This is the second installment of a two-part series on CIOs partnering with early-stage technology companies. The first article discussed the partnering landscape from informal alliances to acquisitions.
CIOs stand to learn a lot from IT startups and may end up partnering with them to solve technology challenges.
There's plenty of innovation happening among early-stage companies that can supplement an enterprise's research and development activities. CIOs don't have to venture any farther than their email accounts to find startups looking for the proverbial foot in the door. The problem for CIOs is identifying the early-stage companies most relevant to their organizations' technology and business strategies.
After all, there's quite a pile to sift through. According to AngelList, a website for startup investors, there are 28,000-plus startups just in Silicon Valley.
A CIO's inbox "looks like a disaster area with all kinds of cold email," said Tom Frangione, COO at Greylock Partners, a venture capital firm in Silicon Valley.
Venture capital (VC) firms such as Greylock, however, are developing ways to introduce promising IT startups to CIOs and other corporate technology decision-makers. Joining them in this brokering role are IT consultancies that also act as go-betweens, setting up meetings between CIOs and tech startups.
The resulting conversations aim to provide something for everyone. The CIO stays up to date on new technology and develops startup relationships that can bring emerging technologies to bear on IT challenges. The startup gets enterprise feedback on its product and lines up possible business opportunities. The VC firm gains exposure for its portfolio companies and external validation of its investment directions. And consulting firms expand their trusted advisor role as they help clients filter through the startup multitude.
The VC as conversation broker
Greylock has recognized the value of engaging with CIOs, CTOs and heads of digital for a while, but has been trying to more aggressively cultivate those relationships of late, Frangione said. He said the appetite for conversations that place corporate technology leaders at the table with IT startups and the VC investment team is growing on all sides.
The meetings may take different forms. In some cases, Greylock will host a visiting CIO or CTO at its Silicon Valley office. The Greylock investment team will meet with the technology executives to discuss their IT priorities and Greylock's portfolio companies. A discussion might determine that a handful of the portfolio companies might fit into the executives' tech priorities. Next, half-hour to 40-minute meet-ups are arranged with those companies -- the startup equivalent of speed dating.
Frangione said the feedback from CIOs and CTOs representing different industries is "incredibly valuable" for startup companies.
"Understanding how to take an early product or early technology and make it something that works for a large enterprise -- that takes a lot of feedback," he said.
While Greylock and its startups benefit from the tech executives' perspective, the goal is for the CIOs and CTOs to also benefit.
"We are very focused on, 'How do we build a good learning environment for both sides?'" Frangione said.
At minimum, the CIOs and CTOs can learn what types of technologies are winning over investors. The venture-backed startups serve as a barometer of sorts for what's up-and-coming in such areas as enterprise and consumer software. Frangione said the dollars flowing into technology innovation can serve as a "sensor network" for IT executives.
As relationships evolve over additional meetings and briefings, a CIO might tap a startup for a proof-of-concept project and perhaps a contract down the road, he added.
IT consultants offer access to innovation
VC firms aren't the only startup matchmakers, however. IT consulting firms are also playing a role.
"The big consulting companies are recognizing they need to help bring this innovation to companies," said Nigel Fenwick, a vice president and principal analyst at Forrester Research. "They are trying to accelerate this process and introduce their larger corporate clients to these startups."
One example is Trace3, an IT solutions provider and consulting firm based in Irvine, Calif. The company's Venture Capital CIO Briefing Program plugs its customers into startup innovation, partnering with VC firms. Chad Cardenas, president of Trace3, suggested that making technology matches isn't the only focus of the initiative, or even its most important one.
The briefing program, he said, "doesn't just connect CIOs to innovative technologies, it gives them a view into the future, and an opportunity to shift their mindset accordingly."
Cardenas said the corporate technology leaders do wind up launching formal relationships with some of the IT startups and may adopt their offerings, but called that benefit a fraction of the program's value. He said connecting a CIO directly into "the heart of technology innovation in Silicon Valley" -- its top venture investors and entrepreneurs -- goes beyond access to transformational technologies.
"You're providing opportunity for transformation of the individual, their strategy and their understanding of what's possible," Cardenas said, citing access to the key Silicon Valley players.
Chad Cardenaspresident, Trace3
Cardenas said the CIO's mission is to help their companies respond more rapidly to the threat of digital disruption. Within that mission, CIOs need to take the lead in researching the market for available solutions to their companies' challenges, vet those solutions and pick the few that will prove a fit, he said.
CIOs also need to beat others to the punch when it comes to the task of digitally transforming to remain competitive, Cardenas noted.
"A major part of their responsibility is to find the next disruptive technologies that will assist in that effort, before everyone else around them does," he said.
Vertical market trends
Indeed, concerns over digital disruption appear to be boosting interest in corporate startup meetings.
On the enterprise side, financial services firms and retailers are particularly interested in introductions to early-stage companies. Investment banking firms, for example, are motivated to meet IT startups on a couple of levels. Investment bankers view young companies as potential clients for their mergers and acquisitions as well as other banking services. In addition, the financial services firms, as heavy users of enterprise IT, also want to stay on technology's cutting edge and will bring in their IT leaders to meet startups, Frangione noted.
Retailers for their part are looking to gain a better understanding of how to leverage technologies to better compete with their digital rivals. Frangione said retailers are very much aware of the success Amazon.com has had with its commerce and recommendation engines and in its ability to take advantage of data and analytics.
Cardenas, meanwhile, said representatives from a range of vertical markets have participated in Trace3's VC-CIO briefing program. He cited entertainment, education, government, manufacturing, retail, financial service, healthcare and automotive as examples. The technology leaders in those vertical all have business outcomes they are driving toward, Cardenas said.
"Those outcomes can all be affected in some form by an innovative application of disruptive technology," he added.
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