Startup Scouting

In an entrepreneurial and innovative ecosystem, the object of the Technology Scouting process and subsequent sourcing is increasingly frequently represented by hi-tech startups.
Hi-tech startups are vehicles of technological innovation , in fact a growing amount of innovations and technologies of potential interest for businesses are introduced by startups.

Organizations must therefore also prepare and monitor that subset of the Scouting process focused on startups, called Startup Scouting.
Startups Scouting is the process of identifying, selecting, shortlisting, evaluating and involving startups as a source of technological and business innovation. This scouting process on primary sources of innovation is fundamental for businesses .
To properly design it, it is necessary to consider some key elements. First of all, governance: the process can be managed by “facilitators”, or by the company itself which deals with it in its entirety. Secondly, the data sources as in a data- driven world startup scouting must also be guided by as much information and data as possible.

From this perspective, startup scouting databases can represent an alternative to the creation of a network of scouts for those companies that, due to the availability of resources, cannot afford one. These DBs support in the identification phase of the Technology intelligence process, and over time, various ones have emerged, which differ in terms of variables such as: Target (for example, Startups, companies, patents, events); coverage (geography, financial data, R&D data, company master data); data collection process (e.g. crowdsourced or automated); and degree of openness and pricing for access.

Startup scouting should be In the end “result-oriented”, as managers should reflect on the desired outcome of the process from the beginning .
Starting from the desired result helps to develop innovation scouting processes that work backwards, maintaining a strong focus on the final objectives. This allows you to build a plan that focuses on relevant data sources and leverages the right people from expert networks closest to the technological areas being investigated. To adopt this approach, it is essential to recognize that a scouting initiative has three typical outcomes:

– procurement,
– product development, e- investment or M&A.

In scouting aimed at procurement. a business function (such as marketing, IT, purchasing) is looking for a new solution for a clearly defined technology. The innovation scouting process involves the study, shortlisting and selection of one or more organizations capable of building and selling emerging technologies that meet procurement needs: that is, the selection of startups intended as suppliers.
Implicitly, this excludes organizations such as R&D teams, unfunded startups, or academic technology transfer offices, which are not structured to be technology providers.

In other circumstances, companies may pursue scouting because they see it as an effective way to supplement their internal R&D investments, or as a way to experiment in categories adjacent to their core business lines.

Enterprises typically rely on trusted suppliers to introduce new technologies and solutions on the front end of product development. However, when a market is significantly oriented towards technological change, traditional suppliers may no longer be a reliable source of innovation and new know-how: therefore, it was decided to turn to innovative players.

The technology may be sourced from, or developed in collaboration with, startups, universities, specialized research and development laboratories, or technology transfer offices.
Due to the symbiotic nature of the partnerships that arise from these types of collaborations, IP development, ownership and licensing considerations become critically important, and contractual agreements must align a complex set of incentives.

In the case of scouting oriented towards investments in startups or M&A, companies could establish that the best or fastest way to acquire technological know-how and customer penetration in new technology domains and new markets is to acquire high-growth startups and high potential.
With that starting point, this type of scouting typically requires an extensive list of requirements (such as growth forecast, valuation, deal financing, ownership structure, and other financial and strategic considerations that do not come into play in a normal project of scouting).

Even when driven solely by the need to acquire technological know-how, innovation scouting projects for M&A require much more rigorous verification of information .

Strategic fit within the acquiring company’s broader business model, compatibility with existing internal know-how or technology platforms, and post-transaction integration constraints further reduce the entire “universe” of realistic merger and acquisition, making this the most complex outcome to achieve through a scouting process, but at the same time the one with the greatest strategic-entrepreneurial implications and potential.