IT leaders looking to accelerate their innovation agendas have a partner-in-waiting in the startup ecosystem. By linking up with startups, CIOs can greatly expand their opportunities to experiment with emerging technologies and augment their in-house innovation programs. And the market for doing so remains robust for corporations looking to make the most of the model.\n\nDespite a volatile economy, corporate venture capital investments in startups fell by only 2% to $192 billion in 2022, compared to a 25% drop in overall venture capital. In addition, the percentage of corporate-backed deals in early seed rounds increased from 10% in 2021 to 18% in 2022. The implication is that while some businesses are cutting costs and many tech companies are announcing layoffs, forward-looking enterprises are investing and collaborating with startups.\n\nWhile there are several pitfalls to avoid when partnering with startups, there are also best practices that can improve the enterprise\u2019s potential for business success, the startup\u2019s growth opportunities, and the CIO\u2019s career outlook. During a recent Coffee with Digital Trailblazers event that I hosted on how enterprises can work most effectively with startups, several panelists and others shared insights on developing two-way partnerships between CIOs and their leadership teams with startup founders. \n\nOrganize frequent startup pitches and demos\n\nWith venture capital investment continuing to fall in 2023, more startups should find themselves eager to partner with enterprises, and that presents IT leaders a wealth of opportunities to improve their innovation outlook.\n\nJoseph Puglisi, a former CIO who is now an investor, advisor, and board member, believes CIOs have tremendous opportunities to bring value to their enterprise by partnering and investing in startups. \u201cThe CIO may gain an advantage by investing in startups, acquire new and unique capabilities for their company, and gain an additional benefit of steering the development of the product or service,\u201d he says.\n\nBut CIOs should remain strategic. They must evaluate a potential partner\u2019s capabilities and customer satisfaction, determine any compliance factors, and develop relationships with founders when considering startup partnership opportunities.\n\nAnd they should consider this process from the startup\u2019s perspective as well, says Blaine Mathieu, CEO of Pratexo, advocating for a streamlined, standardized process. \u201cEstablish a clear, transparent, and efficient process for startups to engage with the large enterprise,\u201d he says. \u201cThis may include a single point of contact, an online portal for submitting proposals, and a standardized evaluation framework.\u201d\n\nOne best practice is to create a yearly schedule for startup pitches and define a theme for each event. The approach makes it easier for VCs and third-party innovation agencies to propose startups that deliver capabilities aligned to themes selected by the enterprise. The CIO can also maximize the audience by inviting the company\u2019s technology and business leaders to attend events that align with their interests and business needs.\n\nShare your goals and success criteria with the startup\n\nCIOs may need to define alternative rules of engagement when sharing information with startups compared to how procurement organizations lead the evaluation and negotiation of large contracts. Large contract negotiations are driven by pricing and service levels, so what information is shared with vendors is managed through a controlled process.\n\nWhen evaluating startups, the overwhelming recommendation is to be more upfront and transparent with the startup. \u201cDefine the goals of the collaboration from the outset and ensure both parties understand the desired outcomes and are aligned in their expectations. Don\u2019t make the startup guess,\u201d says Mathieu, adding that CIOs should provide clarity around budgets and approval processes in particular. \u201cThis may involve adjusting procurement processes, contract terms, or decision-making structures.\u201d\n\nJoanne Friedman, PhD., CEO, and principal of smart manufacturing at Connektedminds, suggests that CIOs envision how the startup relationship might evolve longer term. \u201cStartups are exciting and filled with potential, but CIOs should be clear about what they seek. A digital venture you can nurture and spin off, a collaborator-partner you can deeply influence, or just a very reliable and responsive technology supplier?\u201d CIOs should have plans for the upsides and also develop risk mitigation strategies. \n\nAddress culture when partnering with startups\n\nCIOs can use startup partnerships as a catalyst to accelerate organizational culture changes. \u201cWe think weeks; they think months,\u201d says Mathieu of the startup mentality. Transformational CIOs can thus use the partnership to illustrate how their organization can speed up decision-making and reduce collaboration impediments, he says.\n\n\u201cStartup culture is intense and hyper-paced, while corporate culture, whether remote or in the office, is far calmer,\u201d says Friedman. \u201cBlending the two can be as difficult as creating a blended family.\u201d\n\nMathieu recommends being flexible and adaptable. \u201cLarge enterprises should prepare to adapt their processes and culture to accommodate startups\u2019 more agile and dynamic nature,\u201d he says.\n\nCIOs should define a specialized co-creation model, optimized for collaborating with startups, that can be very different from their in-house development strategies and partnerships with larger service providers. For example, startups are likelier to have advanced devops practices that enable continuous deployments and feature experimentation. Partnering with startups is a great opportunity to partake in how applying these devops capabilities can improve end-user experiences and accelerate application development practices. \n\nCIOs will likely find people in their organizations who naturally fit startup culture and speeds. But driving a culture change requires exposing more people to how startups operate. Taking people outside their comfort zones isn\u2019t easy, and Friedman recommends that CIOs seek internal partners for assistance. \u201cGet support from HR or bring in a coach to help you get the right atmospheric synergy to create the high-performance team you want,\u201d she says.\n\nMathieu shared these recommendations on how enterprises and startups can ensure early excitement and enthusiasm for the partnership leads to ongoing success:\n\nBuild beyond the basic partnership model\n\nCIOs and startup founders should also look beyond their partnership objectives to consider the follow-on benefits of establishing an ongoing relationship with one another.\n\nFor example, CIOs should take advantage of the startup founders\u2019 networks and seek introductions to venture capitalists and other startup founders. To reciprocate, Mathieu suggests CIOs help the startup expand its reach and build credibility by connecting founders with other potential customers, partners, and investors.\n\nFrank Diana, managing partner and futurist at TCS, says startup partnerships are just the beginning of a more open operating model. \u201cThe future of partnerships centers around horizontal ecosystems,\u201d he says. \u201cOrganizations must view themselves as composable building blocks that can be organized and reorganized around emerging disruptors and opportunities.\u201d\n\nCIOs with a systems architectural background understand the appeal and value of composable building blocks and architectures. The implication is that the enterprise can start with a basic or commodity capability, then consider replacing it and experimenting with a differentiating and innovative option developed by a startup.\n\nDiana continues, \u201cEnterprises should prepare to unbundle themselves and work across an ecosystem of startups, educational institutions, and governmental entities to compose organizations around internal and ecosystem assets. Startup partners can fill the gaps in these services by providing specialized capabilities traditionally delivered by internal portfolios.\u201d\n\nConsider the career enhancement opportunities\n\nBeyond the benefits to their businesses, CIOs should view startup partnerships as learning and career-expanding opportunities.\n\n\u201cThe CIO can become a startup investor, expand their visibility to new technologies, and learn how to separate the wheat from the chaff through due diligence,\u201d says Puglisi. \u201cThe CIO can also become a startup advisor, learn how to sell the benefits of technology in a highly competitive market space, and sharpen their business acumen and communications skills.\u201d\n\nIn a world where emerging technology capabilities become mainstream far faster than enterprise velocities, startup partnerships are a significant opportunity for CIOs to drive benefits for their organizations and themselves.