The relationship between big business and startups is broadening. Previously startups would build with the vision of either becoming the next billion-dollar company or to be bought out by one and get a nice hefty pay cheque, like what has happened when Facebook bought Whatsapp or Oculous Rift.
But a new way of growing a startup is gaining momentum with the big end of town realising it can secure the talent and ideas within startups by partnering with them or launching internal acceleration programs. There’s more on that here.
Multinational software company SAP is one big tech player which is running internal startup programs, partnering with over 1000 startups globally.
“AS SAP we can’t do it all,” SAP global vice president for customer and partner strategy Sven Denecken said. “Sometimes there’s a very dedicated topic where you need to be very close to the topic or the client or you need specific skills.”
By partnering startups can leverage SAP’s infrastructure and technology while in return the multinational benefits from their innovative ideas.
“It is a talent pool, it is people you wouldn’t usually connotate with SAP but they’re clever, they have very good ideas and they cover areas where we currently didn’t put at our priority list,” Denecken said.
“We are focussed on other more classical things with cloud computing,” he said, adding “startups are more nimble and go into very uncovered new business”.
SAP has launched an internal incubation program and investment fund for startups and was one of the early investors in Linkedin through its separate capital investment company SAP Ventures.
He said the company has learned startups are good at figuring out what’s missing between their product offering and where to differentiate.
“Where startups today often struggle is they have a good idea and they of course pick the technology de jour which is cloud computing then they struggle to get over that hurdle of ‘do I really understand my market, do I understand my customers, and what do my customers want from technology capability’,” Denecken said, adding partnering with big business can help a startup build market compatible products with global reach.
SAP estimates it has 30 million users in the public cloud, and using SAP’s platform allows the startup to tap into that vast user base, Denecken said.
“I think it’s very helpful for our clients as well to touch in with some of those startups to solve some very specific problems for them,” he said.
“There’s a very symbiotic handshake between a startup and a company like SAP which has a platform they can also offer that business development approach that is not only technology but how to run business at a global scale.”
Previously SAP has just acquired startups in areas it sees are growing or changing. In 2012 the company spent almost $8 billion acquiring two cloud computing companies, with a $3.4 billion purchase of SuccessFactors, and another $4.3 billion on Ariba.
While the company used to do bigger acquisitions it is now focussed on the smaller purchases to “augment what we have”, Denecken said.
The company’s portfolio now has most tech areas covered and new acquisitions or partnerships will happen when the issues start to change but Denecken earmarked customer relationship management, human resources and procurement as three areas which are transitioning.
“We look at categories where we see with an acquisition where we can definitely fulfil a blank in our portfolio or leapfrog an area,” he said.
“Startups detect a small area or a niche and we say that’s a perfect addition to our portfolio.”
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