Big companies taking on startups in residence
Desjardins Lab’s ‘startup in residence’ an example of win-win collaboration
Julien Brault wants his startup to do business with large financial institutions.
He’s the founder of Hardbacon, a Montreal startup that’s developing an app intended to give ordinary people the information they need to manage their own investments.
The app isn’t scheduled to launch until October, but in mid-June, Hardbacon was selected to be the first “startup in residence” of Desjardins Lab, the credit union’s innovation team.
Desjardins is providing him with office space, access to mentoring and other services, but there’s no investment deal and no restrictions on who he can do business with. That’s important for Brault, who wants to do business with multiple financial institutions. His goal is for them to distribute his app to their customers.
Being selected by Desjardins is also a chance to meet the people he hopes he’ll be doing business with in the near future. That’s particularly important in a large, risk-averse organization, like a financial institution.
“It’s great to be introduced from within,” Brault says.
While Hardbacon might be Desjardins Lab’s first startup in residence, it’s hardly the first startup the credit union has collaborated with. The credit union — like many other large companies in Montreal — has begun seeking out startups to do business with as it looks to become more innovative.
Sometimes these big guy, little guy arrangements involve financing, but many don’t. Participants — on both the corporate and startup sides — describe it as a win-win situation that gives large organizations a low-risk way to get access to new ideas and gives startups the credibility that comes from working with an established partner.
For startups, though, the biggest benefit is the possibility of signing a large company as their first customer. “Startups suck at talking to bigger companies,” says Ilias Benjelloun, whose job title at Desjardins Lab is “inter preneur ship catalyst.” Startups tend to be focused on the products they’re developing and, often, they aren’t very good at explaining how those products might meet the needs of a larger organization, he says.
That’s where Benjelloun and his colleagues come in — they can act as “translators” between a startup’s products and corporate needs.
The Lab’s 16-person team often works to encourage what Federico Puebla, the director of innovation at Desjardins and the head of Desjardins Lab, calls “creative collisions.”
“We ask startups to come to the lab and for employees to join them — for them to learn from each other,” he says.
Startups can teach Desjardins employees about being less riskaverse, while employees can teach startup entrepreneurs how to do business with the credit union.
This collaboration can lead to partnerships.
“We’ve had projects that have started from just that encounter at the lab where you hear about somebody’s startup, you hear about somebody’s product,” says Deborah Hayek, the head of research and development at Desjardins Lab.
One of those deals is an ongoing project with Dataperformers, a local artificial intelligence startup, to identify trends in the credit union’s vast repository of raw data, she says.
Hayek says the lab team saw the potential in the technology. “A lot of companies start with an issue first and try to resolve it and go from problem to problem to problem. We do that, too,” she says. “But you have to push the technology, the innovation first, as well, otherwise you’re constantly going to be in problem-solving mode, putting out fires.”
By focusing on innovation, instead of problems, she says, the lab can “skip ahead” and create opportunities.
For startups, forming a partnership with an established company can be a huge boost. “It was a way for us to get out of our basements and really become a company,” says Vincent-Charles Hodder, the CEO and co-founder of Local Logic, a Montreal-based startup that collects and analyzes urban data. “It was a game-changer.”
It all started with a meeting with a Yellow Pages executive at the InnoCité startup accelerator, a program started by the city of Montreal to spur the growth of new businesses that are developing technology intended to improve urban living. That resulted in a business relationship: Ultimately, Yellow Pages invested in Local Logic, a deal that came with obtaining space at Yellow Pages’ office.
That close contact gave Local Logic access to expertise that helped it develop such things as a pricing model, Hodder says.
The relationship also opened other doors.
“Having that logo and having that backing is huge. You go into a sales meeting, or you go and speak with investors, and it’s not just an idea or a cool project — people see it as a real business,” he says. “It makes that initial conversation go a lot smoother.”
For Yellow Pages, working with startups is a low-risk way for it to experiment with new ideas, says Matthieu Houle, the company’s vice-president of digital media.
“At YP, we’re transforming to become a digital company, so our roadmap is pretty clear,” he says.
As a result, the company doesn’t always have the resources to test new ideas that aren’t part of that plan — even if they might support those ideas.
Because startups are small and don’t have the pressure to deliver returns for shareholders every quarter, they can take risks on new ideas that might not work out in a way that a publicly traded company cannot.
Cossette, a Quebec City-headquartered marketing and communications agency, has been working with startups through its “lab” since 2011. First launched in Montreal, Cossette now has labs in Vancouver, Toronto and Halifax.
It began as a way to accelerate innovation at the company, says Malik Yacoubi, Cossette’s chief digital officer.
“At the end of the day, we can develop pretty much everything in-house, but it’s a matter of what you’re going to focus on,” he says.
Because startups tend to develop a single product, they have an advantage over a larger company that offers a variety of products and services.
For Cossette, one of the big advantages of the lab is that it’s able to offer the products and services developed by startups to its customers. As is the case at Desjardins, it’s a matter of translation.
“Large corporations are very interested in working with startups, but startups don’t necessarily have the right language or approach to start to work with them,” Yacoubi says.