Startups like Red Riding Hood should beware of corporate wolves

Unilever and Canary Wharf’s ‘Cognicity’ both invite you to come and help them crack a world-wide problem, but… Corporates are seducing startups into giving them their good ideas, but the odds and the risks against getting your rewards are less evident than they should be. There is a solution.

Here’s a new but increasingly familiar slant for startups – from a big corporate (Unilever). We’ll identify some specific key issues, they say, (in this case how data can be used to attract people to live more sustainably). You come along and work with our staff to suggest ways to crack such issues – at a Hackathon. Our staff will provide background – marketing, sustainability, IT and consumer research, together with one-on-one mentorship. One winner gets £5,000 in prize money, and may be invited to participate in a paid pilot with Unilever, with £31,000 made available to help develop and test their idea.

Level39 at Canary Wharf’s ‘Cognicity’ has launched a similar challenge. Smart City technology companies have been invited to apply for one of six streams – each about a specific aspect of ‘the city of the future’. For each stream, six teams were to be selected to enter an Accelerator with leading technology companies and Canary Wharf Group partners – to develop their technologies and solutions. In each stream, one would receive a £50,000 prize, and ‘pilot their solutions in the ongoing development of Canary Wharf and create a showcase connected city’.

It’s hard to tell whether these are impact enterprises or commercial ventures. Each competition has only one winner; and the costs and benefits of being involved in any pilot are unknowable. There is no mention of who owns the ideas nor who shall have the rights to them. And there is no one there to protect your rights. So if you have a good idea, you would be at risk of being seduced into a process in which, whether you win the prize or not, your ideas may have lost any protection.

Nesta, some time ago in an open innovation pilot, acted as intermediary for P&G by eliciting and selecting relevant ideas and then providing a period of support and development with the help of a VC for their originators (including ensuring adequate protection and the writing of a business plan) and enabling the best to be pitched to P&G. Ultimately, one of these was felt by P&G to have very considerable market potential. (http://www.nesta.org.uk/corporate-connect). This process, known as the ‘Air Lock’ is run regularly now for many different companies by its creaters in Nesta in ‘100%Open’: it builds up communication channels and trust, and it protects IP.

Young businesses in accelerator programmes run by organisations like Techstars and Startupbootcamp expect to get from idea to marketable proposition in 13 weeks (for which the latter take around 7% of equity in return). At that point they are in a position to negotiate with users as investors on a commercial basis rather than simply on the terms dictated by a corporate.

Accessing creative start-up talent is increasingly necessary for larger companies who want to capture the best ideas, people and technologies. As scouting by corporates for good ideas becomes more common, they must not be allowed to play the Wolf to Red Riding Hoods. They should recognize that they do not know what they will be able to catch in their fishing net: vagueness simply raises suspicions.

John Whatmore April 2015

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