Cracking the Code: The Strategic Blueprint for Startups and Corporates to Collaborate on Deep Tech Dreams

By Joachim Rösch, Deep Tech Expert at Chemovator

Deep tech, in essence, refers to startups that focus on developing and implementing cutting-edge technologies and scientific advancements to solve complex problems. They're the pioneers, visionaries, and risk-takers who dive into uncharted territories, striving to push the boundaries of what's possible. In this blog, Joachim dives into the world of deep tech startups, unveiling their unique advantages and exploring the art of collaboration with corporates.

Look at companies like Shopify, Zillow, TripAdvisor, and Docusign. They show us that hitting it big in startups doesn't always mean being a tech genius or discovering something revolutionary. They do it by simply solving problems and making things better for users. They mix existing technologies to improve how we experience things, making them easier and more accessible. This smart approach brings in lots of users and big money.

Now, you might wonder if deep tech startups are still a big deal. Well, they definitely are. Even though shallow tech is often grabbing the spotlight, deep tech startups have their own cool reasons to exist. Sure, dealing with complex technology challenges isn't easy, but these startups choose the deep tech path for some really good reasons.

Here's why:

• Differentiation and Competitive Advantage: Deep tech innovations often lead to unique and novel solutions that set startups apart from their competitors. Having a truly groundbreaking product or technology can create a significant competitive and long-lasting advantage in the market. Their disruptive potential can lead to unanticipated larger market opportunities and high growth potential.
• High Barrier to Entry: The complex and resource-intensive nature of deep tech can act as a barrier to entry for competitors, providing startups with a degree of protection against rapid imitation.
• Long-Term Value: Deep tech solutions tend to have longer development cycles but can offer substantial long-term value once they are successfully commercialized. Value can come from intellectual property, market leadership, and sustainable revenue streams. This can provide startups with a strong foundation for negotiating partnerships, licensing agreements, and potential exits through acquisitions.
• Access to Talent and Funding: Working on cutting-edge technology attracts top talent - engineers, scientists, researchers - who are passionate about pushing the boundaries of knowledge (just think Tesla, Space-X). It can also attract funding from investors interested in supporting groundbreaking innovations
• Global Impact: Many deep tech solutions have the potential to create significant positive impacts on a global scale, whether by advancing medical treatments, revolutionizing energy production, or solving critical environmental challenges. Contributing to solutions for these challenges can be highly rewarding and impactful.

Nvidia (renowned for graphical processing), DeepMind (noted for being the first AI to predict protein folding, subsequently acquired by Google), and Moderna and Curevac (notable for their contributions to mRNA therapeutics) exemplify successful instances of deep tech startups. Interestingly, numerous enterprises now regarded as major corporations originally emerged as deep tech startups. Nonetheless, only a small fraction of these evolved deep tech startups managed to sustain their pioneering spirit. In truth, instances of triumphant deep tech innovation within large corporations are more of an anomaly than a standard occurrence.

Does this imply that deep tech startups and large corporations are inherently separate entities, devoid of potential mutual benefits? Absolutely not! The collaboration between startups and large corporations on deep tech endeavors can yield remarkable advantages. Their respective strengths and resources can converge to generate synergies that fuel innovation, expedite progress, and yield outcomes that are advantageous to both parties. Here are several compelling reasons outlining why cooperation between startups and large corporations on deep tech projects is highly advantageous:

• Access to Resources: Large corporates typically have extensive resources, including funding, facilities, and established networks, which can provide crucial support to startups lacking these assets. Startups can access resources that might otherwise be out of reach, enabling them to focus on R&D and product development.
• Expertise Exchange: Startups often bring cutting-edge technical expertise and agility to the table, while large corporates possess industry experience, market knowledge, and operational know-how. Collaborating allows for the exchange of knowledge and skills that can lead to more robust solutions.
• Faster Time-to-Market: Startups are agile and can quickly iterate on ideas, prototypes, and minimum viable products. When combined with the scale and distribution capabilities of large corporations, this agility can lead to accelerated commercialization and faster time-to-market.
• Risk Sharing: Deep tech projects can be high-risk endeavors with uncertain outcomes. By collaborating, the risk is shared between the startup and the corporate partner, allowing both parties to mitigate potential losses and maximize the chances of success.
• Access to Markets: Large corporates have established customer bases and distribution channels that startups often lack. Partnering with a corporate allows a startup to tap into these markets more effectively and efficiently.
• Validation and Credibility: Collaboration with a well-known and respected corporate partner can provide validation and credibility to a startup's technology. This can be crucial when seeking investment, customers, and further partnerships.
• Access to Funding: Large corporates can provide funding through various means, including direct investment, grants, or access to venture capital networks. This funding can be instrumental in supporting the development of deep tech solutions.
• Ecosystem Integration: Corporate-startup collaborations can integrate the startup into a larger innovation ecosystem. This can lead to exposure to mentors, potential customers, investors, and other valuable connections.
• Scalability: Large corporates have the infrastructure and resources required to scale up a successful deep tech solution rapidly. Startups can benefit from this scalability potential without having to build these capabilities from scratch.
• Diverse Perspectives: Collaborations bring together individuals from different backgrounds, cultures, and experiences. This diversity can lead to innovative solutions and creative problem-solving.
• Staying Competitive: Corporates can stay competitive by tapping into the dynamic and rapidly evolving startup landscape. They can gain access to emerging technologies and novel approaches that might be outside their traditional areas of expertise.
• Intrapreneurship: Encouraging employees within a corporate to collaborate with start-ups on deep tech projects fosters intrapreneurship and can infuse the organization with fresh ideas and perspectives.

Undoubtedly, startup ventures and large corporations remain two inherently distinct categories of enterprises, each characterized by its unique corporate culture and inherent limitations. A notable study on deep tech conducted by the Boston Consulting Group, for instance, highlights that 50% of startups expressed a less than satisfactory experience when collaborating with large corporations.

Herein lie several pivotal success factors that can effectively bridge the gap between these two distinct realms of startups and large corporations:

• Clear Objectives: Define the goals and objectives of the collaboration upfront. Both the startup and the corporate partner should have a shared understanding of what they aim to achieve and how success will be measured.
• Aligned Interests: Ensure that the interests, values, and strategic priorities of both parties are aligned. Misalignment can lead to conflicts and hinder the progress of the collaboration.
• Mutual Benefit: The collaboration should offer value to both the startup and the corporate. Clearly articulate how each party will benefit, whether it's access to resources, technology, markets, or expertise.
• Open Communication: Establish open and transparent communication channels. Regular updates, progress reports, and feedback sessions help maintain a clear understanding of the project's status and direction.
• Intellectual Property (IP) Agreement: Clearly outline how intellectual property rights will be handled, including ownership, licensing, and protection. This is crucial for avoiding disputes later on.
• Dedicated Resources: Allocate dedicated resources from both sides to the collaboration. This includes personnel, time, funding, and facilities required to work on the project effectively.
• Cultural Compatibility: Consider the cultural fit between the startup and the corporate. Differences in work culture, decision-making processes, and expectations should be addressed and accommodated.
• Top-Level Support: Support from senior leadership within both the startup and the corporate is essential. Their backing provides the collaboration with the necessary resources and legitimacy.

If upon reviewing these points, you find yourself thinking, "Well, this all appears to be well-intentioned but somewhat vague and difficult to manage," then your assessment is accurate. Effectively executing these strategies demands the concerted efforts of a dedicated team backed by substantial experience and top-level support. A consensus is emerging within the industry that the standard organizational structure of large corporations often lacks the necessary time, patience, resources, and expertise required for these collaborations to flourish. Consequently, the prevailing approach has shifted toward adopting the corporate incubator or corporate venturing model, which was scarcely present before 2010 but has since become the norm.

In the case of BASF, this role has been embodied by Chemovator. Over the course of five years, Chemovator has adeptly established itself as a corporate incubator for spin-offs. Building upon this success, Chemovator has taken a significant stride by extending its entrepreneurship and seed investment program to encompass external startups as well. Any startup displaying potential relevance in the realms of future chemistry, materials science, or chemical engineering stands to benefit from its incubation program and gains access to an extensive network of experts and resources inherent to a global chemical conglomerate.

Do you believe deep tech and corporate partnerships are a match made in innovation heaven? Share your thoughts!