Utilizing Investments of Others
How Startup Partnering, or Venture Clienting, can provide a ‘Free Rider’ opportunity.
In Brief: Startup partnering allows corporations to become "free riders" by leveraging the R&D efforts undertaken by startups without making a direct financial investment. In short: why purchase Apple stock when you can buy the iPhone directly? If the goal is to acquire a specific solution or technology, then buying the product directly offers a more straightforward path to that end.
In today's fast-paced world, the phrase ‘R&D unit’ is no longer exclusive to large corporations with extensive resources. Startups have become innovation power-houses which, small as they are, can develop and iterate ideas quickly. These days, this innovation capability is exposed to a strong network of supporters: Germany serves as a remarkable case study in this context, boasting a flourishing startup ecosystem supported by various stakeholders like (corporate) venture capital firms, angel investors, and public supporters such as the High-Tech Gründerfonds (HTGF) and de:hub initiative.
In such a supportive environment, how can corporations most effectively harness the power of startups? One intriguing approach is through startup partnering.
In essence, startup partnering allows corporations to become “free riders” by leveraging the R&D efforts undertaken by startups without making a direct financial investment. In short: why purchase Apple stock when you can buy the iPhone directly? If the goal is to acquire a specific solution or technology, then buying the product directly offers a more straightforward path to that end.
It is not to say that startup partnering is better than venture capital. The opposite is true: our startups need a strong support system to continue flourishing. It is a way to further leverage those efforts undertaken while simultaneously further strengthening the stakeholders involved.
GlassDollar Insight: Leveraged VC Through Startup Partnering Is Significant Compared to R&D
'Average VC Leveraged per Year' is calculated by dividing the 'Total VC Leveraged' by 10, since the study focuses on companies founded in 2013 or later.
The figures represent a minimum estimate as most startups have not disclosed funding amounts, and the number of relationships is likely underestimated due to undisclosed partnerships, as indicated in our Exploratory Data Analysis.
