As large corporations move haltingly toward circular business models, circular-economy startups can provide innovation, fresh thinking and new technology.
Some companies are partnering with green startups to advance their zero-waste and other sustainability goals, but that presents challenges.
Small, privately financed and moving rapidly, startups operate on tiny — or sometimes nonexistent — profit margins. Larger companies have the luxury of time, resources and money; but mismatches in pace, business culture and communication styles often hinder partnerships.
Partnering with startups can help companies to “solve a product problem, create a new avenue for revenue, accelerate R&D, or accelerate time to market for a specific product,” according to Otilia Barbuta, principal at HP Tech Ventures, the venture capital arm of HP. She was talking at a breakout session at Circularity 2024. “There are solutions in the market created by startups and in this circularity realm, I think it’s more important than ever to partner with [them].”
Here are five takeaways on forging fruitful partnerships with startups:
1. Structure an official program for working with startups
Figuring out who the right people are to connect with at a large company is daunting for startups. David Cutler, co-founder and CEO at Fortuna Cools, for instance, said he identified Grab (NASDAQ:GRAB), the “Uber of Southeast Asia,” as a strong potential buyer for his startup’s coconut husk packaging but it wasn’t obvious how to engage the company. Grab’s services include food delivery, and Fortuna Cools’ packaging is a cleaner alternative to the polystyrene coolers used by the company and others delivering food.
“There were a few people that had overlapping areas of responsibility around materials, and sustainability, but also around packaging and procurement. For us, it was about finding the right individuals and the right teams within this big company to be able to move fast,” he said.
Ultimately, Cutler “went nine levels over people’s heads to meet with someone in Palo Alto, who sent a WhatsApp message back to Singapore,” to get the ball rolling. Patiently working through channels “in the standard B2B way, frankly, I don’t think it would have happened.”
Creating an official program to give startups an entry point makes it easier for both the entrepreneurs and the company, Barbuta said. A formal program can tie together an internal champion and alignment on incentives and resources, she said. It provides “a structured way to motivate everybody and give them clear milestones, a clear timeline, and clear metrics that you want to achieve.”
2. Internal champions should keep the ball rolling
Barbuta scouts for startups, figures out where they can plug in and serves as an internal champion at HP Tech Ventures, following them through the vetting process. “I’m going out and convincing other people [internally] that there is value and … here’s why we should think about it,” she said.
She spends a lot of time meeting with stakeholders, “going back again and again,” pinging them when decisions are needed. “It’s active management of the relationship,” she said.
Navigating the process without an internal champion to see why delays are occurring, or where the friction points are, is tough for startups. Deals can die if startups spend too much time figuring out “who has P&L, who are the decision-makers and having multiple conversations at the same time” with a spreadsheet of potential customers, said Rob Lawson-Shanks, CEO and co-founder Molg, a startup building micro-factories with AI for circular manufacturing.
3. Co-create with the startup to foster enthusiasm on your own team
Rather than viewing a startup as just another vendor, tap into the advantages it offers as scrappy innovators on the cutting edge of materials and technological advancements. One way to do that is to co-design solutions through fast-paced design “charrettes,” collaborative planning processes where staff brainstorm new solutions under a deadline. That can help keep your teams engaged and energized as they move forward.
“Even if it’s not the entire solution, [companies] feel some ownership and pride around it … and it obviously leads to better outcomes, better results,” said Cutler.
4. Understand the challenges startups face
Startups are constantly juggling multiple opportunities, and companies need to be transparent and set the right expectations.
If “you put all your eggs in one basket, you’re going to be left on the vine to die,” said Lawson-Shanks.
Furthermore, Barbuta said, “It’s important to be mindful that time is very different for the CEO of a small company versus us working paycheck to paycheck. For me, it’s another project, but for [Lawson-Shanks], this is a very critical part of his life.”
5. Stay engaged for the long haul
When Barbuta first met Lawson-Shanks two years ago, she liked Molg’s vision, but she couldn’t get teams within HP to align on incentives and resources, she said. Molg is now in the HP Ventures startup program. It has a proof-of-concept business model with metrics and milestones, and a continuous series of meetings with HP execs. But Molg, an early-stage startup, has not yet raised a Series A funding round. HP Ventures awarded MOLG a $25,000 grant for a six-month period. (Molg previously won a $6 million grant from the Department of Energy.)
When Molg is ready to raise its Series A, HP Ventures will be waiting. “We want to move from this [proof of concept] into a longer-term commercial engagement and investment is always on the table,” said Barbuta.
“Circularity relies on these upstream and downstream kind of partnerships,” said Lawson-Shanks. We could toil for years and [barely make a] dent, whereas if we can grow and scale alongside each of [our] needs and circularity goals, we have such a larger opportunity.”
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