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MATCH-MAKER VENTURES
The age of collaboration
à Corporates and Startups need each other!
23.05.2016 Vienna
2
01 Welcome to a new innovation reality
02 Scale is king
03 Age of collaboration has just begun
04 Corporates: Get up and Corp-Up!
05 Startups: It’s on you too!
3
01 Welcome to a new innovation realityà Rate of disruption is accelerating and corporates are being
hit hard
à Startup impact impact increasing and they are here to stay
à Corporates risk following falling into the same old traps
4
Entry year of today’s Fortune 500
Rate of disruption is accelerating: Corporates are hit hard01
Source: Match-Maker Ventures and Arthur D. Little analysis based on Fortune 500, 1955-2015 1) Selection 2) Change in methodology in 1995
5
⦿ There is no hype going to explode like in the dot-com period
o US funding per internet user has been roughly flat since the dot-com bubble burst
o Tech funding as share of US GDP amounts to only 2.6% today compared to almost 11% in 1999
⦿ Increase in VC funding is based on actual increase of the market sizes and actual market potentials – not (purely) based on fantasy
2016 ≠ 2000
Startups’ impact is increasing and they are here to stay01
Source: Match-Maker Ventures Corp-Up study 2016
6
02 Scale is king
à Being a startup is tough– most won’t survive
à Scaling is the key challenge – manage your growth
à Europe is suffering from fragmentation and is falling behind
7Source: CBInsights 1) Deals in Q1 2016, others disregarded
⦿ The life of most startups isn’t the high-life many people envision it to be – in reality, few startups make it
⦿ Out of 10 startups conducting a seed/ angel investment, only one startup will reach Series E financing or beyond
⦿ Although numbers on startup failure highly differ, the 1:10 ratio relates with the average success numbers known from Venture Capital firms
Many startups will fail1
Being a startup is tough: Most won’t survive02A long way to become big
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⦿ Europe is only home to 17 unicorns. This is less than 20% of the US unicorns, and just slightly more than 50% of Chinese unicorns
⦿ There is also a lack of risk capital: VC investment in Europe is on average 84% lower compared to the US and 26% lower compared to Asia (2011-15)
⦿ Many startups in Europe that have gained initial traction are therefore trying to move to the US
Source: CBInsights, 10.05.16
Europe lags behind: We have a problem02Lack of risk capitalNumber of unicorns by origin
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Average customer base per telco (millions)
Scaling in Europe is a challenge
European startups suffer from market fragmentation02
Source: Match-Maker Ventures 2016
⦿ Legal, regulatory, and standard business procedures still protect national markets
⦿ National incumbents in Europe (in particular in smaller markets) don’t feel the same pressure to innovate as in international markets and essentially leads to a time impact of innovation
10
03 Age of collaboration has just begunà All try, few succeed
à Choice is yours, but take it carefully
à Shifting from financial focus to creation of tangible business impact
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Strategic importance and interest in collaboration are high03Strategic importance of collaboration
Source: Match-Maker Ventures Corp-Up study 2016
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Description Startups1
Business partnerships ranging from supplier relationships to joint product developmentCorp-Up 63%
Corporate-hosted events for startups often in competition format
One-off event 37%
Business support programs for early-stage startups in exchange for equity
Accelerator/ Incubator 25%
Direct investments in startups in exchange for equityCVC 24%
Acquisition of a startup by a corporateM&A 7%
Corporates1
55%
38%
45%
41%
41%
Collaboration vehicles are manifold: Corp-Up in favor03
Source: Match-Maker Ventures Corp-Up study 2016 1) Having already engaged in the respective vehicle
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Corporate’s objectives for collaboration
Source: Match-Maker Ventures Corp-Up study 2016
03Creation of real business impact gets ever more important
⦿ Many corporates still focus on equity collaboration, which is not aligned with their objectives
⦿ Equity has an inherent issue: Instead of focusing on creating business impact for your customers, you are inclined to focus on valuation increase
14
Did the Corp-Up produce the results expected (in %)?
Source: Match-Maker Ventures Corp-Up study 2016
03But most corporates are not able to grasp it
⦿ Startups and corporates evaluate Corp-Up very differently indicating an overall lower expectation by startups
⦿ Corporates’ Corp-Up performance is poor: Only 30% reach results in 12 months, 40% never
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Corporates need to work on their perception
Source: Match-Maker Ventures Corp-Up study 2016
03First word corporates about startups First word startups about corporates
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04 Corporates: Get-up and Corp-Up!à Ensure top management commitment and assign clear
accountabilities
à Act fast, take decisions and allocate sufficient resources
à Involve business owners early on to ensure successful onboarding
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Top management commitmentEnsure a long-term focus to prevent the initiative from being abandoned after the first challenges arise
Clearly assigned accountabilityAssign end-to-end accountability and ensure internal empowerment
Sufficient and appropriate resourcesAllocate both human resources with relevant skills and sufficient time as well as financial budget
Agility in set up and processManage the time challenge by matching objectives with vehicle and enabling decisions
Strong involvement of the business ownersEnsure that business owners are involved throughout the entire process
Corporates should adhere to five key success factors
Source: Match-Maker Ventures Corp-Up study 2016
04
18Source: Match-Maker Ventures Corp-Up study 2016
What are the key challenges in Corp-Ups? (2 mentions max.)
04Culture related aspects are of highest importance
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05 Startups: It’s on you too!
à Know when the opportunity arises and grasp it
à Enable decisions by validating the joint value creation potential
à Remain flexible, but know when to pull the plug
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Know when you are readyShift your focus from simply offering capabilities to being able to deliver a product or service
Be preparedTry to better understand the corporate and form a hypothesis of the joint value creation potential
Be patient and persistentPlan for delays and changes, as corporates will never have the turn-around times of startups
Ensure your independenceDraft alternative courses of action early-on and be prepared as you can easily be swept away
Keep on fightingInvest time and resources if you want the collaboration to prosper – personal relationships are important
Know when to pull the plugEnsure your time is wisely allocated - be selective and kill limited opportunities
Six key success factors for startups
Source: Match-Maker Ventures Corp-Up study 2016
05
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Collaboration remains positive: 100% want to collaborate again!
Source: Match-Maker Ventures Corp-Up study 2016
Would you collaborate again (in %)?
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BACKUP: Solid basis for our report
Match-Maker Ventures Team 1,200
Partners (Arthur D. Little and Telecom Council of Silicon Valley) 300
Startups 100
Corporates 100
Industry Stakeholders 100
1,800
About 400 participants, out-of which 177 corporates (40% C-level), 103 startups (80% founders) and 82 industry stakeholders from more than 50 countries
Online Survey
39 individual interviews elaborating on the collaboration process more in-depth. More than 80% of interview partners were either in the C-level management or owners of their company
1:1 interviews
Our primary research was complemented with our extensive experience in this field as well as numerous hours of desk research
Experience & desk research
Approach Investment
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We are here to clarify any open questions
MM Ventures GmbH, Türkenstrasse 25, 1090 Vienna, Austria
Your contact
Dr. Nicolai Schaettgen
Managing Partner
Mobil: +43 664 853 9962Email: [email protected]