Why partnering with startups offers the best of both worlds
February 3, 2025
A key motto of startups is to “fail fast and move on”. While startups use this approach to develop and incubate innovations, it’s not often the cultural approach you find in big corporates. Large corporations can sometimes look enviously at startup culture - having the freedom to break things, to experiment, to be motivated by passion and idealism rather than stakeholder demands can be invigorating and highly rewarding.
However, 30% of startups fail within two years, and 70% fail within five mostly due in part to insufficient finances and expertise in bringing products to market at scale. Larger companies have significant budgets, expertise, and insights that are the envy of many startups; however, with this comes responsibility – to employees, shareholders, suppliers and customers. As companies grow bigger, they can become more averse to risk, which can in turn stifle innovation.
How then can we achieve the best of both worlds? The collaboration model offers considerable potential with larger entities like ABB, using their global resources and market reach to help accelerate and scale promising startups and their ideas. This helps share the burden of risk while also ideally bringing innovative products to market quicker. However, such an approach is not without its own challenges. Clashing cultures, misaligned incentives, lack of focus, complex organizational structures and “innovation theater” are just some barriers that could be encountered.
ABB Electrification first launched its venture collaboration program in 2020, partnering with SynerLeap, ABB’s startup accelerator, and Microsoft to ask startups worldwide to submit their best technological solutions for key energy challenges. Winners are awarded a collaboration project with ABB worth $30,000 to develop a minimum viable product (MVP) and the opportunity to launch a common solution for ABB’s customers. They also qualify for mentoring from Microsoft’s and Synerleap’s startup advisors plus a free six-month membership to SynerLeap.
More than 20 MVPs have already been delivered since the annual challenges started. ABB continues to collaborate with several winners and finalists from previous years, helping them to secure commercial contracts. These have included Swedish technical support firm Mavenoid, U.K. climate tech startup Tallarna, edge innovation platform Pratexo, and Austrian augmented reality startup View AR.
From the last five years of our startup challenges, we’ve learned a lot about how best to approach open innovation and collaboration. Running a successful program requires a change in mindset, particularly from the corporate partner. Where ABB’s approach differs from others is that we do not immediately seek a return on investment. While we have invested in some startups in the program, this has typically happened organically over time as partnerships have deepened. Collaboration should be treated as true, mutually beneficial partnerships with aligned incentives.
With venture collaboration, you must be prepared to invest resources to co-create an MVP with the startup. Developing a viable product takes time but so, too, does bringing it to market. Combining experience and expertise from both sides can help to anticipate and address challenges sooner and ensure that the building blocks for success are established from the outset.
It’s also important to consider that no single company has all the answers, particularly when it comes to a challenge so vast and complex as the energy transition. While startups and ABB have learned from each other, we have applied a startup approach to solve a range of customer challenges.
A model where MVPs can get to market faster helps foster robust real-world feedback. This would not necessarily be possible for the startup to do alone. The feedback can then be used to quickly iterate improvements to a product or service. The oversight offered through a collaborative approach can also provide some much-needed clarity and avoid situations where excessive time and effort are invested into projects that simply aren’t working.
“Fail fast and move on” continues to have relevance in this ecosystem. Failing fast is one of the best ways to learn and improve. Not every collaboration or proof of concept will be a success, and it is always better to find this out sooner rather than later. Removing barriers to execution and allowing startups the freedom to experiment can help provide novel and unexpected ideas and solutions.
Having specific KPIs and clarity on outcomes will help teams stay focused. When working with startups, it can be easy to get swept up in idealism and be too optimistic about how easy it will be to solve problems down the line. Having belief in your product is essential but so, too, is the pragmatism of knowing that not every brilliant concept will be successful. Establishing KPIs and clear outcomes can help stakeholders maintain focus on overarching goals, fostering innovation while keeping it from descending into chaos.
The combination of startup agility with ABB’s scale and global commercial footprint has proven to be a successful model. Both parties innovate faster, accelerating progress toward a decarbonized society. These partnerships force us to be more customer-focused, better understanding customer pain points and challenges to develop innovative solutions and better results.
We have seen a notable cultural shift at ABB as a result of our venture program. We’ve identified some very promising startups and created a pipeline of innovation partners. We have also made investments and are working together to bring some great innovations to market. Against the backdrop of the climate challenge, the success of ABB’s venture collaboration model is proof that such partnerships can provide tremendous value to customers, by bringing much-needed innovative solutions to the market, quickly and at scale.
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