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Let’s Be Friends – Relationship Advice from Venadar’s Mark Kaiser

uhohspoonIn my years of initiating relationships and negotiations with big companies and emerging companies, I’ve seen some incredible results from these partnerships. I am struck and sometimes amused, though, by stories entrepreneurs have told me about being approached by big companies, and by how big companies are often surprised by what entrepreneurs ask and do.  I‘d like to share some of my favorite anecdotes as a way to help both big companies and entrepreneurs have successful encounters.

Three’s… er, Seventeen’s a Crowd

As a favor, I was asked to tag along on a dinner a Fortune 500 company scheduled with a successful entrepreneur to discuss the potential for a partnership.  The dinner was hosted at the Ritz Carlton, and when I arrived I found that I wasn’t the only person invited – 17 people from the big company were also asked to “tag along”.  You can imagine how intimate a conversation of 17 on 1 felt.  Here are a couple of suggestions for the next meeting: 1) keep it small and don’t overwhelm the small company; and 2) choose a venue that is appropriate for someone who is trying to make payroll.  Entrepreneurs already think big companies have unlimited funds, so picking up the tab for 18 people at a Ritz Carlton for dinner only proves they are right!

#I’mGoingToDisneyland!

After they scheduled a first meeting and met with an entrepreneur, another client called me to complain that the entrepreneur posted on Facebook and Twitter he just met with “ABC Corporation” and they agreed to do a deal together.  A lot of entrepreneurs are into shameless promotion because “buzz” is important.  That doesn’t excuse the behavior, but care should be taken to not say or do anything that you wouldn’t want broadcast far and wide before a confidentiality agreement is in place.  Until the NDA, nothing is “off the record”.  Talking out of school or sharing confidential information (whether an NDA has been signed or not) is not a good way to advance your cause if you have any genuine interest in working with a particular big company.

Practical Advice for Entrepreneurs and Big Companies

I could go on and on… but here is some practical advice for both big company folks and entrepreneurs:

Big company: Entrepreneurs have a love/hate relationship with you. On one hand, they admire what you have accomplished and would like to be a billion dollar company just like you – on the other, they fear you will “steal” their ideas.  Start with a “low risk” conversation about how you may be able to support the entrepreneur, and, if available, point to your track record of working well with partnering and investing in start-ups.

Big Company: Hard to believe, but It’s usually not about the Benjamins. While some entrepreneurs desire access to capital under reasonable terms, more often they are interested in access to your distribution/customers to grow their revenue. With some exceptions, they don’t necessarily want “help” with their supply chain, HR, your purchasing power, or advice on how to run their business.  Listen and offer to help with things the entrepreneur really might value.  You are starting a business friendship.  Be a friend.  You are not in a purchasing transaction.

Entrepreneurs: If I’ve said it once, I’ll say is a thousand times, avoid exaggeration like the plague.  Whether you have 23 customers or 12, you are still a small business.  Ditto for 43 employees or 27.   If the demo is just a prototype, say so.  The truth is always better than something you make up.  You might be surprised as the big company might just be able to help you with your real problems, not the ones a vaporware story might imply.

Big company: Entrepreneurs work in real-time.  Set realistic expectations and if things are going to move slowly, tell the entrepreneur why.  One deal we were working on recently needed the approval of the CMO.  He was on a three-week vacation and doesn’t work when he is on vacation.  It would have been better to say that upfront than “go dark” for four or five weeks, which is a lifetime for an entrepreneur.  To an entrepreneur, a vacation is special and to not work when away is unheard of.  Going dark for more than 24-48 hours without giving advance notice may cost you a relationship.

Entrepreneurs:  Don’t be afraid if a representative of a big company gets in touch.  Be guarded, but it’s probably a good thing.  And at first, don’t tell anyone anything you are uncomfortable sharing.  My rule of thumb is don’t share anything you wouldn’t share with a good, well-qualified customer or prospect in a sales call.  A confidentiality agreement is just like a fishing license, but a fishing license doesn’t guarantee you will catch a fish.  It protects confidential information that is shared, but it doesn’t require you to share any information at all.  It is okay to say “I am not comfortable sharing that information at this time” or “before I answer, I am curious why you are interested”.

Proverbial Win-Win

Keep in mind there are many dialects in almost every modern language – in business partnerships, there is the dialect of the big company and the dialect of the entrepreneur.  Listen and learn how to understand what each other is saying (I still have a hard time understanding someone from the Bronx, or Alabama), it’s the key to starting a new friendship with someone who might help you create the next billion dollar business.

Brands Under Attack

McCormickUnderAttack

Your business is under attack – if you don’t think so, consider this. During a recent conversation, a colleague shared a quote he read from a Unilever VP who said, “I’m not losing share to P&G and other CPG companies.  I’m losing it to small players who are finding niche products.”

The VP has got it right.

Consumer goods companies are facing “death by a thousand cuts.” Brands are under attack. Market researcher Mintel says the number of new packaged goods introduced each year—everything from food to cosmetics—has grown more than 30-fold over the past 50 years. And IRI and Boston Consulting Group report that CPG sales grew to $670bn last year, except half of those sales were made by small to mid-sized companies.

The recent news about Unilever’s intended acquisition of The Honest Company could put Unilever in a pole position in the fast-growing “natural” or “green” cleaning products and diaper market. Honest was created to confront mainstream products that typically use harsh chemicals. More importantly The Honest Company’s Direct-to-Consumer business model with auto replenishment will allow Unilever to build a new platform, extend their existing brands into home delivery, and provide them valuable data to fuel new product development.

Someone is gunning for you

Entrepreneurs recognize unmet needs very early because they are often close to the problem – in the case of The Honest Company, founder Jessica Alba was inspired by the birth of her first child and her own experience with childhood illnesses to create a company that provided safe alternatives to the usual baby products. The current products or services not only work for these entrepreneurs personally, they see a way to make improvements to, or use an existing product in a different way. While they may dream of selling to a Fortune 500 company someday, most entrepreneurs have 2 aspirations:

  1. Become a $100 million company; or
  2. Become a $1BN company

The best entrepreneurs are too busy building their business to participate in competitions, exhibit at trade shows, or generally schmooze. For many successful entrepreneurs, partnering with any big company is not a priority. Recently, cofounder Nikhil Arora said of his start-up food company Back to the Roots, “How do we build in some way the next Kraft? How do we build a brand that outlives all of us, and how is that going to impact the food system that can last generations?”

And then there’s Maddy Hasulak, the Chief Love Officer of Love Grown, who made Forbes’ 30 under 30 by thinking outside of the cereal box – she makes breakfast cereal out of navy, lentil, and garbanzo beans. Maddy states in a recent interview, “We didn’t want to just be a Raisin Bran or a Cheerio; we want to innovate in a category that’s really been stagnant… And so we totally revolutionized breakfast by making the first wheat-free corn-free breakfast cereal, which has higher protein, higher fiber, and they totally taste !” While still working at Wells Fargo, she approached City Market, a subsidiary of Kroger, directly for advice on how to get on their shelves. Within 2 months her product was on an end cap in one of their stores, and within 6 months Love Grown’s products were in 80 stores.

It’s difficult to stay ahead of consumer preferences.

Due to consumers’ rapidly changing habits and evolving demands, consumer packaged goods companies are hard pressed to innovate and offer products that cater to specific tastes or a set of principles. Large CPG companies are hamstrung by their legacy systems and traditions, lacking the nimbleness to deliver quickly. Consumers want products that are authentic, focus on health, contain natural ingredients, sustainably sourced, easy to access and personalized. Deloitte’s American Pantry Study found that 81 percent of Americans will pay a premium for healthier products, and 55 percent are willing pay more for eco-friendly options. Unilever understands this, which is why they are talking to The Honest Company and have acquired Seventh Generation.

How do you anticipate an attack?

We recommend measuring entrepreneurial activity, particularly activity outside of measured channels such as Nielsen and Symphony IRI, while there is still time to do something about them. Where there is smoke, there is fire. For most client engagements, it is not unusual for us to discover hundreds of unique, emerging, independent brands working in the spaces occupied by our client’s brands. For a health & wellness client, Venadar curated a list of emerging and early stage brands across 6 categories who were focused on a common goal: products and services to enhance our aging population’s quality of life. Starting from over 635 companies, Venadar created product portfolios to address the transitions of aging.

Your next competitor will likely be an innovative entrepreneur creating solutions that are more relevant and more resonant with your consumers, and they are creating them more quickly than you. This has already lead those consumers to turn elsewhere. Small players will continue to find niche markets, so it’s important to figure out a way to discover what’s emerging, whether it’s information to fuel a CVC effort, drive strategy or to inspire internal innovation.

Innovation’s Best Kept Secret

venadar dictionary

Venadar is a portmanteau of the words Venture and Radar: Venture because we live deep in the entrepreneurial ecosystem of corporate and venture capital investing and partnerships; and Radar because we have a process and track record for detecting the presence and direction of innovative product and service solutions before they come to the attention of the broader market.  In fact, the Venadar Radar is consistently discovering innovations 3-7 years ahead of the market. 

Search vs. Discovery

We are not a search firm with a tired database powered by a search engine, or a consulting firm with the same prediction of the future for everybody – we discover the emerging companies that have real solutions to the real challenges our clients are facing today. Seth Godin writes in his blog post Search vs. Discovery:

Search and Discovery are not the same; in fact, they couldn’t be much more different.

Search is what we call the action of knowing what you want and questing until you ultimately find it.

Discovery, on the other hand, is what happens when the universe (or an organization, or a friend) helps you encounter something you didn’t even know you were looking for.

The Value of Cross-Pollination

We’ve been told the real value we bring is the cross-pollination of ideas – that is, discovering something “over there”, and teaching and encouraging our clients to repurpose or use it “over here.”  Early on, we were asked to help create “Baby Monitors 2.0” for a client. We found the innovation that was key in the home security industry. In the rearview mirror, it was an obvious fit. We also bring value in the way we craft partnerships. When you create a new billion-dollar opportunity, there is plenty of room for everyone to win. We are skilled in designing corporate-entrepreneurial partnerships, enabling them to be wildly successful and making dreams come true.

Innovation Talent Scouts

We began business over 10 years ago as “innovation talent scouts” who assisted large companies looking to develop or launch fast-to-market products, services and new business models by discovering, recruiting and partnering with entrepreneurs with extraordinary product or service solutions.  As our Fortune 500 client base grew to include some of the world’s most innovative companies, we expanded our services to include the formation of corporate innovation centers, the creation and management of target acquisition pipelines, and the execution and ongoing management of client investments and partnerships. We are now in the business of accelerating corporate growth and addressing competitive threats and customer/consumer risk.   We love to fish and love teaching people how to fish.

At our core, we support corporate “external innovation” by discovering innovations created by emerging companies who would benefit from a relationship with a larger company.  We have over 100 “innovation scouts” in 65 countries (including people on the ground in each of the EU countries, India, Mexico, Brazil, Japan, China, Vietnam, South Korea and others) who fuel our clients’ innovation pipeline with discoveries, and our team has an unsurpassed record of executing successful corporate and business development activities on behalf of major corporations and clients.

Southeast Corporate Innovation Hub

While we have a global reach, we are fortunate to be headquartered in Tech Square, adjacent to The Georgia Institute of Technology in Midtown Atlanta.   Our neighborhood has the highest concentration of startups, venture capitalists, research labs and business incubators in the Southeast with over 2 million square feet of academic, research and innovation density.

The area has also become a destination for corporate innovation centers and R&D outposts, 14 are within walking distance of our office. Companies here include Google for Entrepreneurs, Microsoft, The AT&T Foundry, Stanley Black & Decker, Delta Air Lines, NCR Corp., The Home Depot, The Southern Company, Panasonic Automotive, ThyssenKrupp, Worldpay, Kaiser Permanente, GE, and The Coca-Cola Company.    

Equally important is the burgeoning number of incubators, accelerators and other resources for startups in Midtown Atlanta including TechSquare Labs (our home and one of 25 Google for Entrepreneurs campuses), ATDC, Flashpoint, Atlanta Tech Village, TechStars, Switchyards, Startup Chicks, Forge and more. If you want to know more about our friends in the ‘hood, we’d be happy to show you around.

As we embark on our next ten years, we are still excited by the way entrepreneurs and startups are transforming the way business gets done, how far ahead they see and continuing to craft successful partnerships between leading entrepreneurs and our corporate clients to fuel growth and enable the future.