It’s no longer David versus Goliath in the business world; it’s David and Goliath.
Large multinational companies (MNCs) teaming up with start-ups, something unheard of as recently as five years ago, is becoming an industry norm.
Over the last 10 years there has been growing realisation, one that started in Silicon Valley, that no single entity can keep abreast of the speed of innovation, not even Google and Apple, says Sami Jaaskelainen, community director of Nordic Innovation House, which helps start-ups from Nordic countries find a footing in local markets.
Jaaskelainen says: “The pace of technological growth is so fast that it’s very difficult to stay ahead, and that’s where the accelerators and start-ups come in. Small players are becoming major players and are expanding at an insane pace of growth.”
He points to ride-sharing app Uber and audio streaming giant Spotify, both of which started operations scarcely 10 years ago with limited budgets and are today multi-billion dollar companies and household names—‘unicorns’ in tech-speak.
Multinational Danish engineering company Danfoss has a specially created venture capital arm focusing on identifying the right start-ups to work with. President of Asia Pacific operations, Soren Kvorning, says Danfoss is becoming more open to partnering with start-ups.
“There is a lot of disruption in our industry and to accelerate our own evolution we need to partner the smaller companies. They benefit from our presence and we gain speed by working with them,” he elaborates, sharing that Danfoss is now working on an electrification project with a start-up in Singapore.
Danfoss isn’t alone. French energy firm Engie now has Engie Factory for energy-related start-ups, and DSM works with start-ups on solar innovation, to name a few. This growing trend is proving particularly significant for companies wanting to become more sustainable.
What does this mean for companies going green?
With the global climate crisis and the threat it poses to human civilisation capturing headlines, the responsible business movement is gaining ground.
Experts Eco-Business spoke to said partnering start-ups gives companies a cost friendly way to try out different solutions to sustainability problems they face—and solutions could range from cutting energy use, expanding the lifetime of resources or coming out with a new product entirely that can be reused. The challenge is looking for the right start-up to partner with.
One initiative that identifies deep tech start-ups and solutions that can help advance a circular economy and clean energy is The Liveability Challenge. The global platform identifies start-ups with solutions that can deliver significant impact and improve the liveability of cities in the tropics, and matches them with investors that can help them raise funding and scale up.
This year’s grand finale event last week showcased six innovative solutions including a smart platform for reuseables, a device to enhance diesel engines with hydrogen, a new biomaterial for 3D printing, green data centres, and a dehumidifier for use in air conditioning. But the grand prize of S$1 million in funding from Temasek Foundation went to Sophie’s Kitchen, a US-based tech start-up for its solution to create edible proteins using microalgae grown on food manufacturing byproduct in urban environments.
Now in its second year, the Challenge is presented by Temasek Foundation and organised by Eco-Business and sister non-profit EB Impact, in partnership with Ecosperity Week 2019.
“The Liveability Challenge is a very concrete and practical gate opener. Companies get to submit their project, pitch it, and finally have the possibility of doing a project here. Many Nordic start-ups are forerunners in the energy and sustainable space and the Challenge gives them a great opportunity to connect companies here with the Nordic solutions,” Jaaskelainen says.
Working with start-ups can help companies identify new business opportunities in traditional sectors, says Anna Tari, founder and director of the London-based Circular Economy Club, that links start-ups with circular economy solutions with funding and the right connections.
For instance, the concept of a circular economy, which emphasises maximising the use of resources while minimising waste, has come into sharp focus in recent years as a way to limit the environmental impact of production and consumption.
“Eighty per cent of consumer goods are not recovered, and there’s a US$3 billion opportunity for companies [that find a solution to waste]—it’s huge. There will be many more collaborations between MNCs and start-ups to plug this gap,” she remarks.
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The pace of technological growth is so fast that it’s very difficult to stay ahead, and that’s where the accelerators and start-ups come in.
Sami Jaaskelainen, community director, Nordic Innovation House Singapore
There is also room for innovation as the thinking around waste management changes. “People used to think environmentally conscious programmes were limited to recycling, but now it’s more focused on designing out waste, such as modular buildings,” Tari tells Eco-Business. Some mobile phones today are also being designed for disassembly so each part can be reused, and many of these initiatives are the result of MNC-start-up collaboration, she adds.
A clear example the Dutch start-up Turntoo, which works as a go-between in a traditional buyer-seller relationship to implement a circular business model. It worked with lighting giant Philips to sell illumination by the hour to buildings at Amsterdam Airport Schiphol in 2015. Schiphol pays for the light it uses, while Philips remains the owner of all fixtures and installations. This incentivises Philips to make a durable product that it can track for maintenance purposes, and the airport sees the benefit of being energy efficient. This new business model has resulted in 50 per cent energy savings.
MNC-start-up collaborations have become indispensable to some companies, which rely on them to expand into new areas of business.
The electrification of the transport sector is catching on globally and the key to securing some success in the fight against climate change, says Danfoss’ Kvorning. Partnerships with start-ups has helped the traditional engineering firm enter this space and offer more environmentally sustainable products and services.
The company is getting ready to pilot test electric buses in Singapore within the next two years, he adds. “Over the past five years there has been an explosion in such partnerships between MNCs and start-ups, and this is because of the success rates of such collaborations.”
