Spoilt for choice? Forging productive relationships with start-ups

Last week, JISC and Emerge Education launched a “health check” for edtech start-ups called ‘Step Up’ to help universities identify companies that have the necessary capabilities to deliver, even if they are relatively new or small.

It seems that there is a paradox in play: many universities want to work with start-ups to benefit from bespoke service and fast-paced innovation. But most universities tend to take a traditional approach to risk, basing judgements on things like size, financial turnover and track record – so the very things that make a start-up nimble and able to offer personalised service are the very things that exclude them from working with universities.

Much like the highly advantaged Old Etonian breezing past their state-educated counterparts for a place at a top university, large companies come with an inbuilt advantage and don’t necessarily have to work as hard or be as clever as the smaller companies challenging them. While on paper they may look like the best bet, there are lots of potential benefits to widening participation to include start-ups as suppliers for your university. But it takes some flexibility to overcome the barriers of too much choice of supplier and rigid procurement processes.

Too much choice

With hundreds of new companies entering the market and asking to be considered by universities, it can be dizzying to consider every entrant each time a new project arises. Institutional leaders are frequently contacted by start-ups seeking an audience and the opportunity to explain their offer. Not only is there not sufficient time in the day to meet with everyone, there is no centralised objective criteria to evaluate the capabilities of each start-up.

Possible solutions

The JISC/Emerge Education Step Up programme offers a tangible solution to this barrier by selecting a smaller number of start-ups that have already been vetted. There are other ways to help protect time and identify potential partnerships, however.

1. Participate in events that allow you to meet a lot of start-ups in a short period of time. Often events will organise this as a kind of “speed dating” exercise, but there’s no reason you can’t do it at your university to save travel time. Invite several start-ups to join you on one particular day and use the time efficiently to present on your university and priorities to all of them, before meeting them individually.
2. Get active in networks of university leaders who work with, and spend a lot of time vetting, start-ups. You can benefit from their research and hear about exciting new companies through a trusted referral, rather than just their marketing material.

Procurement processes

Legacy procurement processes that haven’t been reviewed recently may unintentionally cater predominantly to the large sector-dominating companies. The standard government selection questionnaire guidance suggests asking for three examples of previous contracts which are of a similar size to the contract being procured. If all universities use this criterion, it means that a start-up is caught in a catch 22: it cannot win its first large public sector contract unless it has three previous examples of large public sector contracts.

And while previous contracts may be a useful indicator of capability in some cases (eg a large building project), this isn’t always the case. For technology companies and digital products, the difference between supplying a product on a smaller or larger scale can be as little as pressing a button to activate more servers. What matters instead is that the product is of high quality, has been tested by a range of users, and that there is a robust plan in place for scaling the back-end architecture – none of which are determined by the number or size of previous contracts.

Possible solutions

Alongside using programmes such as JISC/Emerge to do the due diligence of checking financial, product and people capabilities for you, there are several ways you can adjust procurement without overly exposing yourself to risk. For example:

1. Asking for three previous contracts of a similar size may be the norm, but it’s not mandatory. Consider what it is you’re looking for companies to prove in order to show that they’re up to the task. For example, in the case of procuring digital products, it is often more useful to ask for a statement in which the supplier explains how the platform will be scaled.
2. Allow the flexibility for potential suppliers to show either three examples of previous projects, or one example of a similarly-sized contract.
3. Rather than using a financial threshold based on minimum yearly turnover (something that can exclude all but the largest of companies), you could use a combination of different criteria to assess a company’s financial health in a more holistic way. These could include:

• book value (i.e. assets minus liabilities);
• current ratio (i.e. the ratio of assets to liabilities);
• quick ratio (i.e. the ratio of assets, not including inventory, to liabilities);
• whether any major risks have been identified by the company’s auditors or by the university (taking into account financial probity as well as financial strength and capacity);
• whether a large percentage (e.g. more than 90%) of the company’s assets are classified as “work in progress”;
• whether the company is profitable, and if not, whether the company’s losses are indicative of a failing business or a normal pattern of growth for a start-up

There are, of course, other barriers (getting stakeholder buy-in, managing risk), but removing the logistical barriers to being able to partner with a start-up could open a world of potential. Acting early to update practices and processes could mean that you get to shape the product and benefit from its competitive advantage.