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π Economics

Reverse Shark Tanks: a new way to initiate partnerships for start-ups

Mette Præst Knudsen
Professor of Innovation Management at Chair “Technology for Change” (IP Paris) and Head of Research for the Center for Integrative Innovation Management at University of Southern Denmark
Marianne Harbo Frederiksen
Associate Professor of Innovation and Technology Management at the Centre for Integrative Innovation Management, University of Southern Denmark
Thierry Rayna
Thierry Rayna
Researcher at the CNRS i³-CRG* laboratory and Professor at École Polytechnique (IP Paris)
Key takeaways
  • It is difficult for investors to find a match between their needs and the solutions offered by start-ups.
  • The "Shark Tank" is a format where start-ups pitch their solution to potential investors.
  • The "Reverse Shark Tank" reverses the concept so that investors present their needs before the start-ups work on them.
  • This format has been used between the shipping company Maersk and drone start-ups.
  • The RST format can enable faster and easier development of technological solutions to open up emerging markets.

Estab­lished busi­ness­es have long been aware of the large inno­v­a­tive poten­tial of start-ups. Yet, it is a known conun­drum that har­ness­ing this poten­tial rep­re­sents a sig­nif­i­cant chal­lenge, because of the gen­er­al lack of ade­qua­tion between the start-ups vision and their poten­tial clients’ needs. Var­i­ous attempts have been made to over­come this issue, “shark thanks” being one of them. Yet these rely on start-ups pitch­ing their ‘vision’ to larg­er com­pa­nies and investors, with every­one hop­ing that their vision will cor­re­spond to an actu­al need, which is often very much akin pok­ing in the dark. 

This arti­cle relates a very inter­est­ing exper­i­ment test­ed in Cana­da and Den­mark, aim­ing to over­come this issue by ‘revers­ing’ the process. In this “Reverse Shark Tank”, these are no longer the start-ups pitch­ing their vision to large com­pa­nies, but large com­pa­nies pitch­ing their needs to start-ups, who then have to pro­vide – poten­tial­ly togeth­er – a solu­tion based on their tech­nol­o­gy that sat­is­fies this need. 

Thier­ry Rayna

In order for start-ups to sur­vive, it is crit­i­cal that their inno­v­a­tive ideas pro­vide answers to poten­tial cus­tomer needs. How­ev­er, start-ups often strug­gle to match their solu­tions with poten­tial cus­tomers, which delays their entry into the mar­ket. On one hand, start-ups find it chal­leng­ing and expen­sive to iden­ti­fy mar­ketable oppor­tu­ni­ties for their inno­v­a­tive tech­nolo­gies and cre­ate net­works with­in that mar­ket whilst still focus­ing on refin­ing their ini­tial solu­tion. On the oth­er, poten­tial cus­tomers can often lack the focus or expe­ri­ence to iden­ti­fy poten­tial sup­pli­ers of inno­v­a­tive offers that are (or may become) able to sat­is­fy their future needs. In oth­er words, it can be hard for both types of play­ers to find a match out of the blue. This is par­tic­u­lar­ly the case in bud­ding sec­tors that can be high­ly uncer­tain – such as the drone industry.

From time to time, clus­ter organ­i­sa­tions, edu­ca­tion­al insti­tu­tions, and oth­ers invite com­pa­nies to con­nect­ing events such as hackathons. Here, par­tic­i­pants are organ­ised into small groups, who work intense­ly on solv­ing spe­cif­ic, pre-defined chal­lenges of actors on the cus­tomer side with­in a short time frame. How­ev­er, in the case of emerg­ing tech­nolo­gies, such as drones or quan­tum com­put­ing, it may not nec­es­sar­i­ly be evi­dent what these inno­v­a­tive solu­tions can be used for in spe­cif­ic sec­tors or firms. There is a need for an inno­v­a­tive approach to close­ly con­nect­ing start-ups and poten­tial customers. 

Connecting start-ups and potential customers

The shark tank is a well-known con­cept that cap­i­tal firms use to dis­cov­er start-ups to invest in. It is now also wide­ly known thanks to pop­u­lar TV-shows under the same name in the USA, BBC’s “Dragon’s Den” in the UK, “Dans l’œil du drag­on” in France, and Denmark’s “Løvens hule” (The Lion’s Cave). In short, this for­mat pro­vides start-ups with a few min­utes to pitch a busi­ness idea, fol­lowed by a Q&A ses­sion where poten­tial investors chal­lenge the start-up and decide if they are inter­est­ed enough to nego­ti­ate an invest­ment with the start-up owners.

Our new con­cept of a “Reverse Shark Tank” (RST) is a way of estab­lish­ing mean­ing­ful con­nec­tions between start-ups and poten­tial cus­tomers through encour­ag­ing and enabling co-cre­ation of inno­va­tion solu­tions. It is done in reverse order as the poten­tial investor – typ­i­cal­ly in the form of a large incum­bent firm – first presents chal­lenges that it has iden­ti­fied per­tain­ing to a part of its busi­ness or sup­ply chain. Thus, the “shark” is now pitch­ing to a range of start-ups that there­after present their tech­nolo­gies and how these may help solve the pre­sent­ed chal­lenges. As such, the RST revolves around tech­no­log­i­cal solu­tions to real chal­lenges faced by indus­tri­als. Such a ses­sion for match­ing cus­tomers’ chal­lenges with start-ups’ offer­ings can lead to sub­se­quent meet­ings and co-cre­ation of solutions. 

The innovative method: Reverse Shark Tank 

We test­ed the RST con­cept in both Den­mark and Cana­da with a series of start-ups in the drone indus­try by intro­duc­ing them to sev­er­al, more estab­lished, firms. Drones are being con­sid­ered an emerg­ing tech­nol­o­gy, and the cur­rent EU focus on the tech­nol­o­gy is esti­mat­ed to lead to 150,000 jobs and an annu­al rev­enue of €15bn by 20501. How­ev­er, despite the huge poten­tial for mar­ket oppor­tu­ni­ties, the indus­try is pri­mar­i­ly com­posed of start-ups strug­gling to estab­lish them­selves in the mar­ket­place. Using RST, we asked large com­pa­nies to pitch chal­lenges to the start-ups by pre­sent­ing prob­lems that they thought could be addressed using drone-based tech­nol­o­gy. Whilst the RST insti­gat­ed an ini­tial dia­logue, it also pushed the par­tic­i­pants towards a clos­er dis­cus­sion that would hope­ful­ly lead to a fruit­ful inno­va­tion partnership. 

As an inno­va­tion mod­el, in prac­tise reverse shark tanks take the form of events where large com­pa­nies invite small com­pa­nies and start-ups to come to their sites. We test­ed sev­er­al for­mats to analyse the most effec­tive. Our first event was held at Maer­sk – the largest ship­ping com­pa­ny in the world. Although the com­pa­ny was not yet ready to invest, a num­ber of poten­tial sys­temic uses for drones rel­e­vant to the com­pa­ny appeared, which had not pre­vi­ous­ly been envis­aged. Thus, Maer­sk obtained valu­able inspi­ra­tion for future busi­ness oppor­tu­ni­ties and were con­vinced that these would be on small and on an ad hoc basis. In Den­mark, we also car­ried out an RST with Sund & Baelt, who run the two largest bridges in Den­mark, where drone solu­tions were sug­gest­ed for very detailed inspec­tion assess­ment of main­te­nance needs on the infra­struc­ture like search­ing for cracks in the con­crete. This led to agree­ments of fur­ther col­lab­o­ra­tion between the com­pa­ny and a cou­ple of the drone tech­nol­o­gy start-ups present at the event. 

Final­ly, oth­ers like the Dan­ish ship­ping com­pa­ny, DFDS, col­lab­o­rat­ed with drone start-up Upteko to cre­ate viable solu­tions to strate­gic prob­lems such as risk man­age­ment. They were able to devel­op drone tech­nol­o­gy to deal with emer­gen­cies such as “man over­board”. For this, the drones use infrared cam­eras and GPS to search the sur­round­ing area for peo­ple who may be in the water. The basis for this now well-estab­lished part­ner­ship was one of the first reverse shark tank events. 

The ben­e­fits of Reverse Shark Tanks 

Seen from a mar­ket cre­ation per­spec­tive, the RST for­mat may enable more expe­di­ent and lean devel­op­ment of tech­nol­o­gy-based solu­tions to open nascent mar­kets. Such medi­at­ing arrange­ments can close the gap between start-ups and poten­tial cus­tomers that exist when both par­ties face dif­fi­cul­ties iden­ti­fy­ing each oth­er. Thus, the RST for­mat is an advan­tage to both types of actors, recent­ly demon­strat­ed through a range of suc­cess­ful RSTs with drone tech­nol­o­gy start-ups and poten­tial pub­lic and pri­vate cus­tomers in Denmark. 

There were even cas­es where sev­er­al of the start-ups formed new part­ner­ships among them to bet­ter address the needs of poten­tial cus­tomers even better.

At these RSTs, start-ups gained 1:1 access to poten­tial cus­tomers, which helped them qual­i­fy and fur­ther devel­op their offer­ings as well as strength­en their inno­v­a­tive com­pe­tences towards scal­ing-up their busi­ness. For the start-ups, they gen­er­al­ly used the “open door” to present their solu­tions and get­ting the much-need­ed feed­back from poten­tial future cus­tomers. The start-ups got invalu­able insights into what mar­ket needs they should devel­op for. They also expressed the invalu­able insights they gained from lis­ten­ing to the con­ver­sa­tions of oth­er start-ups and how they pitched their solu­tions. There were even cas­es where sev­er­al of the start-ups formed new part­ner­ships among them to bet­ter address the needs of poten­tial cus­tomers even bet­ter. Hence, they broad­ened their mind­set from their own solu­tion to see­ing how best to match needs of poten­tial cus­tomers through part­ner­ing with com­ple­men­tary solu­tions. The expe­ri­enced ben­e­fits for the large firms were main­ly in clar­i­fy­ing the poten­tial use cas­es and how to reduce poten­tial bar­ri­ers to use. More­over, the poten­tial cus­tomers gained an overview of busi­ness-rel­e­vant oppor­tu­ni­ties in a jun­gle of inno­v­a­tive offer­ings and got the oppor­tu­ni­ty to influ­ence the devel­op­ment of solu­tions to fit their needs. 

The con­cept has worked very well for drone-ori­ent­ed com­pa­nies and so mov­ing for­ward its suc­cess in oth­er indus­tries will be explored. Thus far, robot­ics com­pa­nies and quan­tum tech­nol­o­gy net­works have shown inter­est in test­ing the inno­v­a­tive concept.

1SESAR Joint Under­tak­ing. (2016). Euro­pean Drones Out­look Study: Unlock­ing the Val­ue for Europe. 

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