During the Corporate Startup Stars Awards Ceremony held in Paris on Dec. 16th, presented some of the main evidences emerging from the Report “Evolve or Be Extinct. Future Models of Open Innovation from the 2021 Global Corporate Startup Stars” that analyses how Fortune 500/Forbes 2000 companies interact with startups and scaleups at global level.
1) Corporate Startup Stars tend to implement a mix of actions, creating significant value for startups and their wider ecosystems, at domestic, regional and global levels
2) While performing tools and models are becoming increasingly obsolete, and thus restructured or dismissed by companies, fresh new approaches are constantly emerging, confirming that the Open Innovation arena is rapidly evolving.
3) Then for corporates it is key both benchmarking the open innovation initiatives innovation leaders run and getting ready to adjust their innovation strategies and tools.
- The vast majority (88%) of Corporate Startup Stars have a structured presence in the two most thriving global innovation hubs (Silicon Valley and Israel), or are regularly visiting (8%). Open Innovation Challengers (companies that entered the innovation arena more recently) are following suit by increasingly setting up innovation antennas (52% vs. 44% in 2020). Emerging innovation destinations include Seoul, several US hubs outside Silicon Valley (e.g. Dallas, Austin, Miami), Dubai, Singapore, China (mainly Shanghai), and India (mainly Bangalore). In Europe, the most chosen locations are London, Barcelona, Berlin, and Munich.
- Innovation Leaders are increasingly revamping their Intrapreneurship Programs, by opening them to external contributions by entrepreneurs and startups or integrating with venture builders. They impact on average 35% of the employees for the Corporate Startup Stars and 15% for the Open Innovation Challengers. That means a deal flow of about 500-1000 projects per year for the first and 100-500 for the second. Results wise, the number of projects actually implemented ranges from 5% to 10%.
- Corporate Accelerators are currently under reconsideration by the majority of Innovation Leaders: first of all, most programs shifted from Early Stage Startups to Scaleups and are going virtual; hands-on tailored support is winning on training modules; there’s a lower attention in taking equity; the batch model has been abandoned. Traditional accelerator activities are shifting towards “Innovation Labs”, “Startup Studios” and “Venture Builders”.
- Venture Builders are still a relatively new trend, as only 30% of Corporate Startup Stars and 24% of Open Innovation Challengers started their VB programs over 3 years ago. Half of Corporate Startup Stars and 24% of Challengers launched a Venture Builder in the last 3 years. A fairly large subset of corporates have no Venture Builder yet (20% of Corporate Startup Stars and 34% of Open Innovation Challengers).
- The Venture Client model is heavily adopted, but it requires a global reach to be effective. All the analysed Corporates have a structured scouting process in place at global level through which they filter through numerous startups to engage with, generating a long-list of prospects (typically, 1,000-5,000/year). 10% is usually shortlisted and analysed in-depth, a subset of these (on average 1 out of 5/10) might then enter into pilot phase. The outcomes are very selective (only about 1-2% reach the final phase). Corporate Startup Stars report to procure on average $50M-$100M per year in business from startups while Open Innovation Challengers yearly spend on average $5M-$25M.
- Innovation leaders typically invest through dedicated vehicles (Corporate Venture Fund – CVC), though with different implementation techniques, ranging from close funds to evergreen off-balance sheet approaches. Others invest indirectly by participating as limited partners (LP) into third party funds. On average, innovation leaders invest about $5-25M per year ($25M-$50M the CSS, $5M-25M the OIC), the vast majority having a CVC arm (85% of CSS, 64% of OIC), the average size being around $200-500M. The approach is global. An increasing number of companies are spinning out their CVC arms.
- Established corporates are not particularly active on the startup M&A front. Only 43% of Corporate Startup Stars and 18% of Challengers buy startups regularly (1-5 per year). On average, Corporate Startup Stars typically spend annually between $50-100M on startup acquisitions (with a few investing over $100M). European companies are still lagging behind their US counterparts. Asian companies seem to be more active.
“Open Innovation does not happen on its own. It requires top-level buy-in, a strong organizational commitment, dedicated resources and processes in place, with adequate KPIs to track progress – commented Alberto Onetti, Chairman of Mind the Bridge – . Almost all Corporate Startup Stars and Open Innovation Challengers have a dedicated Open Innovation Unit, in most cases separate from the “traditional” R&D or IT department, that directly reports to C-level executives, in most cases directly to the CEO or another CxO.”
As a matter of fact, almost all Corporate Startup Stars and Challengers (97%) implement specific processes to enable Open Innovation across the organisation and the vast majority of CSS and OIC (85% and 70% respectively) have a mid-long term roadmap in place. Finally, all Corporate Startup Stars and 66% of Challengers provide dedicated training for Open Innovation, also including specific KPIs related to innovation.
Open Innovation is a visible trend across all industries. The Energy industry sector is becoming increasingly relevant, Telcos and Electronics industrial manufacturers follow. It’s also an increasing trend among banks and financial institutions.