Benefit from the innovative strength of start-ups with the venture client model

In venture clienting, companies do not make equity investments in start-ups, as is usual with corporate venture capital, for example. Instead, they act as first customers and rely on the technology or solution of the start-ups in a clearly defined pilot project. The advantage: the costs and duration of these pilot projects are low, which enables companies to test a large number of innovations without taking high financial risks. The aim of the venture client model is to enable new products, improved processes or innovative business models for the company. The start-up is tested in a controlled environment and under real conditions. A budget is made available to the start-up, which then uses its technology or solution in a defined pilot project in the corporate context. The result is a prototype or proof of concept (PoC) that can be used to validate the added value of the start-up technology. If testing is successful, the solution can be integrated into the company. This approach offers companies a wide range of opportunities – regardless of their size or sector.

The inno.venture research project and the Stratosfare initiative

The venture client model is being scientifically analyzed and further developed as part of the inno.venture research project. The Stratosfare initiative, in which companies from it’s OWL have joined forces for venture clienting, including Miele, WAGO, Claas and Melitta, offers a practical insight into how the model works. In collaboration with these companies, the project examines how innovative technologies from start-ups can be optimally integrated into the corporate context. This gives the partner companies valuable insights into how to optimize their innovation processes and successfully implement pioneering technologies.

How Venture Clienting works: A look behind the scenes of modern innovation

The venture client model is characterized by clearly defined processes that enable collaboration with start-ups to be scaled across the company. This structured approach enables specialist departments to carry out venture client projects directly in their areas. If necessary, the experts from the specialist departments are supported in the pilot projects by a person with experience in venture clienting. At it’s OWL, the expertise of the Stratosfare project team can be called upon for this purpose. The model is divided into several clearly defined phases:

1. Request: Companies identify internal problems or innovation needs, known as requests, and formulate these as a scouting assignment. For example, a company could be looking for sustainable packaging materials. This request is then used to find a suitable start-up.
2. Scouting: In this phase, a targeted search is made for start-ups that meet the company’s requirements. This can be done by Stratosfare’s own scouting or by advertisements on company websites. The best start-ups are placed on a longlist.
3. Match: In the third phase, the longlist is reduced to a shortlist. The final start-up is often selected in a pitch event at which the start-up presents its solution. The decision is made by the company on the basis of clearly defined evaluation criteria.
4. Buy: After selection, the start-up is formally commissioned. For this purpose, legal agreements such as non-disclosure agreements (NDAs) or cooperation agreements are concluded. This is done in close cooperation with the legal department, IT and purchasing.
5. Pilot: The pilot project is carried out over a period of three to six months. The aim is to develop a prototype or proof of concept (PoC) that validates the potential of the start-up technology under real conditions.
6. Integrate: After a successful test phase, a decision is made on the long-term integration of the start-up solution. Options include the direct purchase of the solution, licensing or an investment in the start-up.

WAGO relies on image recognition: A smart solution for small items

The variety of applications of the Venture Client model is demonstrated in specific pilot projects. In the production sector, for example, retrofittable sensors were installed on older machines in order to reduce downtimes through predictive maintenance functions. In another example from IT, a software platform optimized license management by creating transparency about SaaS solutions used and thus saving on license costs. In the case of products, new innovations can be sought in a wide variety of search fields, such as new types of sensor technology, sustainable materials or complementary digital solutions. A concrete example of the success of the venture client model is the collaboration between WAGO and the start-up nyris. WAGO was looking for a solution to identify products using image recognition, as QR or barcodes on small items often fade and become illegible. In a pilot project with the start-up nyris, the image recognition software was successfully tested and subsequently integrated into the WAGO app. Today, the app enables the reliable identification of over 30,000 items – a huge relief for users.

Win-win scenario: Why companies and start-ups benefit from the venture client model

The venture client model offers a win-win situation for both sides. Companies benefit from the low costs and the manageable time frame of the pilot projects. The biggest advantage is that companies can test many different start-up solutions and then make a decision about future cooperation, such as purchasing the start-up solution or investing in the start-up. In addition, the model is easy to scale as it can be applied to different business areas and industries. Start-ups benefit from the fact that they can validate and further develop their solutions in a real business environment. As they act as a supplier and do not have to give up shares, they receive valuable references and revenue to finance their development. Direct access to the companies’ expertise and market knowledge offers them additional advantages.

From the idea to integration: stumbling blocks in the venture client model

The venture client model offers companies the opportunity to efficiently integrate innovations, but here too there are challenges that need to be overcome. Cultural differences between start-ups and companies can make collaboration more difficult. In addition, building an internal network is crucial in order to identify relevant contacts and promote the integration of start-ups. There is also the challenge of finding suitable evaluation criteria and integrating start-up solutions into corporate structures in the long term. These exemplary challenges illustrate the need for research into the venture client model. The inno.venture research project is working with the companies Miele and WAGO to develop solutions for such hurdles, which will be validated directly through application in the companies.