Like you, we understand the advantage that an industry partner can bring to emerging technology startups, and how this can accelerate market entry and help your technology gain traction. Unlike funding from VCs or angel investors, industry partners bring crucial resources to the table: scale-up experience for manufacturing, direct knowledge of the ecosystem from its own presence in the market, regulatory expertise, and access to critical initial customer relationships.
We know you don’t need to be convinced about the benefits of industry collaboration, so it’s less a question of if, and rather more about how to find the right partner to negotiate a good deal.
In trying to level the playing field, negotiating with a big company is already a challenge for any innovative, young firm. However, for young companies with IP-based emerging technology from scientific research, finding the right industry partner and working out a collaboration agreement brings additional twists in the road along on the way to achieving acceleration and market traction.
launching seed, from extensive experience with emerging technology
teams and industry we developed a number of practical insights about finding
prospective collaboration partners.
In terms of initiating the dialogue, here are five important things to do that can help you get there more efficiently:
1. Map your gaps – it’s hard to fill them unless you can name them.
For a partnership between an early-stage technology company and an industry partner to really pay off, it needs to work for both sides. While that’s true for financial investors, the goals are more straightforward: they put in money and seek a 10x return, via a trade sale or IPO. But prospective industry partners aren’t looking to hand you $500K or $1 million and walk away with a $10 million gain on a sale. They’re doing it out of strategic interest, with the goal of using your technology in their products for the markets they serve, rather than for financial gains.
For both sides, the “fit” is king.
First, you need to work out the broad areas of your development plan. A financial investor wants to know what you’ll do with the funds and what your timeline is. Strategic partners want to know that too, but rather than simply financing your development, e.g., the purchase of equipment, hiring consultants or funding a lease, they can make in-kind contributions of valuable resources. These can be cheaper and faster to get than by raising money and converting it to what you need. You also gain not just physical equipment or analytical services, but initial customers, regulatory knowledge, scale-up insights, and so forth. First do yourselves a favor and do a real gap analysis and figure out what you need that a partner can bring to the table. Below is a link to an example of a one-page results summary for an H2 storage technology company.
2. Think (and write) like an industry tech scout to present your company or technology.
Tech scouts are bombarded with technology offerings and exciting new inventions. Another densely written, 5-page technology and business description, with 10 pages of back-up slides may not get the message across in order to get a dialogue going.
Explain the product’s value proposition, the needs it fills, and what it replaces in the market
The most effective way to get tech scouts attention is to give them specific examples of how you improve on existing market solutions. Use an attention grabber – a simple statement that impresses and supports why your technology or company deserves a deeper look. Within the constraints of non-confidential information, don’t be afraid to get very technical about what makes your technology so good, and how it stands out from the competition.
Clearly state the development stage – proof-of concept, lab results, market-ready, and so forth. Don’t forget to mention what markets you are targeting and how large they are. It’s good to mention the advantages your technology has over the status quo and competitors. Note regulatory requirements to be met, if any, to bring your technology to market. State achieved milestones, including any funding or awards received and any important publications – they are great proof of your commitment and help validate your concept and business model. Don’t be shy!
Make your collaboration goal clear, put that gap analysis you did to work for you.
Finding the right industry partner for an emerging technology company is much more like dating than finding VC money, and don’t forget why: prospective industry partners are interested in long-term strategic benefits from the technology. Make sure they know what makes your technology special, and what you want from an industry partner. Though it may be obvious to you from your gap analysis, it won’t neccesarily be obvious to them.
You can talk about the funding you’re looking for, but unless you connect it to development tasks so that a tech scout can understand it – you’re missing a huge opportunity. Keep the collaboration goal simple to reflect what you want to achieve from the partnership – look at the gap analysis you did, e.g., seeking a partner to test integration of your product or material into finished good.
Limit your text
Be merciless with editing text: make your message lean and mean – and make sure it fits on just one to two pages. No one has the time to read through lots of text – especially if they’re not yet sure about the potential fit. Stick to bullet points whenever possible (and not six lines long!), and make liberal use of tables, graphs and images.
3. Compile your potential partner list.
Most startups can produce an overwhelmingly long list in 20 minutes; the trick is to put those companies in order of likeliness of a fit. If you’re not sure and it’s a guess, go with it. Then take your list and do some research on each of their websites. It’s not just hard factors like areas of interests, targeted markets, key innovation resources, but also their vision and culture that are important factors to include which sometimes get overlooked. See where they have research relationships, or from where they have licensed in technology. It will not only be easier to collaborate with people who share your values, but you might also avoid potential misunderstandings.
4. Protect your IP.
Trust is a very important part of every successful partnership, but at the same time you need to make sure that your IP is properly protected. Never disclose any sensitive information before signing an NDA. If you’re affiliated with an institution, ask the Technology Transfer Office if they have a ready-to-go form or use our free two-way NDA.
5. Figure out the best way to reach them.
Tech scouts come in all stripes, but they are often very hard to get in touch with. Use any common point you have, shared contacts via LinkedIn, industry associations, academic connections and so forth.
When a partnership has been launched regular meetings should be scheduled to allow strong two-way communication between you and your industry partner. Follow-ups and feedback is a best way to avoid failure of the partnership you spent so much time establishing. We’ll post more on this later. Any questions? Just drop us a note.