How venture clienting works for startups and corporates

When it comes to growth plans and the prospects of success for startups, the term ‘venture clienting’ comes up time and again. This usually refers to the client relationship between startups and established companies. The term was coined by Gregor Gimmy at BMW, where he founded the first Venture Client Unit in 2015. Based on the success, he founded 27pilots in 2018, the first company specialising in venture client-specific consulting and technology. In this interview, he explains what venture clienting is all about and what startups and their clients need to bear in mind.

Based on this definition, the answer is simple: for all of them. Because all startups need customers! Without customers, a startup's product remains unused, it is not developed further, generates no revenue and consequently no profit.

However, startups can only attract venture clients if their products have reached a certain level of maturity that enables customers to solve their specific problem. Startups that are still in the concept phase will hardly be able to convince venture clients. The decisive factor is that the corporate venture client can use the solution, even if only to a limited extent.

When I developed and introduced the venture client model at BMW in 2014, we often bought products at the prototype stage. This allowed BMW to familiarise itself with new technologies early on and test them in real life, while the startup received revenue and valuable customer feedback.

For which companies does venture clienting make sense?

Venture clienting, meaning the use of startup solutions for products and processes, should only be considered if your own internal solutions are significantly worse or not available at all - not even in the network of established partners, such as suppliers. If a startup is only slightly better, it is better to steer clear of it. In addition, the solutions must be for relevant problems, the resolution of which promises a clear competitive advantage that can be measured in sales or profit increases.

But one thing is clear: as there are many strategic problems these days that startups often simply solve better, being a non-venture client is a risk. You run the risk of falling behind the competition or missing the opportunity to gain a decisive competitive advantage.

Bad venture clients can threaten the existence of a startup. They usually don't have a tried and tested venture client model - no venture client-specific processes and resources - which is risky for the startup. The dangers include:

• Demand for exclusivity

• Demand for the startup's intellectual property rights

• Investment rights

• Unclear or poorly formulated problems

• Pilot projects without payment

• Use of the startup as an extended workbench

• Lack of experience with venture client methods

• No access to strategically relevant problems

• Lack of scalability in problem solving

Good venture clients, on the other hand, offer enormous advantages:

• Accelerated market maturity and shorter time-to-market: startups benefit from faster market entry because they can test their products in real company environments instead of in isolated labs.

• Improved product through expert feedback: Collaboration with experienced specialists in the company helps startups to develop their products faster and in a more targeted manner.

• Access to exclusive resources: Startups gain access to technical infrastructures and expertise that would otherwise not be available to them.

• Free PR and marketing opportunities: The success of a product in a venture client company provides positive publicity without the startup having to pay for it. In addition, revenue is generated through the business relationship.

• Avoidance of investor risks and equity dilution: As venture clients do not require equity investments, the startup's equity remains untouched and potential conflicts with investors or other buyers are avoided.

• Higher exit opportunities: Many corporate venture clients strive for more than just a supplier relationship. They often want to become exclusive users of the startup solutions and therefore take over the startup in order to secure the technology completely for themselves.

For a while, there was a trend for large companies to set up their own startup incubators or accelerators. This trend has been on the decline for some time now. Why is that?

The decline in startup incubators and accelerators is mainly due to the fact that many companies have realised that these programmes often do not bring the direct business benefits they had hoped for. In other words, relevant problems that cannot be solved internally or with established partners are not solved by the startups selected for these usually expensive programmes.

The reason for this lies in the operational model of incubators and accelerators. This focuses primarily on developing the startups (through mentoring etc.) instead of identifying the really relevant problems and finding and integrating the best startups with suitable solutions. In short: instead of looking for help from startups, companies help startups.

What do companies need to consider when setting up a venture clienting unit and from what size of company is it worthwhile?

Any company can do high-quality venture clienting - regardless of its size. For example, my company, 27pilots, with less than 100 employees, utilises the technologies of dozens of startups. Often smaller companies or startups are even the first customers of new startups. The difference between small and large companies lies mainly in the resources that are used for venture clienting. The essence of the model itself remains the same. It can be compared to a human resources department, for example. Every company has one, sometimes consisting of several hundred people, sometimes only a few. But here too, they are trained and have the necessary resources and processes at their disposal.