.
  5. Use a Venture Client-specific style and wording throughout the Venture Client Unit content.
    Communication style and words should reflect your company’s position as a Venture Client of startups. For example: “Venture Client Process”, instead of “PoC Process”. Or, “We seek startups whose technologies help your company solve…” instead of “We seek out startups whose technology … can work with … your company”.
06

The Future of Venture Client

Unleashing the Power of Venture Client: Unveiling the Global Landscape and Best Practices

Venture Clients are companies that venture to buy, use and adopt startup products to solve pressing strategic problems because startups offer the best solutions. Most companies are buying products from startups. Yet without a formal and institutionalized strategy, process and resources. To become better Venture Clients, meaning to be able generate more strategic benefits faster and more efficiently from the startup ecosystem, a growing number of companies set up dedicated Venture Client Units that operate based upon a specific Venture Client Model. These include corporations such as Airbus, BMW, Bosch, Holcim and Siemens. Due to the novelty of the model, little is known about the current status of global Venture Client operations and the distribution of the model as well as its best practices. Hence, this report aimed to investigate the current state of Venture Client among two actors: Venture Clients and startups.

The State of Venture Client Report: Exploring the Dynamics of Venture Client Engagement between Startups and Companies

As this is the first report of its kind, we hope to contribute to closing a research gap and spark scientific interest in bringing the model on the research agenda of a variety of academic fields. The report sheds light on why and how Venture Clients buy from startups and vice versa, why and how startups sell their products to Venture Clients. It targets startups and companies’ representatives to ask pressing questions about the Venture Client Model: How are companies structuring their Venture Client process? In what areas and for what reasons are companies buying from startups? What resources are companies using to conduct Venture Client activities? What challenges and benefits are companies and startups facing to accomplish their Venture Client goals?

Revealing the Gap: Unveiling the Discrepancies between Startup Realities and Corporate Perceptions in Venture Client Engagement

The answers are manifold: We have seen that the terminology is still lacking behind the actual practice of buying from startups. Although many companies are already pursuing the model or elements of the process, the term “Venture Client” is not commonly used among companies. Moreover, companies are not yet aware that the distinguishing factors of startups to corporations are not age or culture. Startups are a legal entity that receive a high amount of Venture Capital funding, possess patents as well as comprise a group of industry experts. This perception is mirrored in the lacking process and resources required when conducting Venture Client Unit operations, e.g. dedicated purchasing process, involved departments (such as legal, procurement, IT), decision making, and startup assessment criteria, among others.

Unlocking Mutual Success: How Startups and Companies Thrive Through a Structured Venture Client Model

Startups on the other hand, prefer a lean decision-making in the purchasing process as well as feedback on the product from their clients, whereas mentoring is deprioritized. A clear problem definition, whether it is process- or product-related, and scalable purchase orders, is what a startup is aiming for. Conducting a structured Venture Client Model leads to strategic benefits for both the startup as well as the incumbent company. However, companies currently fail to set up clear KPIs to measure their success of Venture Client operations, e.g. Business Impact generated, leveraged Venture Capital.

Venture Client Model: Pioneering Open Innovation for Sustainable Success

The Venture Client Model is gaining traction and we expect to see your company’s growth in the Venture Client ecosystem as more and more companies adopt the model as well as specialized service providers emerge to support them. To fully realize the potential of the Venture Client Model, companies must invest in dedicated Venture Client Units and develop best practices for implementing this open innovation approach. For the next reports, we hope to conduct the survey on a yearly basis in order to see how the model evolves. Beyond that, we aim to increase the population of the survey on a global basis in order to conduct more sophisticated analysis, e.g., country comparisons.

 

The insights of this report are relevant for companies to stay ahead of the corporate venturing game and mission-critical for startups to gain new clients. What is your take?

We would love to hear about your feedback!

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You would like to learn more about the report, the Venture Client Model or 27pilots? Please do not hesitate to reach out to us if you have any questions.

07

About

7.1

Authors

Gregor Gimmy

founded 27pilots to help companies benefit strategically from startups through a breakthrough corporation venturing tool: The Venture Client model. As CEO of 27pilots, he is responsible for strategy and growth. His focus is on helping companies understand the value of the Venture Client model and how to integrate it with already existing strategic management vehicles, including innovation and venturing tools. To further advance the Venture Client model, he is deeply engaged in publishing, researching and lecturing about the Venture Client Model at leading business schools. He is an Executive in Residence at the IMD Business School and case co-author and guest lecturer at INSEAD business school. His academic research about Venture Clienting is mainly with Prof. Andreas König at the University of Passau, with whom he co-authored the first academic publication about the Venture Client model, published by the Harvard Business Review in 7/2016. He is also a frequent speaker at startup-relevant conferences such as Slush, Websummit, 4YFN and DLD.

Prior to 27pilots, he spent 6 years at BMW, where he invented and developed the Venture Client model to solve a critical challenge: How to benefit from many more top startups faster, and at lower cost and risk than possible through traditional corporation venturing. He implemented the Venture Client model by founding and managing the BMW Startup Garage, the world’s first Venture Client Unit, for 3 years. Given the success of the Venture Client model at BMW, he founded 27pilots in 6/2018. Prior to the BMW Startup Garage, he established an internal innovation strategy team known as BMW Innovation Works. Prior to BMW, he started various VC- funded ventures in Silicon Valley and Europe. Early in his career, he worked at IDEO (Palo Alto), where he helped create a new innovation model (known as Design Thinking) and transform IDEO into a strategic innovation consultancy, and Roland Berger Strategy Consultants. Gregor studied at TU Stuttgart, Harvard and the American Conservatory Theater in San Francisco.



Sebastian Schäfer

joined 27pilots in May 2021 and leads the Strategy & Structure solutions portfolio — solutions for creating and scaling state-of-the-art organizational Venture Client capabilities. His Venture Client projects range from the field of Mobility over Building Technologies to the field of Manufacturing where he assessed and conducted several pilot projects with startups. He brings in past experiences from both the public (Federal Foreign Office) as well as the private sector (e.g. Siemens Management Consulting). Moreover, he pursued study programs at LMU and TU Munich in Sociology, History and Politics & Technology before joining Stanford’s Designing Education Lab (DEL) as a Visiting Researcher. In parallel with his studies he participated in the entrepreneurship scholarship Manage & More from UnternehmerTUM in Munich.

7.2

About 27pilots

Venture Client Excellence is our passion…

The 27pilots team focuses exclusively on helping companies establish successful Venture Client competencies, such as in-house Venture Client organizational units. We are passionate about this. Our passion is what makes us the leading experts in Venture Client Solutions, including Venture Client model-specific services, technology and data.

We have established highly successful Venture Client operations and integrated our proven Venture Client Solutions at multiple global corporations, such as the BMW Startup Garage, the Venture Client Unit of the BMW Group, and Open Bosch, the Venture Client Unit of the Bosch Group.

27pilots was founded in 2018 as a spin-off from the BMW Group. As an innovation manager at BMW, our founder, Gregor Gimmy, sought out a vehicle that would help BMW to benefit from more qualified startups at a quicker rate and lower risk. Recognizing the limitations of traditional corporate venturing tools such as corporate venture capital, Gregor created a radically new methodology which he coined the “Venture Client Model”. Gregor then created the first Venture Client Unit, the BMW Startup Garage, and managed it for three years. As a result of its success at BMW, Gregor founded 27pilots in 2018 with the vision to create a comprehensive suite of Venture Client Solutions that support existing corporate Venture Client Units and help companies establish new ones.

For more information, see: https://www.27pilots.com/ 

08

Venture Client Literature

The amount of publications, from academia and business news media, about Venture Clienting is still small but growing. Here selected publications that serve to learn more about Venture Clienting.

Bächle, M. (2022). INNOVATIONEN: Das Streben an die globale Spitze. Focus Magazin. https://www.focus.de/magazin/archiv/innovationen-das-streben-an-die-globale-spitze_id_39424858.html

Beedham, M. (2019). How BMW is innovating its business to build cars for the future. The Next Web. https://thenextweb.com/news/how-bmw-is-innovating-its-business-to-build-cars-for-the-future

Besharati, B. (2019). The Two Ways for Startups and Corporations to Partner. Harvard Business Review. https://hbr.org/2019/01/the-two-ways-for-startups-and-corporations-to-partner

Bloomium. (2017). Venture client, the improved version of venture capital. http://bloomium.com/venture-client-improved-version-venture-capital/

BMW Group. (2023). BMW Startup Garage sichert frühen Zugang zu wegweisenden Innovationen [Pressemitteilung]. https://www.press.bmwgroup.com/deutschland/article/detail/T0295365DE/bmw-startup-garage-sichert-fruehen-zugang-zu-wegweisenden-innovationen?language=de

Bontems, N. (2019). Open Innovation: Bring Change from the Outside. Innovation Models. https://www.27pilots.com/wp-content/uploads/2020/02/venture-client_2019-Q4-Feature-innovation-models.pdf

Capgemini. (2020). The Next Big Thing to Boost Your Innovation: The Venture Client Model. https://www.capgemini.com/insights/expert-perspectives/the-next-big-thing-to-boost-your-innovation-the-venture-client-model/

Chapman, Lizette (2022). Startups Raked In $621 Billion in 2021, Shattering Funding Records – Cities outside of Silicon Valley show growing promise as tech hubs. Bloomberg Technology. https://www.bloomberg.com/news/articles/2022-01-12/startups-raked-in-621-billion-in-2021-shattering-funding-records?leadSource=uverify%20wall

Cision PR Newswire. (2020). Tactile Mobility Signs Landmark Deal with Leading OEM to Equip Vehicles with Tactile Sensing Technology. https://www.prnewswire.com/news-releases/tactile-mobility-signs-landmark-deal-with-leading-oem-to-equip-vehicles-with-tactile-sensing-technology-301131031.html?tc=eml_cleartime

Ermisch S. (2022). KOOPERATIONEN MIT START-UPS – Warum viele Unternehmen lieber Kunde als Investor werden (WiWo)

https://www.wiwo.de/erfolg/gruender/kooperationen-mit-start-ups-warum-viele-unternehmen-lieber-kunde-als-investor-werden/28038536.html

Gimmy, G., Kanbach, D., Stubner, S., Konig, A., & Enders, A. (2017). What BMW’s corporation VC offers that regular investors can’t. Harvard business review, 2-6.

https://hbr.org/2017/07/what-bmws-corporate-vc-offers-that-regular-investors-cant

Gimmy, G. (2018). The Venture Client Model. Maize.io. https://www.maize.io/magazine/you-want-your-business-to-grow-faster-become-a-startup-s-first-client/

Gimmy, G. (2021a). Requirements for a winning corporate venturing tool https://medium.com/@gregor_gimmy/requirements-for-a-winning-corporate-venturing-tool-7e2d7a20a2be

Gimmy, G. (2021b). What is a Venture Client company, and what is a good one? https://medium.com/@gregor_gimmy/what-is-a-venture-client-company-and-what-is-a-good-one-395494a6880f

Gimmy, G. (2022a). Kaufen statt Investieren! Wie Sie mit dem Venture-Client-Modell Start-ups strategisch nutzen.

Gimmy, G. (2022b). What is a startup? – Five attributes to distinguish startups from normal companies. https://medium.com/@gregor_gimmy/what-is-a-startup-or-where-is-my-apple-pie-9874fe19380

Haslanger, P. (2019). The landscape of corporation venturing in Germany: Insights on corporation venture capitals and corporation accelerators (No. 01-19). UO Working Paper Series.

Hubik, F., & Gusbeth, S. (2023). Autobauern droht das Ende der „Bilderbuchgewinne“ https://www.handelsblatt.com/unternehmen/industrie/mercedes-bmw-vw-autobauern-droht-das-ende-der-bilderbuchgewinne/29093452.html

Karabasz, I. (2017). “Start-ups sollen die Technik, nicht die Kultur verbessern” [Commentary]. Handelsblatt. https://www.handelsblatt.com/unternehmen/industrie/bmw-manager-gregor-gimmy-start-ups-sollen-die-technik-nicht-die-kultur-verbessern/19462260.html?ticket=ST-4017580-uLGuZFdbkaeN2CWFWjAa-ap3

Niessing, J., Capron, L., Furr, N., Balze, P., Bodner, J.,(2019.) Case Study: How Corporates Co-innovate with Startups: The BMW Startup Garage

https://knowledge.insead.edu/marketing/how-corporates-can-leverage-start-ups-against-covid-19

Niessing J. (2020.) How Corporates Can Leverage Start-ups Against COVID-19. INSEAD Knowledge

https://knowledge.insead.edu/marketing/how-corporates-can-leverage-start-ups-against-covid-19

Ombach, G. (2023). How Venture Client Units Are Revolutionizing Corporate Innovation. Forbes. https://www.forbes.com/sites/forbestechcouncil/2023/03/30/how-venture-client-units-are-revolutionizing-corporate-innovation/?sh=51563684622c

Prashantham, S. (2017). Partnering with startups: How Bayer and BMW approach innovation. The Economist Intelligence Unit. https://www.27pilots.com/wp-content/uploads/2019/10/Prashantham-2017-EIU-Bayer-and-BMW-partnering-with-startups.pdf

Prashantham, S. (2019). The Two Ways for Startups and Corporations to Partner. Harvard Business Review. https://hbr.org/2019/01/the-two-ways-for-startups-and-corporations-to-partner

Prats, J., Amigó, P., Ametller, X., & Batlle, A. (2017). Corporate venturing: Achieving profitable growth through startups. IESE Mobile World Capital Barcelona.

https://media.iese.edu/research/pdfs/ST-0429-E.pdf

Siota, J., Alunni, A., Riveros-Chacón, P., Wilson, M., & Dinnetz, M. K. (2020). Corporate Venturing: Insights for European leaders in government, university and industry. Publications Office of the European Union.

Startup Valley News. (2019). Christian Lindener: „Corporates sollten Start-ups nicht einfach kaufen“. https://startupvalley.news/de/christian-lindener-corporates-start-ups/

The Innovator. (2021). Interview of the week: Gregor Gimmy, 27pilots. https://theinnovator.news/interview-of-the-week-gregor-gimmy-27pilots/

Tischer, S. (2017). We Are Not an Accelerator, We Are a Venture Client – A Talk with the BMW Startup Garage. Munich Startup. https://en.munich-startup.de/2017/06/26/talk-bmw-startup-garage/

09

Edition & Copyright Notice

The first edition of the State of Venture Client report was published on April 30, 2023.

Copyright © 2023 Gregor Gimmy, Sebastian Schäfer, 27pilots Deloitte GmbH, EBS Universität, EBS Universität, ETH Zürich, INSEAD Business School, Universität Passau, WHU – Otto Beisheim School of Management. All rights reserved.

No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of 27pilots Deloitte GmbH, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law.

For permission requests, please contact 27pilots Deloitte GmbH in writing, addressed to information@27pilots.com.

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