Financial Planning

How start-ups and corporates can help each other grow


African start-ups raised $5.2 billion in venture capital in 2021 – more than the preceding seven years combined. That’s a five-fold increase in investments from 2020. This could be driven, in part, by a major mergers and acquisitions trend for big businesses to ‘buy’ core capabilities through strategic acquisitions. At the recent  Sanlam Start-Up Summit, agility was top of the agenda, with particular emphasis on the symbiotic relationships between start-ups and established incumbents.

Nat Jabangwe, Group Digital Executive at Sanlam says, “Over the past few years, we’ve increasingly found start-ups from across the continent at the forefront of reimagining what African innovation looks like. As an enterprise with over a century’s worth of skin in the game, we have learnt that lending these hungry, agile firms our expertise and experience is one of the best possible ways to help an entire continent live with confidence. This is a strategy that works in Africa and across the globe.”

Start-ups can give major corporations agility and fresh ideas, while corporates can help start-ups with resources and governance insights. There have been many examples of these partnerships in play – from Pfizer joining with German pharmaceutical start-up BioNtech, to Toyota’s partnership with Aurora Innovation. Locally, MTN and Sanlam’s InsurTech partnership aims to catalyse 30 million new policy holders continent-wide by 2025.

Sanlam Retail Affluent COO Hennie De Villiers says, “As a business that’s been around for over 100 years, we believe we have a wealth of expertise, resources and established infrastructure for start-ups to tap into. On the other side, we know there’s a huge amount we can learn from start-ups, especially in terms of nimbleness and innovation. It’s imperative for big businesses like ours to find synergies with emerging players. We have a business imperative to nurture innovation and support new entrants.”  

Here are some key take-outs from the summit:

How to achieve agility at scale:

Many big players are investing in start-ups to play in new spaces, accrue scarce resources and scale rapidly.  Tsepo Headbush,  co-founder of venture capital firm Bright On Capital says, “Corporates should consider partnering with start-ups as research and development (R&D). Generally, R&D is expensive, but the right idea can net significant returns. Conversely, the risk involved is minimal as your enterprise’s outlay would be far more if the project was done in-house.”

Thus, by partnering with organisations like Plug and Play, a company that connects innovative start-ups with corporates, large companies can be significantly more fleet footed.

Capitalising on corporate muscle:

Partnerships are not a one-way street. While corporates get the benefit of being able to experiment without risking the integrity of their brand or immense resources, start-ups derive substantial benefits from partnering with their more established cousins, while affording them access to infrastructure, prospective clients and funding, amongst others. 

Teboho Lebakeng, founder and CEO of Digi Pharm, an app that has been described as the UberEats of pharmacies, says, “Corporate support gives you the muscle to help navigate governance and compliance issues. This is especially true in a start-up environment where you are constantly dealing with day-to-day issues.” 

With regulation on the rise in almost every industry, it can be difficult for new players to take ideas to market. Big players can lend the muscle to tick the requisite regulatory boxes. 

Learning not to fear failure:

Delegates were keen to point out that failure is not the opposite of success but part and parcel of it. As a result, neither corporates nor their start-up partners should shy away from risk purely out of fear. In fact, even if a partnership does fail, there are always lessons to be gleaned from that.

Headbush says, “Our first partnership was by far our most enabling one. Unfortunately, didn’t work out and when they pulled out it nearly collapsed us. With that said, the experience we gained from that allowed us to build our skills base and foster other partnership opportunities that spurred our growth. That was an invaluable experience.”

Nat Jabangwe adds, “ reports that over half of all M&A deals fail, primarily because of a mismatch between the targets set and the deal’s strategic purpose. It’s pivotal to seek strong synergies and ensure that core values between the businesses align. There needs to be a clearly articulated deal rationale, deal structure and integration/ execution plan.” 

Ultimately, it is society that benefits the most from symbiotic corporate and start-up partnerships. Most importantly, these give companies across the business landscape the power to adapt nimbly to clients’ evolving needs. 

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