How to Scout High-Growth Startups for External Innovation

As part of the growing trend of open innovation, companies now regularly seek external innovation agents. One of the most popular choices for external innovation is high-growth startups. Thanks to their agility and “fail fast, fail often” approach, they are suitable to test out a large number of products or services in a short time. With startup hubs mushrooming from Toronto and Zug to Hanoi, startup creation and investments are booming across the globe. For corporates, this provides an extensive pool of potential high-growth startups to scout from. However, vetting hundreds or even thousands of startups and identifying the ones that fit best with a company’s innovation goals pose a massive challenge for innovation managers.

What Makes a High-Growth Startup

While looking at startups to partner with, innovation managers need to separate high-growth startups from the rest. Founder credentials and funding raised do not provide the full picture. Some characteristics of high-growth startups include:

Adopting Viral Marketing

The Internet hasn’t just changed how startups operate, but also how they market themselves. Startups generally leverage social media more often than conventional media to target suitable demographics for their products or services. This is even more true for B2C startups who are competing with existing brands and other startups for the attention of their audiences. While viral marketing campaigns aren’t a guarantee for long-term success, they provide a push that allows startups to sustain themselves longer. Working with such startups allows companies to benefit from the brand recall of these marketing campaigns too.

Knowing their Early Adopters

A critical skill that startup teams must develop early on is to identify who their early adopters are. A better knowledge of early adopters allows startups to focus their efforts on their needs. Moreover, word-of-mouth marketing from early adopters often beats paid promotion campaigns. For innovation managers, a startup that has zeroed down on its specific target audience makes it easier for them to assess its fit with their company’s market.

Retaining their Customers

In the early years, customer retention is a crucial metric for a startup’s success. More recently, startups are using monthly recurring revenue (MRR) to raise funding. Retention, by definition, is an indicator of sustained growth. Such startups are better placed than others who spend most of their funds on acquiring new customers. Large companies generally already have a customer base. They stand to benefit more from collaborating with startups who offer a different product or service that some of the large company’s user base consistently pays money from.

Leveraging Process Innovation

Though startups don’t generally have the budget for extensive research and development (R&D), they must still have some room to innovate. Startups that can pivot fast and change their offering, when needed, are more likely to last longer. This is especially important for deep tech startups, where much of the value derives from the technological novelty of the product. While assessing how to fit startups in their innovation strategy, innovation managers need to evaluate how startups themselves handle innovation. Compatible attitudes to innovation are more likely to lead to long-term, fruitful collaborations.

How Data Helps You Scout High-Growth Startups

Earlier, companies relied on industry events and personal connections to scout emerging companies and high-growth startups to partner with. Today, when the entire innovation landscape exists on the Internet, you have access to far more emerging startups and scaleups. The choice is daunting for corporate innovation management teams who don’t have the proper tools for external innovation.

As millions of startups globally work on innovative technologies, evaluating all startups in your focus area is an arduous and time-consuming task. Data-driven approaches analyze extensive firmographic data to speed up the process. For instance, the Big Data & Artificial Intelligence (AI)-powered StartUs Insights Discovery Platform instantly scans through over 2,5 million startups and scaleups to find the ones that best match your innovation goals.

Benefits of using data to scout for high-growth startups include:

1. Reduces Scouting & Time & Cost

Data-driven solutions bring the time for startup scouting down from months to days. This allows innovation management teams to spend more of their time and resources on startup evaluation rather than search.

2. Provides Actionable Insights

Detailed information on every aspect of each startup allows innovation managers to better assess their fit with the company’s innovation goals as well as the best approach to partner with them.

3. Offers Regular Updates on the Global Startup Ecosystem

Data-driven startup scouting provides a snapshot of the entire global startup ecosystem. This allows managers to monitor emerging technologies and products in their industry without missing any solutions.

4. Pre-screens Potential Partners

After startup scouting, the next step is narrowing down the list of startups to potential partners. With a scoring system, data-driven tools already rank startups according to best fit.

5. Generates Contextual Information

Going beyond firmographic data, some startup scouting tools, including the Discovery Platform, analyze other data sources such as news or patent databases. This places relevant startups in the context of the legal or regulatory environment of their industry.

Innovation intelligence places startup-driven innovation in the context of a business’ open innovation strategy.

Find High-Growth Startups Fast

Depending on your innovation goals and requirements, we offer a range of deliverables for your deep technology scouting process. Some of these include:

• Startup Database: Covers hundreds of relevant startups that match your innovation goals.
• Technology Report: Provides firmographic data and insights on highly relevant startups, scaleups, and the technologies they develop.
• Technology Map: Visualizes emerging technologies and their applications in your industry of interest.

StartUs Insights enables you to find high-growth startups that best match your open innovation goals.

To discover how we at StartUs Insights identify high-growth startups that match your innovation agenda, we offer a free consultation. If you want to quickly find emerging startups that will shape your industry, get in touch today!