Marc Gedansky: The Missing Piece in the New Entrepreneur Model in Massachusetts: Corporate America

In all the discussions about changing the culture in Massachusetts to better promote a healthy entrepreneur ecosystem, a major player has been consistently ignored: Large Corporations.  The role of these organizations on local economies is obvious, and yet when considering how to help startups, they're often forgotten. Today, we have local community member Marc Gedansky making the case for why Corporate America should be a key part of the new entrepreneur model in Massachusetts.

The Missing Piece in the New Entrepreneur Model in Massachusetts: Corporate America

About ten years ago, right before the dot-com burst, I attended a sold-out “B2B” conference teeming with software companies, consultants, lawyers, and journalists, all anxious to get a piece of the next big thing. 

In one of the sessions, ”Procurement Practices in the Automotive Industry”; attendees in a  jam-packed ball room listened to a panel discussion among B-school professors, consultants, and industry analysts. The panelists disagreed on how a buyer at GM would negotiate the pricing of tires, each voicing a different opinion as to what a buyer might do.  Frustrated by this impasse, I raised my hand and asked, “Instead of listening to opinions about what a buyer at GM might do, is there a buyer from GM in the audience who can actually tell us what they would do?”

Silence.

Then I asked, “OK; is there anyone here in procurement from any major car company?”

Again, silence.

“Is there anyone here who works in any functional area for any major car company?”

Silence.

And finally:”OK; is there anyone here who is a potential buyer for any of the technologies that are being sold at this conference?”

Silence.

My point? 

Boston is, in many ways, a great environment for launching and nurturing start-ups; we are blessed with great schools, abundant venture capital, and numerous support services.  However, when it comes to connecting our “B2B” start-ups to the users in corporate America who they are creating products for; what help does our environment actually provide?  What mechanisms exist to help the “creators” connect to the “consumers”?

Some will answer that executives from Raytheon and Fidelity, two potential “consumers”, are on the Board of the Mass Technology Leadership Council, as well as other groups that foster start-ups.  But what effectively does this mean?  How many people from Raytheon and Fidelity actively investigate new technologies from local start-ups?  How many attend Mass Innovation Night, the MIT Enterprise Forum, or the many events at the Cambridge Innovation Center?  And if they do, have they been given authority from their companies to engage with start-ups, or are they there “on their own”?

Some might ask: Why should a corporation spend any of its time and money looking at unproven technologies?  A few answers -

As an early adopter:

1 - The corporation beats its competition to a new technology that might give it a strategic advantage.

2 -It can help steer the development of the technology and “customize” it to its needs.

3 -If the technology has widespread appeal, the corporation can invest in the start-up, thereby increasing its own profits when the start-up experiences a successful exit event.

For the start-up, access to potential customers is the most important connection of all, I would argue, even more valuable than a later-round investment from a VC.  Unlike VCs, prospects will provide feedback about which features the new technology must have to be a commercial success.  And, cash from a customer is more valuable than cash from a VC since the customer wants only the product; while the VC wants a chunk of the company.

The purpose of this note is not only to point out a gap in the current environment, but also to suggest to our local corporations that they actively work with local entrepreneurs for the benefit of both parties. Governor Patrick has recently undertaken initiatives to help our local economy and I applaud those efforts.  However, the focus seems to be more on attracting new companies to come to Massachusetts, not on helping the companies that are already here.  

Should we work to better connect large corporations with the entrepreneur ecosystem? How can we best accomplish this?

Marc Gedansky is a 20 year technology sales and marketing veteran who is currently consulting to start-ups and small businesses.  © Marc Gedansky, 2009 http://twitter.com/Marcged

Photo Credit: Wilhei on Flickr