The Role of Startups in Corporate Innovation with Misha De Sterke & Jeroen Tjepkema

If you look at a lot of pitch decks, there's a lot about products and, uh, futures and, uh, what is novel and etc., etc. Or within large corporations about feasibility— can we make it all these things? All relevant. But if you need to sell it in this famous elevator pitch, yeah, you want to say more strategic things like, so, okay, all this operational data that we have gathered in accelerators How does this translate to your home's point, something of strategic value for these senior people? Why should they open their wallet basically, and why should they spend time on their busy agenda listening to another pitch, right? So I think it's, it's a crucial case.

We're going to start with a quick presentation, uh, from our speakers, but let me just introduce them very quickly. So Misha is the CEO and founder of 10x Growth, based out of Amsterdam. So hi Misha, do you want to give a quick introduction on yourself.

Hey guys, thanks for having me. Yeah, so indeed, John, what you said, working for the last ages, it feels like, working for large corporations. I've seen many different companies from the in and outside, worked on many different briefs with startups, without startups, internal building, potential acquisitions, investments. So see many things from many angles. Good to be here and share some of our experiences and also to really crank up the hit rate of these programs that both parties can benefit. That's the goal.

Yeah, it is the goal because the corporates have what a lot of the startups need and the startups have what a lot of the corporates need. Exactly right. So these are things that can really fuel growth, um, across the board. Uh, and then I also want to, want to introduce, uh, Jerome. So, uh, Jerome is a, is a partner, um, and product director at TEDxPro. So Jerome, do you want to give a quick introduction?

Yeah, really sure. So again, also thanks for having me. Um, so I have a tech e-commerce background and I, I have been in both worlds, right? So I've been since early 2010s working with startups, helping them with positioning, fundraising, getting acquired. And the last 6 years, mostly been working for the corporate world on the other side, doing the venture building, international scaling, what to acquire, where to invest. Yeah, and I think right now what Misha said, it's time to increase the hit rate, right? We've been seeing it from both sides. It doesn't work, but it does make sense to work together. So we need to fix it. Let's talk about that today.

100% agree. And that's why we partnered together. And that's why I'd love to— every time I talk to these guys, I learn a lot about the innards of large corporations. And because I'm always coming from the startup side. Right? So these are the guys that I lean on to understand the inner dynamics of how to actually integrate these really fast mobile startups into these large organizations, right, in a way that makes sense for both. So yeah, with that being said, I know, why don't we queue up the presentation here? So just as a reminder to everybody for the agenda, we're going to go through a quick presentation here, 10 to 15 minutes or so, but at any time, if you have questions, throw them into the chat, right? Because when the presentation's over, then we're just going to have a very long Q&A session that's going to be interactive. So throw any questions that you have into the chat and we'll get to them after the talk. All right, I'll leave it to you guys.

John, you see the screen?

All good?

Yep, all good.

Okay, well, as you all know, um, the, the topic of today is, is basically that a lot of initiatives are, are starting within corporations. Um, they're very serious about innovation. A lot of time, money is spent on doing it right, but at the same time, we also see that it doesn't lead to the return of investment that is ambitious, right? And that's for acquisitions, as John mentioned, but also for internal venture building programs, startup accelerators, and everything that is coming across. So it's really time to rethink strategies. Um, that will be part of our, uh, topic of conversation, but first, to set the context, I thought it was good to to share a couple of key principles. As John mentioned, we work for a lot of large companies, and what we see, and which is normal, is that the tendency that a brand or product starts to decline is just a matter of time. And what you see there is, is a central theme in, in our thinking, is what we call the growth gap. So if a product line is declining and we need to create shareholder impact. That means there's a gap between what the core business can produce now and what we should bring in the future. And that core gap, that growth gap, is a core concept we will dive a bit more into because that's one of our key learnings that we need to address to make programs successful. Now, I think most of the people are familiar with the horizons of innovation, but Horizon 1 is optimize existing products. Making it more efficient. Horizon 2 is, is jumping with, with our assets and, and advantages as a corporate in adjacent markets. And Horizon 3 is more transformative or breakthrough innovations. Um, now what we know is that Horizon 1 and 2 innovations, they deliver a steady growth, and it's, it's the engine of today for the cash, but in longer-term future, you also need to work on breakthrough innovations. And that's also because consumer demands are changing, demographic changes are happening in society, so we need to future-proof our core business. And for us, this is also exactly a super interesting space where young companies bring new technologies in that, that can really be of benefit for corporations' core business. Now, at the same time, what we see is that there's actually a couple of scientific studies being done to corporate venture building life cycles. I didn't know it was actually a term before I saw the studies, but just to explain you a bit, it goes— it also follows the same pattern. So there's a need to innovate, to do it better, to do it faster, to do more consumer-centric innovation. To be more agile, etc., etc. Then there's an enthusiasm to start working on initiatives, um, let's say, that, that help us speed up this innovation. Um, and it's about learning, it's about exploring. And then in year 3, people start to ask, well, what's actually the return on investment of all these initiatives? And this is a cycle coming over and over again. So we're now sort of in the cycle again that a lot of larger companies are closing their innovation labs. And it doesn't mean that they don't need to innovate, right? But the conclusion is most of the time, well, we've put a lot of time, effort into many projects, and if we look at the end, yeah, what really came out of it is just not enough that justifies these types of large investments. And innovation labs per definition bring also more tensions on the agenda of senior management because, yeah, it's new initiatives, they're small, they're different than the core business, they're uncertain, and nobody really knows if it will become the next big thing. It takes a lot of time to, to bring some real cash back. Um, even more disturbing for larger companies is that it can be margin dilutive, so we can create the best new product that is completely on trend, but still it will dilute my existing margins. And then the last challenge is that to really get new innovations in market, we need to invest in new capabilities, because the more you move from your core business, the less capabilities you have. Now, for the ones that are familiar with organizational theory, there is Carl Weick, who came up with let's say, a definition of challenging problems. And he calls them wicked because a wicked problem is not something you can solve. There's not an end solution that sort of miraculously, as a miracle, helps you solve the problem. It's more a tension that you need to manage. And that's a very different perspective because the tension will always be there. So it will not go away. And the things that Jeroen and I have experienced, discovered, and written down are a couple of things. So the first one is that a corporate is a large company with a big revenue, so they want to have big innovations with large returns fast. And so we need to deliver something big, but the time frame is short. It will not be the first time that we have heard both, like, um, there's a growth gap of 400 million or 500 million and we need to solve that within X amount of years. 3, 4, 5 years max. So where do we find the $500 million? And then you can imagine that if we look for such large numbers, that puts immense pressure on innovation, which leads to the second almost syndrome, you can call it. It's too big to fill. So in order to get resources allocated to new initiatives, we need to create a big business case with large numbers, which requires large investments. Because why as a corporation would you invest in a small initiative initiatives, well, we have the core that is big and brings a lot of cash in today. The only problem with this is that it's very hard to pull the plug from large investments. For the startups, of course, that really practice Lean Startup and apply principles of metered funding, yeah, that's basically our sanity check to stop before it becomes too big and we don't know if there will be any return. So this is something, also a wicked pattern that comes by. Then number 3 is we want to be disruptive, but we want to build it ourselves. And that has a bit to do with the idea that there's a lot of competition out there. We would like to ideally build it internally because there we can more control, there we can have a better sense of secrecy in that sense. But the problem is that if you build everything yourself or try to do that internally, you automatically fall into the paradox of number 1, is that if you build a new business from scratch, you can't deliver €500 million in 3 years. Well, if you can, that would be fantastic, but the chance is still quite small. And next to this, the consideration of partnering with startups or investing smaller amounts in startup is not always on the table. So what you see that is happening is there are large M&A deals, like really large M&A deals, which you all can read about in the paper. And that has to do with the fact that the M&A team has limited resources, so they can only focus on the large things. Basically follows the same pattern, um, or we build it internally. Now, number 4, um, it's difficult to forecast, right? So innovation is great, breakthrough innovation, uh, is also great but even more uncertain because it's difficult to forecast or even benchmark it with, with something that already exists. And what we see that is happening then is that early adopter traction— so we need to find the people that are really looking for a solution for a problem they have. The data can look fantastic for early adopters, and they love the product, they convert to buying consumers, etc. But it doesn't mean that that is a mainstream adoption. So one of the things that we see with, with early stage initiatives— can be internal, can be a startup— is that if you want to move from early adopters to mainstream, you probably need to change something in your product positioning, price, or channel. Um, now, and that is always also a problem. And what is happening then is that if we mistake early adopter traction for mainstream adoption, a large corporate— corporation is probably investing too early in a product because, again, we need to bring big numbers. So if we are on the trend for early adopters, we can never deliver these big numbers on a timeframe. Number 5 is that innovation is often disconnected from the business growth strategy. So if I have a core business with a couple of major brands and I've calculated with my team, like, look, I need to bring this €500 million within X amount of years, um, and we have ideas how to get there— we need to recruit new audience, we need to create new products, we need to enlarge our distribution, etc., etc. How does innovation help with that? And, and the work that you and I are doing is really connecting, um, the innovation, uh, concepts, ideas, and we plot it into that business growth strategy so that it's not so isolated. And, and what we see happening in practice is that innovation starts sometimes bottom-up, great ideas, well-intended, but how does this fit the larger narrative, the larger brand or growth strategy? So this is something to, to be cautious about. And the last point has a bit to do with the, with the cycle of enthusiasm, uncertainty, and disappointment about corporate venture building. What I've seen in general is that emotions are really underestimated within innovation processes, especially, um, um, uh, for people within a large corporation that are less established, let's say, to deal with the uncertainty. As founders, we know that we know how to deal with uncertainty, though I think the conversation can be more around this. But can you imagine that if you have never worked in such an environment that you constantly are surprised by new data, assumptions are failing, experiments don't work out, your stakeholders are looking at you in a sense of when can we expect something of meaning. And that all also interferes with the hierarchy you have in incorporation. So it's, it's a— I always have a lot of respect for the people that do this because it's not a simple thing to do. And there is an interesting saying that A startup needs to win in the market, which is already a battle by itself, as we know. But a corporate startup needs to win in the markets but also internally. So they basically fight a dual front battle. Now, these patterns, they don't go away, but they need to be managed. So I think that's an important thing to repeat. Now, as a result, um, this can be a typical portfolio analysis of an incubator or a large accelerator, is what you basically see is that there are a lot of projects in small markets which are delivering, uh, small revenues for a large corporation. Coming back to that growth gap, as said, what do we need to deliver in terms of growth to meet board and investor expectations? And what we need to understand as a startup or as an internal venture, we need to understand how is this category growing. How fast is this growing? What is the churn rate of, of, uh, of consumer switching products or going to different categories? This growth gap really serves for us as an understanding to say, well, if we need to come up with the $500 million, we need to do our due diligence upfront to understand that the opportunities that we pursue can be big enough by itself. So we need to change the narrative. So therefore, we collaborate together. As mentioned, we call it Investment Building: A New Way for Corporates to Onboard New Technology with Skill and Timing. 3 main ingredients. So first of all, the imagination premium. It's an interesting concept by Rita McGrath, but basically it's a metric that tells us how confident is the investment community in your company's growth strategy. Now, if you then look at a corporation with core assets, and we really need to understand, um, are we entering a new market with our innovation? Are we recruiting the newer generation to our category? Um, are we regaining market share from competition? So it's basically a couple of things that we need to measure to understand, well, you know, um, this growth strategy really makes sense and we see the first results coming to life. Number 2, acquire strategic positions. So of course we can do large deals, but in fast-growing terrains, and we would like to explore maybe in a different way that we say, look, we're going to do a smaller investment with a young company in that domain. We're going to explore how fast we can grow and how our assets can play a role into that. So can we future-proof our assets If we bring our corporate assets to the table and combine it with the startup, can we grow faster? So these are important things to take into account. Last but not least is the buy, build, hold mentality that really, um, allows us to manage growth within the timelines you need. Because if we see that a trend is not picking up in a specific market or it's not growing fast enough, then we know already maybe it's not the, the right time for a corporation to jump into this trend and build new products around it. Now, we execute in 3 steps. So basically what we want to understand: consumer pain. So very, very— the things that are very basic, but consumer pain points, market numbers, assessing the growth gap of the company, understand the assets that the corporation has. And, and based on this precision work, we're gonna look for companies that can match in terms of consumer pain points, but also in size and futures. And especially in size, because if we need to bring up the $500 million, that means that per definition we're not going to look for companies below Series A. Now, so that's sort of the, the first due diligence. Then we are looking for the right companies. That's called match. And of course, then you validate. It's basically, can we, by partnering together, can we tackle a couple of key risky assumptions? And if all these things are successful, you would like to integrate. Now, we will dive deeper into that in the conversation. Last but not least, so why investment building? As said before, it's the new way for corporates to keep onboarding new technologies and consumers with the right timing. Innovation matters, but only to future-proof core assets for a corporation, in our opinion. Timing and skill conflict in making internal innovation successful. As a startup or as an internal innovation, we are always competing for the same resources and finances. We need to have the buy-build-hold mindset to grow with the right timing. Collaboration with mature enough startups will become key for execution for the growth roadmap. As it allows us to explore the potential of unknown territories quickly without risk and see if we need to buy assets in order to future-proof the core business. And to sum it up, um, investment building is a methodical way to strategize, validate, and execute on breakthrough innovation initiatives. That was it from my side as an introduction.

That was awesome. Thank you, Misha. We got a lot of great questions here in the chat. I know a lot of people, most of the webinars we run, a lot of people are asking if you'll get the recording. You will get the recording. We can share the slides as well, right, Misha? We'll get a PDF going on this. But keep the questions coming. My team is putting them into the flow here because there's just a lot to digest. Alright. I think at least me coming from the startup world, a lot of this is pretty novel, to be honest with you. And it's just, it's, I think the biggest dichotomy, right? And Misha, you explained this to me before, is that it all breaks down to there's a small organization versus a big organization and all of the millions of tensions that are created. Between meals, those two things, right? That's literally what it breaks down to. So, you know, it's like for a lot of those things that you would think that some of those could be solved when the corporations are just starting to get matched or starting to engage, right? And Jérôme, I know you have some thoughts about this as well, like just starting to engage with the startups where you know, even a lot of times it's not the right companies that they're engaging, right? Which, which to me just seems so terrible because it's literally step one.

No, I think you're right. I think from experience I see two things happening. So one, um, there's not a clear enough picture of what we need, right? And the example I always use is the, um, you see big corporates buying brands But usually those brands are small and they cater towards an early adapter audience. And the bigger corporates have the mass market. So when you merge them together, it's not automatic that it will grow. Most of the people buy smaller brands because they hate the bigger brands. So it's kind of human nature to not adapt. So you buy the brand, but you don't think it through what it will mean. And the other part is that if you work together as a corporate, you need to know what the outcome is, right? So I usually see that we start working together, we need to learn, but there's no intent, right? If you want to buy, they want to learn, they want to copy, just be honest up front. And that also, that automatically then also leads to kind of decision-making. How do I want to engage? How far do I want to push it? Um, it's just an honest view in a mirror on how you want to engage, right? It's It's no better way to describe it, but it's, it's, it's not fun. And I've been in so many of these accelerators where, um, the corporate says to startup, I will give you all the data and you can build. And the only thing I think then is then they just want to copy it, right? You just build, they will look at it and they will then rebuild themselves. And that's not a fair game in the startup world. You buy to grow, you buy to get acquired, and the corporates just needs to understand that it's also their responsibility to play that game in that sense.

Yes, that is the biggest, um, apprehension from the startup side, right? It's just saying, okay, I'm going to engage with this corporate, they want data, they're really trying to get a deep dive on my company, um, where at the same time maybe they're not, they're not my direct competitor, right?

But whatever this niche that I'm focused on is like part of their whole big If you're a small startup, you look at it and a corporate comes to you, you think, hey, that's an additional revenue stream, right? It will generate my cash flow for the next 18 months. So you put a lot of effort in, and if it then it doesn't happen— so you do deliver but it doesn't happen— it's a disappointment. I think that's the— and what Misha presented is the— on the other side, corporates need startups to explore these new territories without risk. And so if you match those two together, there's a common pattern. It makes sense, but how to combine it, right? That's kind of the challenge. Um, and I think that with corporate venture building as is, that's why the labs are closing. It stays too small, never gets big, or it just stays exploring. Um, but if you look at it from an investment approach, right, it becomes serious. We get in there to acquire and we need to understand the problem to also understand what do we need to acquire. And then it changes the narrative, but also the mindset of those corporates, because they do know how to spend money, just where to apply it.

And I think, Mischa, you brought up too, right, it's just these dichotomies, like the large corporations have big ambitions and they want to get done fast.

Correct.

But in a lot of cases there, or you could even say in most or almost all cases, their corporations are not set up to act on opportunities very, very quickly, which is why they set up innovation labs and why they engage with startups, right? And so we all understand the why, but it's kind of the how is where things start to fall apart, right? So where are, you know, just outside of, Yeah, startups are meant to move quickly. They iterate quickly. And the companies that are sort of thinking more in horizons, but then in order to reach some of those horizons, they need to move quickly, right? So some of the ways that they're failing, and, you know, I think a larger question is just, yeah, just some of those other patterns that you're seeing as to, you know, when startups are being matched or being put into these innovation programs with large corporations that literally right off the bat, you could say that's not going to work. Yeah, yeah, yeah.

So yeah, a couple of things, right? Um, first of all, I guess that, um, if you have a very good understanding of, of how to grow your own business, right? So if you, if you sort of analyze your own sales data and you understand, look, this is how we have grown in the past, um, and, and now sort of we can forecast what we should do in the future. So where are our growth opportunities in the future? And, and understand, and understand, um, what's behind. Then we can also scout very successful for young companies that probably see the same type of problems, but then from their perspective. Um, but, but there it already starts. So do we have a very good understanding of the opportunity space that we are playing in? Um, and what can we bring as a corporation that brings us an unfair advantage? Because we have brands, right? We have distribution, we have cash, uh, we have a lot of smart people, etc. So it starts already with the scoping of the opportunity space, um, which is actually step one in our process, right? Um, to then, to then be really precise with the type of companies that we are looking for. And, and you then look at most of the startup accelerators where also corporations are being invited. And what's on stage, um, it's basically too small, um, for a large company to absorb because you already mentioned, yeah, this dichotomy between big and small, that's super real. Because I can have, uh, I can find super great companies out there, but I can already tell you upfront that can't be sold internally, right? Because There's another complexity, right, is that you and I can do business together and you make a decision, great. But within a larger company, there are of course more people that need to have an understanding of what to do and sort of give the approval. So they also need to sell it internally, and that's where things get more complicated because, yeah, you can have the best idea, great AI startup, yeah, it will never impact our top line in any way, so why would I spend money into that? We can just wait. And buy a large one, right?

That's from what, from what I've seen there too, Misha, is that a lot of our B2B founders kind of, they understand that concept, right? Of look, when you're working with a corporation, whoever you're talking to, not only are you trying to sell that person, but you're trying to give them, equip them with the ability to sell what you're doing internally to their higher-ups, to their higher-ups, right? But when it comes to a lot of consumer-focused businesses, they don't think that way because they typically don't have to think that way, right? But when they are working and trying to partner with large corporations, they have to think that way because that's the only way that it'll, it'll go up the value chain, right?

Yeah, absolutely.

It's, it's a lot of understanding of how, how it internally works, um, and, and develop the relationships, understand where you are on their agenda, and, and what can I do to make that a higher priority, right? So it's really your own B2B customer development process, right, to sort of figure out how is the sales process going internally, who are the key stakeholders, where am I with my topic on their agenda. And that also leads to a lot of interesting insights, because if we're not on their agenda, why is that? Probably not because they don't find it interesting, but there are potentially other reasons, right? So, right, I think that's good to investigate.

And when it comes to—

oh God, I just want to add to that. I think this is what we discussed, right? So the— so there's a difference between I want to grow something from 100 to, let's say, a billion in 5 years, or I want to double my revenue in a year from now, right? So, and if I want to do the last one, double it, that means that I need to look at startups at a different size, right? So, right, I can double it, but they need to have, let's say, 20, 30 million annual turnover for me to double it at that size. If I have 5 to 6 years, it can be smaller, right? But, but if we treat everything like small because it needs to be inventive, it doesn't match those timelines. So from a corporate perspective, that also then aligns to where to look for, what's the size, What's the uptake? And from a startup perspective, right, working with these corporates, you just need a separate team. I've been on the sidelines with startups, enthusiastic, but it just needs a dedicated team to work corporate alone. That distracts from your own business. So you need to be smart, or at a certain stage where you have to— yeah, you have more than one salesperson. You need to be beyond the founder doing sales. Need a sales team, a customer success team, etc., just to put some people dedicated on corporate just to make it work, right? So there's sizing, there's maturity, there's a revenue stage. All those things are— need to be considered to make it applicable for the cases that Misha mentioned, right? So I need to grow— how much right now? Can it be in 2 years? It's a difficult situation if we don't understand it from both sides.

So one of the things that really like kind of triggered me, just, you know, working with so many startups and seeing it from our side in a lot of these situations is that I think, yeah, this failure happens in a lot of these first stages, right? So, and it's probably, you could do some pretty simple math. So as a corporation, right? Let's say that you have, all right, I have, I need to increase sales by $500 million in 3 years. Or something, right? And they— maybe they're sharing that with startups when they start to engage with them. Maybe they're not. They probably should, right? Um, but even if they're not sharing that with startups, what does that mean? If they want to hit $500 million in 3 years, like, what are the types of startups that they should be starting to engage? Because we see a lot of situations where they're engaging with startups not at the right stage wasting their time, it's wasting the startup's time, you know, it's, it's a, it's a huge net negative.

Yeah, so it goes multiplying the assets, right? But just give— so we have a huge experience in the food industry where it usually takes from 0 to 5 years to get 100 million. So if I need to double in 2 years, for example, to get access, I need to have started that, that's at year 3 maturity, because otherwise I don't have time to grow with my assets. And then you're at kind of these, uh, I do 30, 50 million turnover a year, which means valuation is 200, 300 at current rates, etc. Uh, right, so that's then what I need to look for. If, right, if I have, um, 5 to 10 years to grow, I could look smaller, um, startups and I can make more bets, but I can also treat them better. So it's kind of in that stage that determines where to look at. And then how to look. And what Misha mentioned, but the thing is, if you look at the es, for example, Unilever has the best footprint in terms of sales outlets. So if I pick something that works really well, I already have my 100 million because I just scale it simply, right? It's kind of— that's all in the multiplier we need to look at. But in general terms, it's, it's this where we first start to plot. And we limit— we, so we eliminate small ones, we eliminate really big ones, and this is our niche: 30 to 50 million turnover. And can we grow that?

For example, in this case, what you said, I mean, the huge distribution power that a large company sometimes can bring to the table, yeah, that is— that, that can be played out in both, uh, advantage. But then indeed, is the product tailored to that specific, uh, channel? What does it take to tailor it to that? So it becomes— so you sort of also try to re-engineer what would actually fit and work, right? And I think that's the interesting perspective. So how can that fit their assets with my product? What do I need to change in that to make that fit? These are the right type of questions to run POCs on, for example.

And so what we discussed in our approach is that, right, so we do matchmaking, and then the middle part is the validation. Is where it tends to give a startup funding. Let's say there's €50,000 in marketing funding just to prove that we can scale the product. And if you can prove it as a startup, there's money at the end, right? It could be a partnership, a contract, could be M&A if you want to. But right, it's kind of a reverse methodology to prove it without interfering with the sales standards of startup. But it's kind of this proof where we selected the right way and can we multiply this proof? And then the next step is there also. We continue. Yeah, I think that makes—

yeah, it makes total sense to me. It's just frustrating that a lot of these mismatches just happen so early on. So I want to start wrapping in some audience questions here. So John from from Raleigh. If you guys don't know, Raleigh is a city here in the United States, but John wants to talk about this intention problem. So, you know, what he says is innovation is too often in the enterprise thought as IP, right? It's thought of invention, new invention. And, you know, there is also this dichotomy where founders are going to be afraid of sharing this intention, this information, this IP with third parties. You know, so what is like how, and I guess this boils down to, you know, the key to a good innovation program for a corporation is to make sure that you are doing it in a way that will not hurt a startup in the long term, right? But even from the outset, it's to make sure that even the most interesting startups, when they see what you're trying to do, don't just get turned off.

Right?

Because they are— they need to move quickly. They're getting emails every day from people, and they're saying yes, yes, no, no, yes, yes. So yeah, like, how have you seen large corporations kind of tackle that problem where it's basically getting over the hump of saying, hey, are you just a corporate that is trying to steal my IP, get all the labor of my hard work, and then throw it into your corporate machine and make make a billion dollars off of it, right?

Yeah, look, um, so I think first of all, what is the— um, I've seen many different ideas, and sometimes there's some real, some real novel, uh, technology, for example. Um, and sometimes, uh, there's too much tendency to sort of, uh, be overhyped about an idea. And so I think if you have a real novel technology, then, then I would think twice. First of all, to do I really need this corporation or another partner to work with? So I think that's sort of a serious question to start with. Um, and what I also sometimes see in, in practice is that there's not a real good negotiation process, right? So is that both sides of the table do not really So it's easy to avoid the tensions and the conflicts, have potential that can be happening in these conversations. So I think it's also that if you really have something novel, yeah, first have good negotiations about it, right? And make clear contracts and agreements. And it sometimes is being not done very properly.

Do you think that's a big— so is it like an MOU or even like an NDA or something like that? I mean, is that—

are you guys—

is that a normal part of the process that wouldn't put anything at a halt?

I think it's always difficult to, to negotiate a partnership in a contract because a contract that also has liabilities, right? I think the— how we usually like to approach this is that we have— we convince the corporate that it's about enhancing their current assets. So it's not about copy-pasting, but it's how can we use this to enhance our assets, and then prove from the outside in that it works. So I rather would give the startup incentive— money, contract, etc.— but reimburse them for the effort. To prove that that ID resonates with the asset. And then if it does, right, then I will give you XYZ. So it's kind of an earn-in structure. And so, and that's something you can negotiate in the contract. And then it's actually just a sales quote, right?

So I wish there was a standard here. Maybe we should try to create one, guys, right? You know, like Like the FAST agreement, right, was, um, is a standard we created to try to help facilitate really quick founder and advisor relationships, right? Um, there's a lot of agreements out there where, yeah, it's just if it can make everybody feel a little bit more comfortable and get done quickly without the need of a lawyer, right? Standardization. Because yeah, in a lot of these cases, like the start, the large corporations, like, they're— the last thing that they're probably thinking of is, oh, I want to steal this startup's IP, right? Like, um, so, but it would— yeah, something quick like that, I think, would be interesting.

No, I think that's— so what we do between corporates is kind of we, we run an accelerator, because accelerator, you're allowed to fail, so the liability is gone, and you're allowed to fail to work together. And so you have one ingredient partner and one brand, and then And if successful, the brand takes over. That's in the sales quote, right? But then upfront we agree, if this happens, you agree to buy the product and, and launch it in the market.

Yeah.

Um, and something similar needs to happen there. So my personal experience when I ran a startup is that I usually turn this into a sales quote which then got signed. So it's just an assignment we do for 12 months with a delivery assignment. So 'X, Y, Z,' and then we get the next contract. I saw some remarks about intentions. Yeah, you just have to be very aware on how that happens as a startup. And what Misha mentioned, politics, management, etc. But I think the program we offer should fix this for the startups because we, we know this happens, and we need to create an ecosystem where This can work in a trusted way, but agreed, right? If we can pencil it down and this is a template contract, that would be fine. It's a great question, and I think we can debate about this for hours, but it's— and I would do the earning structure first, also a bit per company.

As some company really would like to own the IP, others feel fine with collaboration and investing. And we met, I think you and I met both a lot of smart people in the corporations. We worked a lot with them and they, um, there are also a lot of, uh, I would say a lot of people very open to all these new things, right? But they are sometimes also don't know how to do this, right? So to your point, John, I think, uh, there's something to, uh, to be created.

Yeah, yeah.

So, and just getting into, you know, and this is a question from Granit, hopefully I'm saying that correctly, it's from Amsterdam, so close to you guys, you know, so I know we've talked a little bit about like what are some of the strategies that we can do this, right? So Granit's asking like, what is replacing these innovation labs? Like what are some of the ways, and I know that we've talked about this a little bit, right? But just replacing these processes so that they can address some of these wicked problems. So we've been sort of going through this step by step, right? Like number one, okay, there's this question of intentions. Number two, are the startups like properly matched and are the companies looking for the properly matched companies in terms of stage and size? Right. And I know we've talked about this, you know, privately before. You guys are pretty adamant in saying that, like, you know, you need to be at least like Series A-ish level, right, before it makes sense. And honestly, that sort of alleviates some of those stealing IP concerns, because if you're at that Series A level, you've already kind of created an engine of growth, right? You figured out Yeah, it's not a question of like, hey, is there product market fit necessarily? It's a question of like, okay, I'm right now at like 5x, how do I get that to 100, right?

Yeah, correct.

And I think the question was about what's, what's sort of replacing now the labs, right? If I, if I—

yeah, like, right.

So, um, what I've seen, and, and, um, is that, um, so if these labs are closing, most of the time it's, it's sort of in the frame of of, uh, we're gonna move it closer to the core business. So there's always this tendency: do you separate your incubation lab or your innovation lab, right? Do you need to separate it from the mothership? If you do, then sometimes it's too far and people wonder what the hell are they doing there. And yeah, nothing serious comes out of it. That's sort of the stereotype, uh, idea, which I completely understand. Also, if I would be in the shoes of the other person. If you put it too close in the core, it starts to mingle with all your core business activities, right? And so it's a bit of a difficult thing. But what I see happening now is that they close labs and they bring it more into the core. And then we just need to know— we don't know what's coming out of it then, right? What's happening then? We don't know. So I don't think— I don't know if it's a good way or not a good way, but the problem behind is that there needs to be more grip on all these dispersed innovation activities within such a large giant, right? So I feel that that's sort of, uh, behind it also.

Yes, so to reiterate, reiterate what Misha says, I think they're moving it back to the core. So the power brands, the core brands, and then more focused, but then the tendency is that they lose sight of the, the new technology waves coming up. And I think the, the, what we try to say with this investment approach, working with startups, I truly believe that if we do it right, this will replace the innovation labs. Yeah. Um, and also provide an ecosystem where I started both grow, get acquired, corporates grow faster. This will replace that, that new technology desire to, to grow faster or make it future-proof, because core assets, a new flavor, a new size sample bottle, whatever, that's what they're good at. But finding the next best thing, I think that's where this initiative we're launching right now is a big answer to that. Yeah. All right.

And it would allow you basically to start engaging with startups in a kind of a lightweight structured way early on, right, before they get to the point where, um, where kind of the corporate, corporate machine may slow them down. And, and I know like something we've chatted about too is like, you know, literally when you just dial into like what is the exact stage that startups should be trying to engage with companies, even that simple question, seemingly simple right, is really complicated because most, most large corporations are trying to find kind of disruptive startups, right? Which means disruptive technology. They're at a stage when they're still— they're, they're sort of before the scale stage. They're still like kind of disrupting, right? So they're at a stage where they need to move really, really quickly, which is exactly why the startups— or the— why the large corporations want to work with them. But then in, in partnering with the large corporation, it literally negates in a lot of ways, the speed by which they attracted the large company to begin with, right? Are there any examples of just, and I know this is what we're trying to do here with this partnership, right? But are there any like kind of just methodologies? I mean, I know there's a lot of corporate like venture building methodologies, there's, you know, even like hackathons. I mean, obviously in a much earlier degree, But are there any examples of companies or just initiatives that you've seen that you think have done it pretty well, or that at least have tried to figure out some concepts there that you think can inform what we do in the future?

Well, I can— I know probably Jeroen will come also with his PepsiCo example, which I'll leave to you. And you probably know which example I will come with, but I like the the, the minority acquisition of Nestlé that bought YFood for 49.5%. You can just read it on the internet. And it's a mature asset, so it delivers— it's a mature company, so it delivers, what is it, 100, 120 million annual revenue. It's tailored to specific audience. It has, of course, a specific brand that is tailored to that and their products. And it's interesting for them also because, uh, yeah, normally M&A buys the whole company, right? Um, but now actually the, the idea is of course that we buy this, this 49.5%. I don't know the exact deal, right, but you can fill in the assumptions. Is that, um, well, €115 million is great, but €600 million is better, right? €600 million. So, so the idea is then, how can, how can we grow this company with all the knowledge and power a large company like Nestlé has. And then it becomes interesting for both parties, because the founders of YFood— and then I think every company goes through that curve— yeah, you will reach a plateau somehow, right? It's difficult to find that next curve. And I think that is a super interesting moment, um, that a large company bring— can bring a lot of muscle, uh, to the table.

So I think this is an interesting example from my side, because most, most companies tend to think about it as all or nothing, right? Not necessarily in that investment.

Yeah, yeah, yeah, correct. Yeah, I think so. The example for YFood is kind of ideal because the founders can then still prove the initial value of the product and then need to show that it works. With a big incentive, of course. I think the— so from structural perspective, I, I really like the PepsiCo Lab example because they spend a lot of time in their due diligence and have a really close relationship with investment, investment network, right? So, so in terms of acquisition, they've proven value, which means that investors provide them with the best solutions, uh, for an M&A purpose or a partnership, right? So it's kind of— it's an ecosystem they created. And it goes both ways. So it's value for startups, value investors, and it's value for PepsiCo. But the key part is they do their due diligence very well. They spend 6 months on understanding the problem and also understanding, okay, then this is what I need to buy for a perfect match with PepsiCo. Um, and I think for Nestlé, what I also like is that they focus on their R&D lab as owning kind of the, the the problem of proving value for new ideas, right, from idea to shelf test. Um, yeah, they, they didn't distribute it in marketing teams, just centralized R&D, build it for us, prove it, and then the country teams will then adopt it. As a mindset methodology for such a large company, that was kind of the— I do believe was the best fit to place it in the company.

In that sense, yeah, it's just a much more agile, a much more agile mindset, right?

It's like there's not an immediate business risk, it's just prove that it brings value. Most of R&D, they can work with other companies. I can use your product, I understand how to make it big, and let's prove together. So it's kind of a no-risk, um, no business commitment, I need to have money right now, um. Problem. There's always problems, but as an example how to place it was, I think, an ideal example, or at least one of the best ones we worked at as a proof of value.

So I have a company here from Catalan, from Bucharest, is asking like this mentality of, uh, quote unquote, it works before, so it'll work a bit again, right? We know better, right? Kind of pervasive, especially in, in large companies, right? Because yeah, they've been successful, right? That's why they're in this position. So I think that dives into a lot of what you guys are talking, just the politics and that kind of stuff. But it is why, like, how have you guys seen, I mean, literally, you guys have done workshops at these companies. You've been trying. I feel like a lot of what you do is just mindset shifting.

Right?

So how do you get them out of that mindset shift? Because they have a point, right? They are successful, they've built a lot of value. But on the other side, it's just the world changes.

Yeah, but I also think— and I didn't encounter this mentality too often, in my opinion, in my experience.

So, um, but, uh, but maybe the people that you're working with encounter this mentality. When they're talking.

Like in every large company, like every institution with a lot of people, there's a lot of management of egos, right? So I think there's a very interesting perspective which I really love myself is we have this— there's this professor from INSEAD, Manfred Goetz de Vries, and he wrote a book about the neurotic theater. And I think that's sometimes the perspective and glass that you can put on to understand, look, there's so many tensions and different stakes in one environment. Of course, that will lead to tensions that are not outspoken, to things that have not been said, to feelings that can't be felt. And then, what it does, it goes under the ground. So, what I always at least try to do in facilitating different groups people is to start, at least try to build this energy or sphere about people being open and that we try to— and things that are not said is the challenge. We actually need to say the things that are not being said. Otherwise, we don't have the right conversation, we don't have the right tension in the conversation. Which doesn't lead to great innovation if we don't really have the pushback to each other.

So, sorry to interrupt because it's very related, right? Pirandip asked, like, that are talking about this leadership to be threatened by innovation, right? It's not only leadership but technology, right? The it teams, if it's a new technology or things like that, they may see those things as threatening as well. So that just sort of compounds this idea. I mean, it's just similar, right? It's like, oh, we know the way to do things. This is how we've always done it. And anything new is not only just questions, OK, well, is this the right thing, the right strategy for our corporation, or is this the right strategy for our team? But it's threatening to the leaders and the people that have power because it literally threatens the basis by which they are employed, right? So yeah, I guess like, is there— yeah, just thinking a little bit more, and I know we're already talking about it here, right? But just ways that at least to equip, because it's usually people are charged with innovation, right? But they're reporting up to people that are managing a lot of different things, and innovation a lot of times is thought of as this little satellite thing over here. Right. But the key is to start integrating that into the mothership in a way that's meaningful, that can pull budget, and that is seen as, you know, future-proofing the business. So yeah, any other strategies you guys have used to really kind of be able to sell those things going up and up and up?

Yeah, so the next to the personal space, I think it's, it's a value-based, right? So the, so the higher up you go the more focused they are on margin growth year-over-year strategies. So I think the only way to overcome it is setting a target. And then Michel mentioned in his presentation growth gap, for example. There will always be a gap if you stretch, right? So if you grow like 20%, if you grow like 50%, there's a stretch. And then anybody that says in that group, we've done it before, et cetera, there's this gap that needs to be filled, right? And if you and your solution can deliver the promise that you can fill that gap in somehow, some way, there will be kind of a need to explore it because otherwise I don't meet my growth targets, right? And then we have a different discussion with leadership but also with innovation teams because suddenly innovation teams become relevant. Maybe not today, but in 2 years from now, there's a gap. And for example, in the food industry, they go 3 to 5% each year. But what if I need to double? So I miss 5% per year, so I need to acquire, get it somewhere else. So if you fit in that 5% growth, right, at least there's a sense of urgency to explore it. And if they've done it before, show it to me, all right? Or some had to add— so I think labeling it not as a solution that fits innovation, but it's something that's relevant to growth year over year, margin, etc. Um, all of a sudden you have a different value-based discussion, which also means you can value your innovation differently. So it sounds simple, but yeah, right? It's, it's the, the way a lot of the teams are set up now.

It's just, it's an innovation team and they're not talking to tech, they're not talking to—

so for example, we don't talk to innovation teams, we talk to a category team or VP strategy that's responsible for doubling it or tripling it. And then based on that ambition, we can start talking to an innovation team because then we know what to deliver. And then we don't do the other way around. It's just a simple way of— we've done it before, or we're already doing it, etc. But if you're doing it, it's not delivering, so where's the gap, right? So it's kind of a mindset change. And I know that it works for me, it's kind of killing any sales discussion. Been to so many meetings where we just present a pitch. Yeah, we've done before, this doesn't happen. And we talk to it and it does it.

You're completely right, right? I mean, and then can we show what's in it for them, right? So I think there's a lot of, uh, if you look at a lot of pitch decks, there's a lot about product and, uh, futures and, uh, what is novel and etc., etc. Or within large corporations about feasibility. Can we make it? All these things, it's all relevant, but if you need to sell it in this famous elevator pitch, yeah, you want to say more strategic things like, so, okay, all this operational data that we have gathered in accelerators, how does this translate to, you, whom's point, something of strategic value for these senior people? Why should they open their wallet, basically? Why should they spend time on their busy agenda listening to another pitch, right? So I think it's a crucial case.

So maybe just as a final example, so I used to run a, own an analytics startup, MeasureWorks, so, and we delivered in what we call site speed. So how does it, is it fast enough? Does it work? It's a technical problem. So you talk with IT people. But when we change the narrative, let's say if I can make you 7% more conversion if you're 1 second faster, there's, there's no e-commerce manager that says no to this. So we just changed the narrative and all of a sudden you could sell to everybody. So it's just reframing how you think. And this is the same, same topic. You just need to find out how to reframe it so it makes sense for a company. In terms of value-add.

Now it makes a lot of sense, guys, and honestly it's a lot of— and just, yeah, to close things up here, like, it's very analogous to a lot of things that we've seen in the startup space, right, the last 10 years or so, where it's all been about, you know, it's just growth and it's like, oh well, you know, it's sort of a mentality of just throwing things against the wall and seeing what sticks. Metrics, right? And I think on the corporate side, it's just if you were— a lot of corporations have just been able to throw a lot of these things under this umbrella of quote unquote innovation, right? Which is press releases and things like that. But when it's not actually tied to the core metrics and the core business, then that's what it becomes. It becomes theater, right? It just becomes press releases. And you can issue a press release for a lot less than it takes to launch a whole innovation lab, right? So, um, it's— yeah, it's kind of similar in the venture, in the startup space, where it's just all been about growth and growth and growth, and don't worry about actually bottom line yet, about actually making a profit. It's just growth, growth, growth, right? And now we're getting to an environment where, uh, it's, it's— yeah, it's being respected a little bit more to create things that are sustainable, that actually have an impact. So, um, I love hearing these insights, guys. I hope, and I can see here from the chat as well, that a lot of people have learned a lot too. You know, I come from the startup space, I live and breathe it. So every time I talk to these guys, I learn more and more just about what are some of the issues as to, you know, how we can help not only the large corporations, but just the companies, right? These are two entities that have value for each other and that want to engage, and they just continue to kind of hit these roadblocks. So if we can figure this out, and even I think from a brainstorming perspective, some kind of standard, I don't know, term sheet, MOU, whatever, you know, at least I know from the startup side that would make a lot of people a lot more comfortable. Um, and, you know, perhaps from the corporate side as well, it would— if you can make more startups comfortable, maybe they can even just increase the volume. Yeah, on their end.

Yeah.

All right. Well, thank you so much. Thank you, Jerome. Thank you, Misha, for joining. Thanks, everyone, for joining as well. We'll send you a video and a PDF as well, the presentation, in the next couple of days. If you are interested in just learning more about what we're doing, you can reply to any of the emails that you receive from us. I know some of them are automated, but if you reply, they all go to the same place. And in addition, we'll be sending out some links along with the video in a couple of days as well where you can get in touch. All right. Thank you so much, everybody. If you are sticking around, there's going to be networking tables as well if you want to go in there and meet some other people. Cool. Thanks.

Thanks a lot.

Bye-bye.

Thank you.