Better Together: Making Magic Between Big Companies and Startups

Why should big companies and startups collaborate?

When rising startups and big companies combine resources, they can experience the best of both worlds, pairing innovation with scale and influence. This helps each side complement the other’s strengths and weaknesses.

Here are some enterprise strengths and weaknesses:

• Enterprise strengths: Large companies boast immense firepower in terms of clout, brand recognition, brand reputation, resources and access to funding. They have the financial capacity to fund projects, staff teams and scale infrastructure as needed. Enterprises also bring extensive industry connections and experience that can help startups navigate regulatory hurdles on the path to growth.
• Enterprise weaknesses: Many large organizations struggle with innovation, often associating it with bottlenecks, uncertainty and shifts in market perception. They may be reluctant to pivot away from core products and services. In a McKinsey survey, 86 percent of executives said innovation is a top-three priority, but fewer than 10 percent feel their organizations are doing it well. Additionally, accounting and finance teams are often highly numbers-driven and hesitant to invest in unproven ventures without clear ROI validation or supporting metrics.

Paul Robson, a serial entrepreneur, investor and business consultant, says enterprises have much to gain from a startup’s fresh, innovative perspective and approach. “Startups are inherently more nimble, so they’re faster and more efficient at improving existing products or services,” Robson explained. “They often spot pain points corporations take longer to identify and can create new products or services to address them.”

In contrast to the enterprise experience, startups typically bring the following strengths and weaknesses to the table:

• Startup strengths: New businesses are often full of cutting-edge talent and best-of-breed expertise. Their workplaces tend to be agile, with less bureaucracy and faster time-to-market than their corporate counterparts. Their goal-driven pace of innovation is usually unencumbered by red tape.
• Startup weaknesses: Understandably, startups are often focused on the challenges of starting a business. They’re working to build credibility within their industries while increasing cash flow. Financial, marketing and administrative resources are often stretched thin. The U.S. Bureau of Labor Statistics reports that about 80 percent of new businesses survive their first year and roughly 55 percent are still operating after five years, illustrating how many don’t make it through early challenges.

When partnerships form, Robson says big companies can benefit from giving startup partners a more direct line to the boardroom. “[Great] ideas within big companies often get bogged down in corporate bureaucracy,” he explained. “They have to filter up through multiple layers of management and may be diluted or discarded before they ever reach the CEO.”

By contrast, a startup partner with a fresh perspective often has a clearer path to senior leadership. “If [an enterprise’s] startup partner has a great idea and shares it directly with the CEO, it’s more likely to be acted upon quickly and decisively,” Robson noted.

How can big companies and startups collaborate?

After forming a startup-enterprise partnership, the two sides need to spend quality time together, well beyond emails and phone calls, to build trust and establish a genuine working relationship. 

Consider the following ways to collaborate and strengthen the partnership:

• Get involved in local communities: Stepping into local technology and innovation communities helps both sides stay current on processes and protocols while uncovering new ways to solve shared business challenges.
• Work together to meet potential customers: Small and large companies can collaborate on challenges, events and joint opportunities that introduce both brands to new audiences and potential customers.
• Establish innovation accelerators: Larger companies may consider establishing or engaging with innovation accelerators to give startup partners access to additional expertise and help them scale their solutions. Research in Sustainability found that startups participating in accelerator programs were more likely to survive than non-accelerated peers, with accelerator participation associated with an average survival increase of about 23 percent. Additional analysis from Wharton found that accelerator graduates often raise more capital and scale faster than comparable startups that don’t participate in accelerator programs.
• Establish clear communication channels: Both sides should prioritize open, two-way communication throughout the partnership, both internally and externally. Big companies don’t want to appear foreboding, and startups want to feel heard. The strongest partnerships are built when both sides communicate openly and treat each other as equals.
• Create mentorship opportunities: Katie Manasse, director and executive coach at Sea and Sky Coaching and Consulting, stresses that mentorship is a particularly effective way to share knowledge, create feedback loops and move shared projects forward. Mentorship is especially valuable for startup CEOs, helping them navigate difficult stretches and manage growth. “They get a crash course in corporate governance, managing shareholder expectations, mergers and acquisitions, working with regulators and exploring more complex financing models,” Manasse explained. “It’s also a strong introduction to leadership skills they may rely on later in their company’s growth journey.”

What are the challenges of startup-enterprise collaboration?

Startups aren’t strangers to collaboration. They work with business investors, customers, contractors and partners to keep operations moving forward. Similarly, enterprises collaborate internally and externally to support growth.

However, startup-enterprise collaboration isn’t always smooth sailing. Here are a few common challenges these partnerships face:

• Startups are protective of their ideas. Smaller companies sometimes worry that an enterprise partner could steal their intellectual property. As a result, they may hesitate to share innovations, even when a larger partner has the resources to help them scale. In practice, established corporations typically favor licensing or acquisition arrangements over appropriating ideas, since those options offer clearer legal protections and lower liability risk.
• Startups fear being taken advantage of. Small business owners may be reluctant to be fully transparent with large corporate partners. This hesitation can make it difficult for enterprises to accurately assess a product or service’s viability. When startups hold information too closely, it becomes harder for larger companies to evaluate whether a partnership or investment makes sense.
• Enterprises may be wary of a startup’s lack of experience. Startups often have limited track records, which can make these partnerships feel risky. According to research from Harvard Business School senior lecturer Shikhar Ghosh, up to 75 percent of venture-backed startups never return cash to investors, and in 30 to 40 percent of cases, investors lose their entire investment. This underscores just how uncertain early-stage ventures can be.

These barriers — some real and some rooted in misperception — have kept many promising partnerships from moving forward. Successful collaboration requires both sides to accept some risk and invest in the relationship, trusting that each party is working toward a shared, mutually beneficial goal.

What are examples of big companies and startups collaborating?

Several high-profile partnerships show how large enterprises and startups can work together to drive innovation without starting from scratch.

Microsoft and OpenAI

Microsoft’s partnership with OpenAI is one of the most closely watched enterprise-startup collaborations in recent years. Microsoft first invested $1 billion in OpenAI in 2019, followed by a reported multiyear investment worth approximately $10 billion in early 2023.

Through the partnership, OpenAI gained access to Microsoft’s Azure cloud infrastructure and enterprise reach. Microsoft, in turn, brought OpenAI’s models into several of its own products, including Azure, Bing and Microsoft 365 Copilot.

Rather than building competing AI systems entirely in-house, Microsoft used the partnership to move faster in a rapidly evolving market. For OpenAI, the collaboration provided the computing power, scale and commercial reach needed to bring its technology to market. The relationship is a good illustration of how established companies can pair their infrastructure and customer base with startup innovation to create practical, real-world applications.

Walmart and Canoo

In 2022, Walmart announced a partnership with electric vehicle startup Canoo, outlining plans to test up to 4,500 all-electric delivery vehicles, with options for additional units. The agreement gave Walmart early access to Canoo’s purpose-built delivery vehicles as part of a broader effort to evaluate electric options for last-mile delivery.

The vehicles were designed with configurable cargo space to support delivery efficiency, allowing Walmart to pilot emerging EV technology without developing vehicles in-house. For Canoo, the partnership put its modular platform in front of a major enterprise customer and allowed the company to test its technology in real delivery conditions.

The collaboration never moved beyond pilot testing, and Canoo later shut down operations, highlighting the financial and execution risks that often come with early-stage startup partnerships. Still, the arrangement shows how large companies typically work with startups: testing new ideas without taking on unnecessary risk upfront.

Pfizer and BioNTech

During the COVID-19 pandemic, vaccine development moved at an unprecedented pace. Pfizer and BioNTech were among the first companies to bring an mRNA COVID-19 vaccine to market, securing emergency authorization in multiple countries as governments raced to slow the virus’s spread.

Their collaboration didn’t begin with COVID-19. The two companies had already been working together since 2018 on mRNA-based influenza vaccines. BioNTech contributed its mRNA research capabilities, while Pfizer brought experience in clinical trials, manufacturing and global distribution. When COVID-19 emerged in early 2020, that groundwork made it possible to pivot quickly.

The result was Comirnaty, an mRNA COVID-19 vaccine that was distributed worldwide and later updated as new variants emerged. At its peak, the Pfizer-BioNTech vaccine generated tens of billions of dollars in annual revenue, including roughly $36 billion in 2021 alone — enough to make it one of the highest-selling vaccines in history.

General Motors and Lithion Recycling

General Motors invested in Lithion Recycling, a battery-recycling startup working to recover materials from end-of-life lithium-ion batteries. For GM, the investment tied into broader efforts to build a more sustainable EV battery lifecycle as production ramps up.

Lithion developed a recycling process designed to recover a high percentage of battery materials, including lithium, nickel and cobalt, so they could be reused in future battery production. From GM’s perspective, the relationship offered early insight into emerging recycling technologies that could help reduce reliance on newly mined materials over time. For Lithion, the partnership provided capital and access to industry expertise as it worked to scale its technology.

The collaboration later stalled as Lithion faced financial challenges, and the partnership did not advance beyond exploratory work.

Taking the next step in your business’s evolution

Partnerships between startups and large companies aren’t always easy, and there are no guarantees, but they can be worth the effort when both sides go in with clear expectations. Startups bring speed, new ideas and a willingness to experiment. Enterprises bring resources, experience and access to markets that are hard to reach alone.

When those strengths line up, collaboration becomes less about big promises and more about practical progress. The companies that get the most out of these relationships tend to focus on trust, communication and shared goals, and they build partnerships that make sense for where both businesses are today, not where they hope to be someday.

Alex Goryachev contributed to this article.