Digitalization and being a quick fish in the market has become a serious competition area among large institutions in the 2000s when industry-intensive production gave way to information and technology, and the added value shifted to technology and innovation rather than mass production and cost advantage. As a matter of fact, this competition is no longer limited to large international institutions or local markets. A patent on autonomous driving technology developed at a Chinese university, for example, could jeopardize the future of a global automotive company worth billions of dollars. Similarly, a small fintech start-up in the United States can re-establish the game in banking and finance, one of the world's most regulated industries in the world. Similar examples can be found in almost every industry and technological hierarchy. In a world where the rules of the game are changing so quickly and aggressively, and the field of competition and its actors has expanded so much, open innovation practices and the success of institutions in these practices are one of the few factors that shall ensure the survival of the companies. Without a doubt, collaborations between corporations and start-ups are the most important and exciting area of open innovation applications. This is a simple and sympathetic task when you need to just talk about it, but it is a difficult task to master when it comes to practice. The dynamics, business practices, and expectations of the two parties are significantly different. Even time works differently for these two parties. For a start-up, a unit of time feels 5-6 times faster than it does in a corporate setting. In this article we prepared with Hamdi Ergök, we will discuss the most common applications in collaborations of institutions and start-ups, which are both indisputably necessary and difficult to implement, as well as the benefits of these applications.

1. Organizing Hackathons and Start-up Competitions 

Hackathons are 40- to 50-hour competitions in which employees collaborate to create innovative ideas and products that address the company’s various requirements and problems outside of their job descriptions. Over time, this concept has started to be realized with the participation of different actors included in the entrepreneurship ecosystem besides company employees. One or more problems that the company wants to solve are shared with the participants at the start of the event, and entrepreneurs are expected to develop ideas and product prototypes to solve these problems during the event. Companies have begun to use hackathons and start-up competitions more effectively and widely in recent years.   

Benefits:

• • Development of innovative ideas and product concepts
• • Entering or reaching greater depths in the entrepreneurship ecosystem (meeting new ventures, stakeholders, and mentors)
• • Accessing talents
• • Increasing brand awareness in the entrepreneurship ecosystem
• • Contributing to internal cultural transformation by rendering company employees and managers a part of the activity.

2. Institutional Acceleration/Incubation Programs:

Benefits: 

• • The formation and/or development of the ecosystem in the relevant area is provided
• • The trends in the relevant industry/field are followed
• • It is ensured that new technologies are integrated into the company’s fields of activity
• • Allows establishing relationships with talents in the start-up ecosystem
• • Employees of the institution are provided the opportunity to mentor and collaborate with start-ups in their field
• • Experience is gained about the business methods of start-ups, and it is ensured that the employees of the company understand this point of view, approach the ecosystem, and transfer the acquired knowledge into the company
• • Financial relations are established with start-ups (becoming a customer, product/technology development, patent licensing, selling the start-up's products through its own channels, and purchasing direct shares or future options) 

3. Opening Defined Calls Focused on Collaboration

Benefits:

• • Accessing talents with a wide range of competencies from all over the world.
• • Assuring that the relevant problem is dealt with quickly and cost-effectively in general. 
• • Promoting a collaborative culture within the company
• • Ensuring that company employees learn about business ways and thinking systematics of start-ups 
• • Supporting agile and lean transformation processes of the companies
• • Triggering of different and new studies by successful studies

4. Becoming a Customer to the Start-ups

Benefits:

• • Collaborating to solve problems and meet requirements
• • Paving the way for quick and agile action
• • Assisting institutions in their technological and digital transformation  
• • Developing cost-effective solutions
• • Getting new and strong references for start-ups

5. Investing in Start-ups (VC-CVC)

It is not enough to establish collaborative relationships with start-ups in the global open innovation competition. Collaborative relationships frequently produce incremental innovations or provide limited monetary returns. However, the fact that venture capital investment funds received rapid returns with significant multipliers as a result of investments made by start-ups during their growth phase stimulated corporate interest in the field. (The period between Early Bird’s investment in UIPath in 2015 and the company’s IPO on the New York Stock Exchange was only six years, and Early Bird is believed to have achieved a 2200x return on this investment.)

Along with this example and similar examples, corporate companies are now considering start-up investments as both a financial and a strategic investment tool (for purposes such as blocking competitors or entering new markets/industries). Within institutional structures, we see that start-up investments are usually made in two ways: 

• • Investing in an existing venture capital fund as a limited partner (becoming an LP to a VC) 
• • Establishing its own corporate venture capital fund (CVC) 

Benefits:

• • Engaging in early-stage partnerships with new start-ups that have a lot of potential in the industry in which they operate
• • Making a quick and resource-efficient entry into new sectors/markets.
• • Elimination of the risk of falling behind in the competition as a result of institutional clumsiness, despite having the expertise and financial resources to complete similar tasks.
• • Achieving financial returns with higher multipliers in a short period of time
• • Growing strength in areas where competition is fierce with strategic investments
• • Developing stronger ties with the start-up ecosystem and being able to personally follow developments