“What if an entrepreneur is given the money, relationships and reach of a MNC to prove its business model?”
We met Dave Lim, one of the entrepreneurs selected by Coca-Cola in November last year to participate in the their unique program of corporate innovation, the Coca-Cola Founders. Almost one year after the program started, let’s analyze how successful their innovation journey has been!
- The objective is to design and build innovative new businesses that solve big pains or address huge opportunities and to scale this leveraging on the power of Coca-Cola or its partners.
- Entrepreneurs get access to Coca-Cola’s vast resources, reach and relationships to validate their business model, and have seed funding through a convertible loan which will be converted in equity at the next round of investment.
- Completely separate entities to keep the agility and speed power of a startup.
- 9 startups born from this program launched in November 2014
1) Objective of Coca-Cola Founders
The objective is to build innovative new businesses that tackle key business challenges that Coca-Cola or its partners are facing, whether it is improving the productivity of its suppliers, finding quality workers, leveraging e-commerce or engaging better with their customers. Basically, Coca-Cola wants to address new opportunities and create more value for the company, for the consumer and for the whole industry. Collaborating with tech startups help innovate quicker and is less risky for their core business.
2) Analysis of the format
Before starting the Coca-Cola Founders program, the company has experimented different models over the last few years, starting with an intrapreneurial team of employees, then hiring experienced entrepreneurs as part of their team in 2013, before realizing that they needed to create a completely separate entity to keep the agility and speed power of a startup.
That’s how the Coca-Cola Founders program was born in November 2014. It is basically a partnership, in which Coca-Cola works deeply with selected experienced entrepreneurs who don’t even have a startup yet, to nurture them from the start. They get access to Coca-Cola’s vast resources, whether it is their internal teams, their various partners and suppliers or their customers, to validate their business model. This is the dream of most early stage startup teams! They also get seed funding through a convertible loan which will be converted into equity (less than 20% usually) at the next round of investment.
The reasons why the previous stages haven’t worked is because they were limiting what are the 3 main strengths of startups compared to large organizations:
1) Entrepreneurial/creative spirit : startups are able to think “out of the box”, they bring new technologies, business models and talents.
2) Agility level: startups are agile enough to pivot swiftly while corporates have cultural, structural, organizational and operational barriers.
3) Openness level : openness leads to faster project execution, better technical performance and higher financial revenues.
3) How does Coca-Cola Founders work?
- 9 teams (originally 8 teams) made from entrepreneurs all around the world have been selected and interviewed by Coca-Cola. There come from Singapore, Sydney, Buenos Aires, Berlin, London, Bangalore, Tel Aviv, San Francisco and Rio de Janeiro.
- They are given full agility to hire, test and try without falling into the compliance issues of big corporations. They have no limits as long as they add value to Coca-Cola’s ecosystem.
- Isolation from the rest of the company.Coca-Cola doesn’t own or even control the project. Each team just have to report to a mentor within the top managers of the local business units on a regular basis, and the VP Innovation has a dashboard with the projects and milestones.
- It all started with 3 days seminar in Berlin gathering all the teams. They presented their local cities, trends and insights and discussed topics prepared by the VP Innovation.
4) Results & limitations
“All entrepreneurs from the program have funded a startup or are about to do it. In our case, we have partnered with an existing startup as we realized they were already doing something similar as what we had in mind, but most of the other founders have started something from scratch” says Dave.
The 9 startups born from the program are detailed on the Coca-Cola Founders website here.
The startup created by Dave’s team, Savasti, provides SaaS tools to traditional trade business owners to help them with inventory management, invoicing & credit tracking, supplier & customer engagement and other aspects of their business operations. In the perspective of Coca-Cola, it increases the productivity of bottler partners by providing better supply chain management and reducing the potential for out-of-stocks.
The team in Sydney came up with Vending Analytics, a company that developed a cloud-based fleet management software that provides recommendations on how to optimize vending machines to maximize sales and minimize stockouts. Using that software, Coca-Cola has already seen a 20% revenue jump per vending machine as David Butler, the Coca-Cola’s VP of Innovation said to USA Today in May.
When asking Dave Lim what are the limitations of this kind of program, he answers that “the only limitation I could see is when dealing with competitors in the same industry, like other beverage brands, as they might be more reluctant to work with us, even though Coca-Cola is not restricting us to do it. Working with MNCs is always slower but any startup who has to partner one day with a MNC will face this issue, and being in such a close relationship with one of them can only make it a bit faster”.
So, it looks like combining the strengths of startups and the power of scale of MNCs seems to be a real win-win for both parts. Hopefully we will see more collaborations of that kind in the future!