Startups and corporates – breaking the rules together 

Open innovation is a hot topic currently not only in Estonia, but also worldwide. Large companies are eagerly looking for innovation as the speed at which technology is disrupting industry by industry is increasing constantly, and this poses huge challenges for traditional large businesses.

Working with startups brings a considerable innovative leap for companies, as they are able to source innovative products and services, experiment with new business models and discover new market needs at a much higher speed than they would have done internally.  

How could the startup community and large companies come together to create even greater value here in the telecommunications industry in Estonia and also in the Baltics and elsewhere? We caught up with Marju Teras from Startup Wise Guys to get their insight into this hot topic.  

Why do startups and large companies engage in open innovation?

Startups and corporations speak different languages, run at different speeds, and serve different purposes in the Estonian economy but also worldwide. Startups constantly disrupt, invent new technology, and develop new business models. Established corporations are more likely to move steadily to protect their financial security. Large companies tend to hire managers while early-stage companies employ nothing but explorers.

Still, in the beginning, startups with their open offices or no offices at all, do not have the power, budget, or credibility to land big partnerships, win over millions of clients or bargain great deals. Therefore, for a startup to achieve fast growth, one way is to partner up with experienced industry experts that might lead to essential investments and open doors to a large customer base in order to test whether the invention will bring value to the customer or not. Hence, corporate partnership becomes a huge boost to startup credibility and makes the time to market much faster. Corporate partners can also help startups with public relations and branding.

On the other hand, large corporations in closed offices often lack the flexibility, speed and independence necessary for startup innovation. So nowadays we see large companies starting to engage actively with startups for new ideas, shelf-ready technology, fresh talent and a cultural infusion. And last but not least, to bring home their innovative spirit and enthusiasm.

Accelerator programs – the ‘tool’ for European telcos to boost innovation

Another trend we see is that more and more large corporations are starting their own internal “accelerator programs,” an internal cooperative initiative, designed to help startups grow over a period of several months. Some companies invest in the exchange of equity, while others impose commercial preference rights, and some like to sponsor for brand awareness. Many big-name firms like Disney, Barclays and Nike already have their own corporate accelerator programs in place, signalling a growing trend in the business world.  

Telecommunications, and especially IT, are the sectors where innovation happens at a higher speed; therefore, corporations who want to keep up with this pace must complement their own ideas with external players, including startups.  

Deutsche Telecom, for example, cooperates with startups on a number of levels. Besides their own accelerator program hub:raum, they have created a venture capital subsidiary called T-Venture, which has made over 180 investments, and currently manages a portfolio of around 80 companies.

Inside hub:raum they develop new programs in cooperation with other corporations. This year they announced joint programs such as the Internet of Things (IoT) accelerator called Challenge Up!  in partnership with Cisco and Intel, open to early-stage startups from Europe, Middle East and Africa. The main objective of this program is to help startups to go-to-market faster through joint projects, mentoring, high-value networking and corporate assets. Selected companies may also receive strategic investments and commercial support for global markets.

And another big player on the European market, Orange, the large French carrier with 240 million customers, has its own 3-month accelerator program called Orange Fab. The aim is to help startups with existing products who are looking for growth and distribution opportunities. In addition, this year they unveiled a new fund called Digital Ventures with the aim of financing early-stage tech businesses. Digital Ventures will start out initially with a budget of €20 million.  

Eesti Telekom's corporate accelerator program VUNK  – the time is right

The Estonian startup scene has always been innovative and has been producing successful niche tech companies over the last decade. And now Eesti Telekom (EMT and Elion) in cooperation with Startup Wise Guys and Garage48 have laid a new cornerstone by creating the first corporate accelerator program VUNK in the Baltics. Being an essential open innovation practice bringing together different parties developing new business models, which will hopefully impact the telecoms industry in general.   

In today’s competitive business environment, external resources is the key to being able to offer the products and services customers need, and to keep up with competitors. This initiative is a guiding light to the corporate scene in Estonia, and establishes a new cooperative mind-set between startups and large corporations. 

And we are eager to see how it will work out!  

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