Tech Scouting: When to Initiate an Anonymous Search
Many of our clients engage yet2 for “traditional” tech scouting services – Strategic DealFlow, where we source step-change opportunities for clients, Topic Specific Scouting, which is when we are focused on finding the right solution to solve timely challenges with specific requirements, and Innovation Tours or Virtual Hubs, which has us scheduling meetings with 10-15 promising potential partners, or where we develop a regional innovation hub for a client.The challenge for many companies is how to get necessary information without the risk and exposure inherent in revealing their indentity to opportunities of interest.Click To Tweet
Adding to that roster of open innovation services, over the past 12 – 24 months, several of our subscription clients have asked us to perform anonymous searches for them. There are a few general reasons why a company might be searching for new technologies, products, or ideas and not want to reveal who they are (and we’ll go into them below). In all anonymous searches, the client has decided they need more information in order to make a go/no-go decision. The challenge for many companies is how to get necessary information without the risk and exposure inherent in revealing their identity to opportunities of interest. In essence, the company does not want to show its cards, yet must keep playing the game. Hence the need to engage a partner like yet2 to conduct an anonymous technology search or due diligence inquiry.
Here are some scenarios for when companies require an anonymous search through a trusted third party:
- Eyeing Disruptors in the Same Industry. In today’s business environment, it feels like every new startup wants to be the disruptive, “Uber” of their industry. yet2 has a significant number of clients that are global brands in industries poised for disruption. In some cases when these incumbents identify startups that look interesting, it can be very important to mask that interest from the startups, not to mention from leaking out to competitors and the rest of the industry. Anonymous approaches, if well executed, can enable these large companies to learn enough information to build an informed business case for a partnership, investment, or acquisition.
- Too Close for Comfort. Sometimes businesses want to expand their product or solution lines into categories similar to those of their suppliers and/or customers. In these cases, they need to remain anonymous during the research phase, so as to not upset or disrupt existing relationships prematurely.
- Competitive Surprises. A yet2 client needed a partner to co-develop a product very quickly in response to a competitor’s new market entry. The client couldn’t reveal to any potential partners that they might want to enter into that market. Our anonymous inquiry research was needed to determine which of three potential partners would be the best fit and which had ties to the known competitor. From that research, we were able to prioritize the top potential partner and confirm it did not have direct ties to the competitor. We also discovered the partner had contracted out a key development capability to a third party and we were then able to facilitate an introduction directly between our client and that third party. The client is well on their way to commercializing a strong response in very close to their target timeframe.
For yet2, trust is at the core of all of our anonymous technology searches. An average startup will be interested in at least entertaining discussions with “A Big Global Brand,” provided said brand was named. The startup can perform their due diligence. See who they know there. Ask around. It’s very different when they are asked to enter into discussions (or potential discussions) with “A Big Global Brand” who can’t be named. How does that startup know the third party is actually representing “A Big Global Brand?” Even if there is a “Big Global Brand” behind the inquiry, is the large-co just trying to steal IP or insight? How can they establish trust?
Why doesn’t “A Big Global Brand” just hire one of their law firms to conduct the research, initiate discussions, and then start negotiations? Quite simply – it is likely that “A Big Global Brand” is listed among the law firm’s clients, thereby negating the “anonymous” part of the anonymous search. Aside from that, many law firms don’t have the business experience to appropriately assess the opportunity. Law firms are hired to mitigate risk, not to maximize opportunity. They cannot advise the client on the business opportunity or the dimensions of the business. Risk analysis is only one part of the equation and is not enough information on which to base a go/no-go decision.
Types of Information Required in Anonymous Searches
While each search is different, there are some general types of information companies are looking for during an anonymous search. A good partner knows how to navigate researching and asking about:
- General interest in a partnership
- Ideal type of partner
- Ideal first markets
- Capabilities needed
- IP plans
- Existing partners
- Funding needs
- Technology or company history
Just as importantly, a good partner knows which questions to avoid early on, postponing until enough trust has been built to wade into such sensitive topic areas. A good partner also has a rich stable of tools to utilize for building trust, in order to collect sufficient information to enable the client’s go-no decision. And a good partner should have a highly refined sense of when to reveal the client’s identity. Too soon, and you risk exposing the client. Too late, and you risk annoying the startup and chilling or killing discussions.
We at yet2 have nearly 20 years of experience and have represented companies in all industries. This breadth and depth of our practice gives us the air cover to conduct anonymous technology searches with authority and credibility. We understand where the potential points of failure are in gathering the information clients need. And we continue to be amazed by how much information we are able to collect with a little bit of experience and a little bit of trust-building.
There is a subtle art and long strategy to conducting anonymous technology searches. Before you embark on one, be sure you are working with a trusted third party with extensive experience on the ground.