Corporate entrepreneurs have assets and capabilities that give them advantages over startups. There are many startups that could probably be blown out of the water if a large company decided to compete instead of acquire. Different companies have different assets that, if leveraged, can provide a substantial unfair advantages over startups trying to tackle the same opportunity. Below are four competitive competitive advantages corporate ventures can have over startups:
Brand/Reputation. Brand and reputation can be extremely important in a customer’s buying decision. As the adage goes “no one ever got fired for buying IBM.” Having a strong brand or reputation in the industry can give customers assurance of quality. Conversely, a scrappy entrepreneur might have trouble selling in to, say, a fortune 500 company.
Distribution. With existing customers, subscribers, and lists, it can be easier for a large company to reach their target audience than a startup that has to start their sales and marketing efforts from scratch.
Domain expertise/Customer insights. If a large company has been in an industry or has served a customer base previously, they will have much deeper domain expertise and customer insights. This can be help inform more effective strategic planning and product decisions.
Capital. While the cost of starting and scaling a company is decreasing, capital is still a necessity. Especially if there’s competition – capital will be needed to outpace the competition. In addition, fundraising is often extremely time consuming for a startup, which can take away from product development, distribution, etc.
Conclusion: There are competitive advantages that startups have over corporate innovation ventures, such as freedom from principal/agent problems and bureaucracy, however these four factors give corporate ventures a big competitive advantage over competitive startups for certain opportunities.