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Key takeaways
- The venture client model enables corporations to engage with startups as clients, rather than investors, by purchasing early-stage solutions before they're fully developed.
- This approach requires less investment and upfront commitment compared to traditional corporate venturing tools like accelerators, incubators, and CVCs.
- Corporations benefit from strategic advantages, like access to new technologies, customised solutions, accelerated innovation, and fostering a culture of innovation.
- Startups maintain autonomy and full equity while generating early revenue, gaining real-world validation, and accessing industry expertise that helps refine their products.
- The model is particularly suitable for companies with low innovation maturity due to its speed, capital efficiency, and reduced risk compared to other innovation approaches.
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For years now, top corporations have successfully leveraged innovation tools like accelerators, incubators, and CVC funds to foster growth and gain a competitive advantage. Now there’s a different innovation tool on the rise: The venture client model.
Corporations that use venture clienting to engage startups as a client, not as an investor, partner or parent company. It benefits corporates by providing quick access to new solutions while giving startups the early revenue they need to grow.
Venture clienting facilitates the interface between internal and external innovation, enabling companies to:
- Grow beyond their core business
- Create new revenue streams
- Accelerate the innovation process
However, compared to other corporate venturing tools, it requires less investment or upfront commitment. Let’s take a closer look at how the venture client strategy works, its benefits and whether it's a good fit for you.
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What is the venture client model?
The venture client model is a corporate innovation strategy where corporations purchase solutions from startups at an early stage, before the startup’s product is fully developed or proven. Instead of investing or acquiring, the corporation becomes an early customer, helping the startup grow through real-world validation and revenue.
Originally created by the BMW Startup Garage in 2015, the venture client model allows companies to:
- Access cutting-edge technology before it hits the market.
- Collaborate with startups without taking an equity stake.
- Provide feedback to improve the startup’s offering through pilot projects.
As explained by Gregor Gimmy, the CEO of 27pilots, credited for coining the term “venture client”:
“We are not an accelerator, we are a venture client. That means we become a startup’s client at a point in time that still makes it a ‘venture,’ for example, because the startup product is not ready to launch yet.”
In essence, the venture client model is a competitive tool that enables companies to make data-driven decisions about whether to engage in long-term collaborations with startups, faster and with less risk.
Today, top companies like Bosch, Siemens, and Holcim have venture client units to discover, engage, and integrate startups with high-potential solutions. These units often complement other corporate innovation tools like corporate venture capital (CVC) and accelerators.
How do venture client units work?
A venture client unit is a dedicated team inside a corporation that identifies and collaborates with startups to solve strategic challenges. Here’s a step-by-step look at how they do it:
Step 1. Identify needs and challenges
This process can start in one of two ways:
- When the venture client unit proactively identifies a promising startup
- When a business unit identifies a problem, gap or challenge
These challenges are typically complex and cannot be addressed through internal resources or existing partnerships. In the latter scenario, the business unit makes a request for external startup support to the venture client unit.
Challenges are usually prioritised based on urgency, impact or the business unit’s motivation to solve the challenge.
Step 2. Analyse the challenge
An in-depth analysis is conducted to establish the criteria for the new startup solution. For example, the venture unit at Bosch is constantly on the lookout for new startup innovations to help speed up its development cycles.
Step 3. Program preparation
Internal preparation includes:
- Allocating budgets
- Gaining buy-in from corporate stakeholders
- Collaborating with technical business units to understand challenges
- Involving legal and procurement teams early to streamline onboarding
External preparation involves:
- Creating startup participation criteria
- Defining KPIs
- Setting project timelines (e.g. ongoing tasks, tenders, etc.)
Step 4. Source, select, and negotiate with startups
During this phase, the venture client unit launches a “program call” to attract relevant startups. After screening applicants, the team invites the best-fit startups for discussions and negotiations.
Step 5. The pilot phase
A pilot project is launched by purchasing a small sample of the startup’s solution. The product is tested in a real-world setting, and its performance is measured against predefined KPIs.
Step 6. Review, scale, or exit
If the solution meets the performance criteria, the corporation can move forward by scaling the solution, entering a licensing agreement, or even pursuing acquisition. If a new solution is approved, the next step is to negotiate a roadmap for future use. This could take the form of:
- Continued patronage
- Licensing the new startup solution
- M&A
If the pilot fails to deliver the expected results, the corporation can exit the engagement without further investment or commitment, keeping risk low and maintaining capital efficiency.
How does the venture client model benefit corporates?
We’ve already touched on some of the benefits of the venture client model for corporations, now let's look at them in more detail:
1. Low-risk access to cutting-edge startups
The venture client model enables companies to test new innovative solutions before making any big investments or commitments. It also allows corporates to work closely with startups and test if there is a good fit before engaging in a long-term relationship.
2. Customised solutions
Early collaborations with startups that haven’t yet fully developed their offerings leave room for customised iterations. For example, after trying a new product or service, a corporate can request new changes and features to make it an even more effective solution. This level of customisation is more of a challenge if the offering is already fully developed.
3. Lower upfront costs compared to other innovation tools
Innovation tools like CVC, incubators, and accelerators often require an upfront investment for things like operations, maintenance and hiring (among others). In comparison, the venture client model is quite cost-effective, requiring a relatively small investment (just enough to purchase the solution). In some cases, the corporate may allocate a budget to cover some of the startup’s costs, but even then, the cost is usually lower than direct funding.
4. An accelerated innovation process
Buiding new solutions internally can take years of research and development with no guarantee of success. The challenge is even bigger for corporations that lack innovation experience.
The venture client model enables corporations to skip to the end of the innovation process and get quick access to vital solutions and technologies. All the tangible benefits of a new solution without the effort of having to build it in-house.
5. It fosters a culture of innovation
Under the venture client model, different units within a corporation work closely with startup teams, gaining exposure to new, out-of-the-box approaches. The collaboration helps boost companies' entrepreneurial thinking, leading to a more robust innovation culture.
How does the venture client model benefit startups?
These are just some of the benefits of the venture client model for startups:
1. Autonomy and full equity
Under the venture client model, startups are simply gaining a client, with no loss of autonomy, equity or control.
2. Reliable validation based on real cases
Early stage products get tested on their ability to solve real corporate challenges. The data and feedback gathered lead to valuable product improvements - even if the solution doesn’t get adopted by the corporate.
3. Early client revenue
The venture client model enables startups to earn revenue much earlier while they’re still developing their product or service. This can provide the revenue needed to fund further development, increasing the chance of long-term success.
4. Access to industry knowledge and expertise
Working in close collaboration with corporates enables startup teams to gain more in-depth knowledge of the industries they serve. In some cases, corporates can even provide valuable coaching and mentoring to help take the startup to the next level.
Venture Clienting FAQs
Q. Can small or medium-sized enterprises implement the venture client model?
Yes, SMEs can implement a scaled version of the venture client model. While large corporations like BMW and Bosch have dedicated teams, smaller companies can assign part-time resources to identify and work with startups on specific challenges, often with simplified processes.
Q. How many startups does a typical venture client unit work with annually?
Most active venture client units engage with 10-25 startups per year through pilot projects. Of these, approximately 30-50% progress to longer-term commercial relationships or solution adoption.
Q. What skills should a venture client team possess?
Effective venture client teams combine business development, technical expertise, and startup ecosystem knowledge. Key skills include problem framing, startup evaluation, negotiation, project management, and the ability to navigate corporate processes and politics.
Q. How does a venture client model differ from open innovation challenges?
While both engage external innovators, venture client models focus on working with existing startups that already have minimum viable products, whereas open innovation challenges often solicit ideas or concepts from diverse participants including individuals, researchers, and companies at various stages.
Q. What industries have seen the most success with the venture client model?
The venture client model has been particularly successful in manufacturing, automotive, healthcare, energy, and financial services—industries with complex technical challenges and where startups face high barriers to entry due to regulatory requirements or enterprise sales cycles.
Q. What happens if a pilot project under the venture client model fails?
After the pilot project, the venture client unit carefully reviews the results against predefined KPIs. If the pilot does not deliver the desired outcomes, the corporation can exit the engagement without further commitment, minimising risk and preserving capital efficiency.
Q. How does the venture client model differ from an accelerator?
The venture client model focuses on corporations purchasing solutions from startups without taking equity, offering real-world validation early on. In contrast, accelerators invest in startups, take equity stakes, and offer structured mentorship programs to accelerate growth.
Is the venture client model right for you?
The venture client model is an effective and efficient way to access new startup solutions before they even hit the market. It’s a low-risk and relatively inexpensive way for corporations to:
- Gain strategic insights
- Test new solutions quickly and cost-effectively
- Benefit from customised offerings
- Access a solution before competitors do (i.e. a time-to-market advantage)
The added capabilities can make a huge impact, enabling companies to enter non-core markets, improve existing processes and compete more effectively.
Given this model's high speed, high capital efficiency, and low risk, it’s a good first approach for corporations with a relatively low level of open innovation maturity. While no corporate venturing activity is entirely free of risk, the venture client model is an ideal way to start collaborating with startups and building your corporate ecosystem.
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Are you looking for new ways to fuel company-wide innovation and create new revenue streams? We can help you leverage existing corporate assets to build your corporate venturing unit and pave the way for the future growth of your business.
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