If your organization is engaged in startup scouting — or considering it — what constitutes an effective approach?
We sought advice recently from Adam Schink, Head of Startup Scouting at Etc., the startup and incubation arm of BT Group. BT Group, based in London, is the $26 billion global communications provider.
Schink was previously Head of Strategic Business Development & Innovation at UK Research and Innovation, which invests more than $10 billion per year to support the British research and innovation ecosystem, and also served in several growth and innovation roles at the oil and gas firm ConocoPhillips.
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OK, so you’re Head of Startup Scouting at Etc., which is part of BT Group. I’m assuming your title is self-explanatory, but give us 30 seconds on your role.
Honestly, I think I have one of the best roles at BT. I lead a team based in the USA and UK within Etc. – the innovation arm of BT Group responsible for identifying, evaluating, recommending, and finally leading strategic partnership and investment negotiations with startup companies that align with the strategic direction of BT Group.
When was your scouting function created, and why?
Our scouting team has had an outpost in the USA for over 15 years. Originally it was based in Silicon Valley because it was critical to be close to where the technology was being created. Since the dissemination of technology throughout the USA and the world, we determined it was still worthwhile to have an outpost in the USA to keep a foothold, but we moved the function to NYC to be closer to the UK time zone.
Where do you sit in the organization, and what group do you report into?
I sit within an exciting division called Etc. As an incubation hub, we use the scale of BT Group to drive growth in emerging categories adjacent to the core by creating products and services that solve genuine business and customer needs. I report into a division within Etc. called “Factory,” where we incubate the next, exciting new ventures.
Etc.’s objective is to build new ventures aligned with the strategic ambitions and pillars of BT Group.
What are the strategic objectives of the program? For example, are you looking for companies you can invest in? Acquire? Partner with?
Etc.’s objective is to build new ventures aligned with the strategic ambitions and pillars of BT Group. We partner strategically with an ecosystem of startups to large multinationals to unlock new opportunities and solve real-world problems.
What are you scouting for now, and why?
We are always on the lookout for the latest and greatest within our new ventures business units. [That includes] health technologies to make the healthcare industry more efficient; leading-edge fintech; drone enablement technology solutions; EV charging; data and AI. We also support other growth divisions within BT Group with their scouting and partnership structuring.
How were those scouting priorities set, and who’s involved in setting them?
We spent time researching every emerging sector to determine industry fit and ultimately whether they are truly meeting customer needs in new ways. It was an exhaustive and robust process which drew on comprehensive internal and external sources.
How big is your team?
We’re one strand of the wider Etc. team, which spans several hundred. Etc. is part of the wider digital team [at BT Group.]
What are the tools in your toolkit that you use for scouting? For example, do you use an incubator? an accelerator? open innovation challenges? databases? a dedicated website where startups can easily find you?
We have a defined approach that draws on the ecosystem and a broad range of external resources.
Once we have a targeted list of potential partners, we hold a pitch day (or days) to vet the companies. From there we jointly determine if we will continue to invest in the market/vertical.
We regularly attend the key conferences like Money2020, CES, Mobile World Congress, Collision, as well as others.
Given the nature of the companies we typically work with we poll the ecosystem, use scouting platforms, online publications, and integrate ourselves well into the industries we are working in to understand the new kids on the block.
What works best? Any lessons you can impart to others?
Don’t waste startup time; it truly is precious. These companies could be boot-strapped, so unless there is a real opportunity, don’t engage with the ecosystem…for long drawn-out periods until you are truly ready to move forward. If you do engage, keep it brief and focused.
Don’t be afraid to get out early and test your thinking with friendly potential customers, investors, and potential partners early on.
Have a clear strategy of where you want to focus but also be ready to adjust the strategy as you learn more. Once you move into a new vertical/industry, you will have a lot more insight and need some flexibility to pivot as needed.
Don’t think that you know everything by simply reading a few articles and research reports. Don’t be afraid to get out early and test your thinking with friendly potential customers, investors, and potential partners early on.
Startups could easily research what corporates are interested in. We get hundreds of inbound emails from companies where there is low overlap with our strategic directions, I would love to see them focus only on companies where there is strategic overlap.
Do you have a relationship with any universities or academic collaborations? How have those been for scouting and sourcing deals?
We do. We have strong relationships with over 30 universities across the globe that support academic and industrial collaboration. We have strategic relationships in the USA with MIT — including their start-up ecosystem — and in the UK with Bristol and Cambridge.
How do you think about measuring success? Do you have any KPIs?
We have annual targets based on the initiatives we support. These span from revenue through to customer success metrics.
Our last report on-startup scouting — which, granted, is from 2022 — noted that the biggest challenge to startup engagement was “convincing other decision makers to invest or engage with a startup.” Other obstacles included differing expectations in both goals and operating speed between the company and the startup. Do those sound familiar? Any recommendations for overcoming those?
There will aways be some barriers, but they are not all fixed. Agility and determination will be key to your success when working with the startup ecosystem.
Our team in Etc. mostly have startup backgrounds, so we look, feel, and importantly operate like startups and can keep up the pace at which startups move.
Social EQ [emotional quotient], trust, internal business development and relationships are key for innovation to succeed in a corporate. Create your internal support ecosystem from the very start with key decision makers, whoever will help you succeed.
People don’t like surprises, so let them know what you are doing early. Innovation teams are always an exciting space, so take people on the journey with you. If they want a meeting once a month, have the meeting. Don’t just say it’s difficult in a corporate — change it.
If contracts take a long time and require high levels of insurance, can you create shorter form agreements for [proof-of-concept or pilot tests] with lower levels of required partner insurance, so it does not take months to get in place? Similarly, if procurement of products takes a long time can you set some stage-gate thresholds where you can procure small volumes quickly to get your project launched faster, if proven successful and economic are there various stage-gates that can support you as you scale.
I am not claiming we are perfect, but we continue to push and try to do better over here.
Any successes you can talk about, or scouting exercises you’re particularly proud of?
I sourced, negotiated, and closed a multi-million-dollar drone software partnership which led to an investment in the unmanned traffic management provider Altitude Angel. We’re now bringing their software to more UK businesses to enable them to better manage airspace, as well as having numerous other strategic deals working in stealth mode.
Are you looking to ultimately just learn and watch, are you there to generate new business ventures, or are you just ‘innovation washing’?
OK, last question: We published this poster on startup innovation ecosystems a couple years ago. Anything missing, or any recommendations for improving it?
I like it…
It comes back to what you are trying to achieve as a company. Are you looking to ultimately just learn and watch, are you there to generate new business ventures, or are you just “innovation washing”?
I would also suggest adding a few more elements to the poster, including partnerships (can be a mix of partnership with joint investment), spinoffs, new venture builders, corporate innovation programs (have employees engage in innovation), and innovation labs (mix of corporate and startups integrating into main operations of the company).
