GenerationS Director Ekaterina Petrova: startups can deal with ambitious corporate tasks

From AIRBUS to La Poste

Corporate accelerators in Russia have recently become a very fashionable topic. Some two or three years ago we had to explain to corporations what a startup was and what benefits it could bring to the business. But now large companies have started to look at startups themselves and build communication with them in various formats.

With the help of startups, corporations can handle ambitious tasks related to business development. At the same time, they can look not only for the technologies and products to enter new markets with, but also for employees with unique competences that are difficult to find by ordinary recruitment.

In this regard, it is useful to learn from the experience of foreign corporations, such as the aircraft manufacturer AIRBUS. In 2018, they became our partner (with the support of Generation S, the corporation started recruiting for their AIRBUS BizLab accelerator in Russia. - Inc.). Their accelerator model has several advantages. The team works closely with all the business units of a company and understands what technologies to look for based on clear requests.

Moreover, Bizlab aims at accelerating not only external projects, but also the projects of its employees. Since 2015, more than 70 startups and about 50 internal projects have gone through the accelerator. The corporation managed to build the infrastructure to search for startups not only in Europe, but also on other markets. As a result, Airbus has a constant flow of startups with fresh solutions. Approximately 700 applications from over 60 countries are submitted for selection.

The French company La Poste also successfully works with startups. It wasn't our partner yet, but we studied their experience. The La Poste accelerator is also a separate entity within the corporation. Its team has managed to set up a process for the swift integration of a startup within the state-backed entity. They quickly resolve the issue of financing startups and integrate their projects into the existing chain of postal operations. A prerequisite for this was that French Post had seven years ago adopted a strategy for the rapid development of new services. Smart cities, healthcare and banking services were singled out among the main areas of activity.

Of all the possible ways to work with startups, La Poste has chosen the most ambitious one: the creation of an accelerator in the form of a subsidiary with a budget of about 10 million euros. The fact is, the postal industry is now facing new challenges. Post offices need transformation - this is due to the decreasing frequency of their use and the rapid development of online services. So, in 2014, the accelerator Start in Post was launched. Over the last five years, more than 1,200 startups applied for participation in the program, and about 70 companies were selected. These companies have attracted over 100 million euros in investments.

As a result, Start in Post has become a resource for tracking trends at an early stage, changing corporate culture and developing partnerships. It is the world's first accelerator of the postal industry and one of the largest corporate accelerators in Europe.

There are successful cases in Russia too, such as the MTS StartUp Hub accelerator. Its head is a fairly young and ambitious man (Dmitry Kurin. - Inc.). He provided rationalization for his strategy to the CEO, and was given the opportunity to manage the process of integrating startups into the company's technological processes. Now it is one of the most successful Russian corporate accelerators. Not so long ago it started the search for projects on foreign markets and announced the establishment of a venture fund.

Metallurgy vs. IT

There number of mature startups has increased in Russia. There was a period when all startups were concentrated only in universities: they had good R&D products designed, but were completely unsuitable for business. The companies took these R&D products to themselves, and then they didn't know what to do with them. At RVC we packed such startups up and created a commercial product from them, then the number of more developed projects in companies began to increase: we saw an annual growth of 15 - 20%.

Traditionally, corporations are more interested in IT startups. This is due to the fact that such startups can quickly reconfigure their processes, adapt the technology for use in a particular company and take it to the next level. In this regard, it is especially convenient for banks and retailers: they can see if they have a successful startup case in a month or two. It is necessary to understand that even when working with startups corporations are not willing to take risks, so the rapid testing of the technology of a project is often the decisive criterion. There are fewer startups in industrial sectors, but recently good projects started to appear in metallurgy and energy.

In metallurgy, Alrosa has the longest experience of searching for and selecting startups. This corporation has its own innovation center in Yakutia, it has the longest experience in the metallurgical sector in working with startups, and over the past few years it has demonstrated to the market its success in introducing new products (the company has been holding a competition for innovation projects since 2012. Selection of startups for the seventh competition in 2018 - 2019 was held on the basis of Generation S. - Inc.).

Other companies are still trying to gather a funnel of projects and assess the scope of the market in order to decide whether they should create a corporate fund. Some of them enter the market with a request in a narrow field, others - in a wider one, but most importantly - such request have started to appear.

Stars on the market

Many startups in Russia already understand that corporations are actively looking for technologies and are changing their business models. Five years ago, when coming to work in a corporation, quite often a startup was happy to have a contract for some 100 thousand rubles. In this case it could test its concept, understand if the market needed it and find its first customer. But now startups have learned how to bargain and take the position like: "I already have pilots with big companies, so my capitalization and the value of the project is x10 of the actual value." Accordingly, cost estimates are also increasing for pilot projects.

It is difficult for corporations to talk to such a startup because they do not always understand its potential for development. To determine that a startup is really worth the investment, a detailed analysis is required. There is no need to invest large sums in the project immediately. It is necessary to act gradually, step by step: give it a small task, and after its completion proceed to the next step. If it is industrial production, it is necessary to understand at what stage of the production chain the startup can be useful to the corporation and how painlessly it can be implemented. In the third - fourth year more investment can be made.

Corporations often have exaggerated expectations: they think that the startup does not need to be managed. Many people think that the founders can be given money and in two months the team will come up with a ready solution. But it doesn’t work like that. In order for the integration of a startup to be successful, it is necessary to set up milestone points for control, to track where difficulties arise and what needs to be adjusted in the project’s development strategy. In this case, representatives of business units act as corporate mentors in a joint project.

There is another difficulty: when there is no person who can set a clear business task for a startup. Then the founders of the startup and the company's management will speak different languages, not understanding what their common goal is. Here adequacy on both sides is needed: the startup must be ready to adjust its solution to the customer's production cycle, and the corporation must find an employee to help it in this process.

For employees to help the startup with integration, they need to be motivated. In our experience, if the CEO says, "I want an accelerator" and others do not want it, it will be very difficult for the company to launch the process of searching for and selecting new projects. It is necessary to train employees, explain to them why it is important, to form motivation schemes for them.

Searching for prospects

Many corporations do not want to spend much time on growing a technology. At the sowing stages corporations invest less and less, most of them expect the return on investment in 2 - 3 years, and some - in a year. Even the accelerator is already being evaluated in terms of financial investment efficiency.

If a company still wants to invest in a startup at an early stage, it should invest time, not money. We have one company that invests at early stages. Its management looks ahead and thinks that in 5-10 years, once the current market is already full, they will need to develop new areas of business. By that time they will have already entered the market with new ready-made solutions and will immediately start selling them.

In order to attract the attention of a corporation, startups at an early stage need to come up with a finished product that can be modified to meet the corporation’s objectives. There must be a clear understanding as to what kind of client - not only the industry, but also a specific company - you are looking for, and you then must apply to this company with a clear proposal. Like the corporation's management, startup founders need to be able to see the future: to understand what is important to do in the business so as to be better than their competitors.