During one of his initial meetings at Molex, Inc., Jacob Babcock showed an image of a scissors cutting a cable.
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That was a bold move by Babcock, co-founder and chief executive officer of Chicago-based wireless-charging startup NuCurrent, because Molex has traditionally been a manufacturer of electronic interconnectors, including everything from electrical components and fiber optics to switches and application tooling.
The partnership between Molex and NuCurrent is a terrific example of how corporations and startups can work together, which was the topic of the Hyde Park Angels and 1871’s Entrepreneurial Education Series on Thursday evening. The audience included more than 300 entrepreneurs and professionals at the tech incubator’s conference center on the 12th floor of the Merchandise Mart.
Rob Diebold, strategic business development manager, Molex, says one reason a corporation works with a startup company is because startups often have an innovative market solution that fills a gap in the corporation’s portfolio. If “[you are] looking to fill a hole in the market, startups can fill that hole,” Diebold says.
That is one of the reasons that Diebold and his team at Molex formed a partnership with NuCurrent. Molex sees a lot of potential for NuCurrent’s wireless antenna technology, so the two companies formed a strategic partnership last December.
Peter Wilkins, managing director of Hyde Park Angels, one of the largest and most active angel investor groups in the Midwest, led the panel discussion “Connecting Corporations and Startups.” The panel included Hardik Bhatt, chief information officer, State of Illinois, Rumi Morales, executive director of the Strategic Investment Group at CME Group, Julie Szudarek, senior vice president and general manager, Groupon Daily Deals, and David Weinstein, founder and managing partner, Freshwater Advisors. It was the third part in Hyde Park Angles’ four-part “Entrepreneurial Education Series.”
The panelists said that whether working with a corporation as a client, partner, or a strategic investor, a startup can significantly grow its business by working with corporations.
There are a lot of doors into a corporation, including business units, procurement, sales, and the C-Suite, remarked those on the panel. Finding the right opening can be difficult, but Weinstein said the key to building relationships with corporations is “through your network.” Find someone who has a solid connection to that company, he said.
“You go get to someone who has a proven track record,” Weinstein said. “Make sure they have a track record that matches up with where you want to sell.”
Why do big corporations stop to look at startups? “If they're giving us access to a market we don't have access to,” said Bhatt, who was with Cisco Systems before becoming the CIO for the State of Illinois.
But just because a startup might be more nimble in its decision-making process, do not assume that corporations are stodgy and unable to be disruptors. “Be very respectful when speaking to a corporation,” Morales said. “We innovate too. Acknowledge that and that you can be partners."
However, Weinstein said a startup also has to know when to cut the cord when pitching a corporation. “A fast no is the second best answer you can have when you are selling,” he said. “A drawn-out no means business death.”
Of course, offering the right product and having your product quality right is most important, and that creates credibility for your product, builds your reputation, and helps to create demand.
“What are you creating that’s new? What’s going to enhance the world as we know it?" said Morales on what CME Group looks for when investing in startups.
Babcock and Morales also advised startups to watch out for exclusivity when signing a deal. “What is the agreement on exclusively?” Babcock said. “Agree on it upfront.”
Morales added: “They may marry you and lock you in a cage. Make sure they don't keep you from hugging others.”
Whether it is seeking investment from a corporation, selling to a corporation, or forming a partnership with a corporation, Wilkins advises: “Your product has to be 10 times better than anything they are looking at for them to ever consider it.”
When it comes to landing investors, startups need to realize that venture-capital firms and corporate VCs are different, said Wilkins. Investors inside corporations are looking to make a connection to the corporation’s overall strategy. “VCs are looking for relationships to help a company grow,” Wilkins said.
Weinstein said: “Corporate venturing [consists of] groups inside corporations that have the mandate to make long-term strategic minority investments.”
“If you’re partnered with the right corporate venturer who is plugged into the right sales channel, you can learn a lot,” Diebold said.
However, when it comes to selling your product or service, “the biggest thing in sales is listening, and doing your homework,” Weinstein said.
You know you are successful as an entrepreneur when “your product starts falling into the hands of customers, and they use it without a lot of effort from you,” Wilkins said.
When NuCurrent inked its deal with Molex last December, Babcock said: “Being able to tap into the engineering expertise at Molex, as well as the global reach of its manufacturing capabilities and sales force, will be an enormous benefit for NuCurrent.”
The partnership between Molex and NuCurrent is a great example of how a marriage between a corporation and a startup can prove beneficial to both the corporation and the startup.
The author, Joe Koenig, is president of Make Ideas Reality, a marketing communications and public relations firm in the Chicago area that specializes in startups, cleantech, environmental communications, and educational leadership.
