How incumbents can partner with start-ups to drive growth

Big, established companies face a contradiction. The business model and strategy that made them successful can hold back future reinvention efforts. They fail to disrupt their industry because they’re unable to first disrupt themselves. In contrast, successful new business models often originate in start-ups, which thrive on upending incumbents’ legacy value propositions, cost structures, and business models.

For that reason, savvy executives look beyond the competitive threat from start-ups and see them as potentially valuable innovation partners. And rather than outright acquisitions, they’re increasingly using hybrid partnership models—a more pragmatic, incremental approach than the high-risk, high-reward moonshot investments of the past—but one that delivers faster impact. Three hybrid models stand out:

Corporate venture capital. In the first approach, established companies invest directly in start-ups to gain early access to emerging technologies, disruptive innovations, and even new customer pools. Rather than treating start-up investments mainly as financial plays (often kept separate from core operations), leading companies today use corporate venture capital to build strategic partnerships that strengthen their competitive position and spur innovation. This more integrated form of investing is becoming more common as incumbents seek to complement their core competencies while picking up new ones in areas such as artificial intelligence, sustainability, and digital transformation.

Corporate venture building. In the second approach, an established company creates a new business venture from scratch, typically using internal resources, corporate assets, and start-up methodologies. Unlike the high-risk, disruptive innovations of the past, which were far from the core of the business, venture-building partnerships today tend to be more pragmatic. Companies focus on developing business models that are adjacent to their current ones, aiming to create value quickly and integrate the new brands and teams into existing operations.

Venture clienting. In the venture clienting model, incumbents collaborate with start-ups as specialised solutions providers, helping the former integrate advanced technology—or even new business models—without taking on the full risk of investment. When a start-up develops a product or technology that can solve a specific problem a company faces, it comes in early as a supplier—often before building references or a large customer base of its own.

How to choose the right approach

To choose among these options, leaders at established companies should ask these core questions:

1.  Do we need to look outside our company for new business models?  Companies with stable, well-established products and services will benefit most from looking outside for innovation, typically through a venture capital or venture clienting approach.
2. How compatible is the new offering or innovation with our core business?  In cases when the new offering or innovation is largely compatible with the core business, a lower-risk venture building or clienting approach may work best.
3. How much money are we willing to invest, and for how long?  Companies seeking radical reinvention will most likely benefit from a venture capital or venture building approach, which demand large investments and patience but offer higher-impact opportunities. In contrast, venture clienting lets companies test and adopt innovations quickly through commercial partnerships or pilot projects without requiring major upfront investment.