Corporations face new challenges in innovation scouting
Publication date: 27.08.23
Reading time: 5 minutes
In today's competitive landscape, corporations are forced to embrace innovation to stay ahead of the curve. Almost all corporations invest in in-house R&D, however, this process sometimes requires years of research. The fast-paced nature of business and the challenges that corporations face demand finding and implementing technologies in the fastest way.

One way to achieve this is to scout startups that are developing new technologies and solutions that can be quickly and effectively implemented into a corporation's existing operations. Scouting startups is becoming a popular tool for corporations, and this trend will continue to grow in the future.

Trends in the corporate innovation market

The most popular trends in 2023 in the field of corporate innovation are:

Cyber ​​security. Corporations are concerned about the growing threat of data breaches, which pose significant financial and reputational risks. By the way, as artificial intelligence and machine learning technologies become integrated into most innovative IT solutions, the risk of data leakage has also escalated.

To protect and monitor cloud data, in May 2023, the American giant IBM acquired the Israeli startup Polar Security for $60 million. Polar Security offers an advanced solution that automatically detects and classifies unknown and confidential data in the cloud. The platform can display potential and actual data flows, while also identifying vulnerabilities such as misconfigurations, excessive permissions, and behaviors that violate company policies or rules.

AI/ML. These technologies allow companies to automate many processes, reduce information processing time, and employ predictive analytics to prevent potential issues.

For example, Nvidia, in collaboration with Oracle and Salesforce has invested $270 million in Cohere. McKinsey also announced a partnership with Cohere in the field of artificial intelligence, aiming to provide AI solutions to its corporate clients for cost and time optimization, data protection, and ensuring customer privacy.

Blockchain. One of the applications of blockchain in the industry is its integration with IoT solutions for monitoring production processes and ensuring product quality. With the increasing presence of smart devices and interconnected control equipment in manufacturing networks, all connected to cloud platforms, security concerns arise. Blockchain has the potential to address security issues and establish trust in IoT devices.

General Electric (GE) has joined a $12 million Series A funding round for the Xage, which specializes in developing blockchain-based cybersecurity solutions for industrial Internet of Things (IoT) devices. The technology creates a distributed network of devices capable of identifying the digital fingerprint of each device within a production environment. This capability empowers the system to detect anomalies in devices and proactively prevent the spread of attacks through a centralized network.

ESG. Energy transition is a priority on the European environmental agenda. In 2023, ESG technologies are no longer just a trend, but also a mandatory requirement for corporations, established by laws and other regulatory acts.

In September 2022, Google acquired over $200 million in the Israeli startup BreezoMeter. BreezoMeter focuses on air quality monitoring and improving people's health by collecting atmospheric data from multiple sensor stations. Their advanced technology incorporates artificial intelligence and machine learning algorithms, which have been trained to identify and detect various types of pollutants.

In order to stay in the leading positions, corporations must necessarily look at external technological partners. In case they lack resources for research and analysis, the best option would be to engage a professional scout who can identify relevant startups for piloting. So, let's explore who a scout is and what tools they use to search for suitable startups.

So what does a scout's job involve?

A scout is a connector, bridging the gap between corporations and startups, so they must understand the needs and interests of both parties.

A scout cannot guarantee communication between the startup and the client, but anyway a scout does everything possible to make sure that the best startups get a chance to pitch to corporations.

Moreover, a scout's responsibilities go beyond just creating a list of startups. They also ensure that the shortlisted candidates have tested and validated Minimum Viable Products (MVPs), have a strong team, and understand their target market.

Scouting algorithms and tools

Corporations often make long-lists of startups by using open sources, connecting with venture capital firms, and collaborating with accelerators to search for candidates. However, manual searching requires a huge amount of time and resources, which may not be suitable due to tight deadlines.

One of the best solutions for searching startups is to use special platforms that contain databases with information about startups, potential clients, and investors. For instance, Innotechnics has the most comprehensive database in Europe for corporate scouting. To understand how it works, you can register for a trial period and then proceed with a subscription.

Actually, corporations can make the long-list of startups themselves. However, it’s better to entrust this step to a scout, as it involves a significant amount of time and requires experience in searching and interacting with startups. Based on their experience, scouts ensure that only the most promising and well-prepared startups are presented to corporations for potential partnerships.

1. The first step of a scout is making a long-list of startups depending on the client's requirements and the scale of the project. This list could include hundreds or even thousands of startups.

In most cases, approximately half of the screened startups are excluded for various reasons that make them irrelevant.

2. The next step for a scout is to discuss a long-list with a client. As a result, additional selection criteria are determined to prioritize the startups. A scout creates a short-list of 10-15 startups with detailed description of their technological solutions, competitive advantages and value propositions, which the startup team can present to the client.

Case Study

Innotechnics found solutions for $2bn+ Bank in the field of KYC and Anti-fraud for potential implementation in the structures of the bank. We analyzed and assembled a funnel of 60+ solutions according to client's requests. We also issued and presented 15 solutions to the client.

3. The selected startups undergo scoring using a specific methodology. For example, Innotechnics ranks startups based on the following criteria: startup activity, geography, stage of development, and accuracy in meeting the business client's requirements. Deep analysis of the startup, detailed product immersion, and communication with the team are necessary at this stage.

Many startups may have a lack of trust in scouts, so it’s important for the startup to know that the scout won’t require any confidential information for their project's resume, only information that does not constitute proprietary know-how. A scout or a client sometimes have additional questions during the examination of the technology, and in this case the scout must clarify any concerns.

Case Study

Innotechnics selected technological partners for the digital transformation of the client - $7bn+ Bank. We conducted 30 interviews with department heads to shape the requirements for startups. We reviewed over 300 and recommended 30 startups for piloting. Additionally, we held 5 pitch sessions, each consisting of 5-10 startups.

As a result, we found FinTech solutions for extension of the Customer’s product line, and B2B solutions for internal processes optimization. The startups were given the opportunity for project piloting and establishing a long-term partnership with the client.

4. At the final stage, a scout offers a list of startups that best match the corporation's request and are recommended for the pilot.

As you can see, the role of a scout in the process of identifying and selecting startups for piloting is of paramount importance. By leveraging their expertise, extensive research, and in-depth understanding of both corporate requirements and the startup ecosystem, scouts play a crucial role in facilitating successful partnerships between corporations and innovative startups. So, Innotechnics can be such a scout.

About Innotechnics.
Innotechnics has extensive experience in startup scouting, and we have successfully solved 50+ cases.
The company does not just search for technologies and compile shortlists of startups for clients, but also conducts in-depth technology analysis, organizes pitch sessions for startups, and supports startups during negotiation stages with corporations, helping to facilitate communication between the parties. In addition to a complete database of startups and scouting services, Innotechnics provides services in market analysis, trend watching, venture ecosystem assessment, and technology analysis.
Read more about case studies on our website.