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For a large corporation, purchasing innovative products or services from a new venture can be a source of competitiveness, but such a transaction poses technical, financial, legal, and relational challenges. To foster cooperation between a large corporation and an innovative young company, the motivation of the former must outweigh the obstacles. Evaluation criteria include competitiveness, differentiation, and compatibility with the processes of the large corporation. To persuade both a large corporation and an investor, it is essential to develop a compelling value proposition, provide strong proof of concept, and highlight an experienced team.
E. Krieger
For an investor, funding a new venture can be highly profitable when the sale or listing of the company on the stock market generates significant value. However, the inherent risks in these innovative companies are real and, for an investor, translate into a significant probability of capital loss coupled with a sustained lack of liquidity. The assessment of the team’s quality, development strategy, and execution capacity will be crucial in deciding to invest.
For a large corporation, purchasing innovative products or services developed by a young company can also be a formidable source of differentiation and competitiveness. The young company gains revenue, an opportunity to improve its processes, and a credibility label among other prospects and potential investors.
Nevertheless, the difficulties associated with cooperation with an innovative young company are numerous and can be categorized into four main areas:
- Technical Risk: Non-compliance with standards, quality issues, limited understanding by the large corporation of the supplier and its technology, difficulty in providing large volumes, etc.
- Financial Risk: Financial fragility of the young company due to generally limited equity and reduced or negative self-financing capacity.
- Legal Risk: Imbalance in contractual terms that may lead to an obligation of support from the large corporation, a change of control in the long term, and discontinuity in management.
- Relational Risk: Atypical positioning of the founders of the young company and a lack of visibility inherent in an organization navigating between agility and fragility.
The motivation to work together must be stronger than the barriers
As emphasized by Georges Liberman, a successful entrepreneur and member of the strategic committee of several innovative young companies, motivation must surpass the barriers that hinder cooperation between an innovative young company and a large corporation.
To successfully sell your offering to a large corporation, qualities similar to those required to convince an investor must be deployed: reassure, de-risk, and prove that your value proposition is substantial.
A professional investor will be more convinced by your company if they understand the value of your offering to your customers and the significance of the corresponding market.
Take care of your value proposition!
Among the decisive criteria for evaluating an innovative offering by a large corporation, you should prioritize:
- The value of your offering: Can you qualify and quantify the gains generated by your solution? This relates to the quality/price ratio and your value proposition, defined as perceived benefits minus perceived sacrifices.
- Differentiation: How does your offering adapt to the client’s needs? What is the technical innovation, and what are the accompanying services? This will demonstrate your competitive advantage.
- Compatibility of your offering: Is your offering and your company compatible with the processes of the large corporation, especially its requirements for business continuity, social and environmental responsibility, financial transparency, and risk management?
To maximize your chances of convincing a large corporation, it will be necessary to work well in advance of the issuance of future tenders. This will help limit the risk of « playing a supporting role » against a competitor who has already built a relationship based on technical and relational factors that are impossible to surpass.
It will also be essential to look for the detail that makes a difference, understand the client’s and end users’ needs thoroughly, and take into account the obstacles and problems to overcome.
Trust will essentially be based on your team
In summary, here are some key points for successfully selling your innovation to large corporations or investors:
- Develop a compelling value proposition: Explain how your innovation solves specific problems for your client. Demonstrate your impact and the gains in operational efficiency, growth, or cost reduction.
- Provide strong proof of concept: By offering a demonstration of your offering, you will reassure potential clients and/or investors about the feasibility of your innovation.
- Highlight your team: Investors and early adopter clients often bet as much on strong teams as on innovative concepts. Therefore, emphasize the experience and skills of your team.
A nuanced understanding of your interlocutors’ decision criteria and effective communication will be essential. Adaptation, transparency, and demonstrating the value created by your company will be decisive in selling your innovation to both investors and large corporations.
