Why having a corporate sponsor is necessary for a startup in 2018

What is Corporate Sponsorship?

Having a good Sponsor can be a powerful way to skyrocket a new business. Corporate sponsorship is an agreement between two entities with the aim of mutual benefit - both materially and organisationally. Sponsorship relationships vary and evolve. Furthermore, when trust is built and mutual benefits are obvious, the relationship deepens over time. At this point, 'sponsorships' become 'partnerships'.

The list of benefits may cover areas such as:

  • Business growth
  • Market share growth
  • Branding and co-branding
  • Marketing benefits
  • Community engagement
  • Staff development & motivation
  • Access to government, business and community networks
  • Co-creation and co-innovation

When identifying which business to approach for support, it is vital for the applicant to do in-depth research to find out which business is a good fit and who is likely to respond. Each sponsor is attracted by different opportunities. Startups need to customize their proposal to attract the right sponsor.

Types of startup funding and where corporate sponsors stand

  • Angel: Early stage funding for startups usually come from angel investors and family or friends.
  • Seed: A startup can usually get between $10K-$2M at this stage. 
  • Venture: Round series A to H. For example, A and B are for early-stage startups and can be between $1M-$20M. C to H rounds are for more established startups and can range anywhere from $10M+.
  • Equity Crowdfunding: Investing in startups in exchange for equity.
  • Product Crowdfunding: A startup provides a product in exchange for raising capital.
  • Private Equity: Private equity firms and hedge funds engage in late-stage rounds and less risky investments. Rounds are $40M+.
  • Convertible Note: An ‘in-between’ round to help startups make it to the next funding round - typically after Series A.
  • Debt Financing: Firms lend money to a company. In addition, the company will promise to repay the money with interest.
  • Non-Equity Assistance: When a company or investor provides capital, support, services, time, equipment, office space or mentorship with no equity in return. Grants, Donations, and Sponsorships belong here.

What a corporate sponsor can bring to the table

  • Material support (could be one or many cash contributions, grants)
  • Assumptions of an old debt
  • Donation (could be money given by a company to a non-profit organization)
  • Funding a specific project or event (often sustainable efforts, community-focused)
  • Goods (labels, tickets, branded materials)
  • Equipment
  • Gifts
  • Support (in the form of time, expertise, work)
  • Space (work or event space)
  • Services (volunteering, favoring innovative programs or projects)
  • Networking
  • Co-branding

When corporate sponsors usually get involved

  • Interesting research and idea
  • Innovation, new tech, etc.
  • Hackathons; Competitions
  • Industry focus reflects an upcoming or future project
  • Social responsibility
  • Branding on new media or platform
  • Large event sponsorships
  • Crunchy culture, art, new hot tendencies, etc.
  • Hosts, stars, experts, influencers or other individuals found to be unique
  • Market penetration or expanding, reaching new target groups
  • Positive brand exposure
  • Tax deductions

What corporate sponsors are looking for in partners

What type of startup is attractive to sponsors? Those who bring value to the table.

Especially relevant is how a brand uses marketing, co-branding, and co-creation as entertainment. Using sponsorship wisely is the key.

People who appeared on the list above have something in common. They have created something of high value, solved problems, helped others to improve, or created something for the environment.

When finding out what motivates people, there is an interesting pattern. Most people are attracted to things out of love, passion, kindness, curiosity, and need. These inner powers bring great solutions and inspire many.

In addition, all sponsors have something in common. They follow value. If what you do is valuable to many, you will likely be rewarded.

Sponsorship of Projects & Events

The key advantages of receiving corporate sponsorships are in the timing – help comes exactly when needed and in return, the startup has one responsibility – to show or mention the sponsor's brand during the process.

Details on the amount and ways of support remain between the two parties involved. Any further participation in shared promotions or materials can be discussed.

As a result, you can choose to stay with one event per sponsor and keep your brand identity intact. Or you can benefit from the fact that hackathons often give a chance of favoritism, especially when it comes to helping out their own. Many corporate sponsorship partnerships started this way.

Positive Affiliation

Corporate sponsorship can be mutually beneficial for the corporation delivering the support, and for the startup receiving the donation.

For instance, an organization which is mindful about the wellbeing of our planet can subsidize a Planet Earth Protection Program started by a local startup (Rainforest Alliance, Save the frogs, Wildlife protection), a celebration at a community center nearby, an educational institution, or deliver supplies for a local fair related to the wellbeing of the environment.

Many organizations are acknowledging the need for corporate social responsibility (CSR) and find common ground with smaller organizations. As a result, they join efforts and cooperate on various occasions and events.

The sponsor seeks to promote its brand by expressing goodwill and kindness to the needs of others. In the meantime, the organization which is hosting the event obtains a boost of credibility by sharing the stage with big companies by cooperating with them.

Negative Affiliation

No one wants to be bad news. As life is not always pink unicorns and smiles - it is vital for startups and sponsors to be realistic.

A good example is an audio released of Donald Sterling, owner of a famous LA-based basketball team. On the tape, he made racist comments about the legendary Magic Johnson. Sponsors and partners reacted quickly by pulling their support (Carmax, Virgin America, Mercedes-Benz, Chumash Casino Resort, Corona, Kia, Red Bull, Samsung). It resulted in NBA banning Sterling for life.

Good deeds are rewarded and bad deeds are punished - it is as simple as that.

In conclusion, pulling and suspending sponsorship after a scandal helps the innocent party to distance themselves from the storm.

Branding & Co-branding

Finding your brand voice and space is a term Max Lenderman defines as Purpose Marketing in his book “Brand New World and Sponsorship”.

Startups are constantly looking to gain visibility, getting their product the brand exposure they believe it deserves. For a brand-new startup, finding a corporate sponsor can often seem hard, and sometimes impossible.

One way into the spotlight is using someone who is already there. Researching startups can be a source of inspiration. It will help to understand what channels work better than others, and what type of sponsors invest in certain branding related activities.

A small tweak in the approach can align startups with their sponsor. Promoting shared values is the key. Another winning element is focusing on mutually respected commitments to core target groups or local communities. Last but not least is the timing - what can be done simultaneously that will benefit both sides.

Ever heard the expression: "One shot - two rabbits”. When two companies are partnering for one event, their cooperative efforts can be viewed as a way to save time, avoid double efforts and additional costs for both sides.

Most sponsors are choosing the types of startups or brands they support based on:
  • Ties to a product
  • Industry
  • Market
  • Trending (new types of media, growing social networks, digital channels, and platforms)

If for example, one of the brands is already established in the area or has an existing network and good reputation – the external company can benefit from the stable brand positioning of its local partner. The approach can also help both entrepreneurs and corporate sponsors to reach new target markets. Brand recognition can benefit from unique client entertainment opportunities and broader brand visibility for all brand supporters out there.

Behemoth companies can afford to target existing and new customers, as well as future target groups. A good example is Coca-Cola sponsoring virtual soccer stars in 'FIFA 18', targeting younger teenagers.

Co-branding is a great trend. Brands are coming together more frequently to innovate. Airbnb recently did this with multiple partners. The company uses sponsorship to grow. Here is the list of Airbnb’s partners which completely differ by industry and size.

Tax Deductions

Unlike a donor, a sponsor is not always entitled to a tax deduction for the support provided as they are receiving a commercial benefit in exchange for their support. Sponsors can claim a tax deduction for legitimate business expenses.

When a sponsorship meets the conditions described below, it may be a legitimate expense:

  • promotes a business
  • meets business purposes 'wholly and exclusively'
  • benefits a business 'wholly and exclusively'

If there is a duality of purpose, element or implication of a non-business benefit, then the cost is not allowed.

What can be claimed in VAT return or yearly tax return reports includes the following costs:

  • Entry
  • Membership fee
  • Brand equipment, clothing or accessories
  • Brand assets – a bicycle, motorcycle or car if you are sponsoring a racer
  • Facility expenses directly related to the event or activity being sponsored

In many countries, sponsors can benefit from positive tax implications. Tax advisers usually are able to pre-determine to which extent the contribution in focus is deductible.

Shadow dance as a growth element

Disrupting your own ideas before someone else does.

Startup founders as all of us have ups and downs but the key is to make it work in your favor. Entrepreneurs have a place where darkness lies, insecurity, fears & secrets sit, rejected pieces hide and undeveloped dreams stay wrapped in regrets and guilt.

A shift happens when the external focused and creative force turns inwards towards their analytical, sometimes judgemental and destructive selves. Meeting their personal shadows is not exactly pretty or fun, but it is where personal growth and unique transformation can come about.

Why are startups afraid of working with corporations

Entrepreneurs often perceive the involvement of corporate support as losing their identity, their voice. It is possible for those who approach partnerships by setting healthy borders first.

Starting a company can often be more expensive than entrepreneurs imagine. Most entrepreneurs are confident and proud people and seeking help seems to them as failing.

Some startup founders are anti-corporation. They believe that big companies can not understand their problems. Actually, all companies were small at some point. It’s like thinking that older people do not understand kids because they forgot what it is to be young. The truth is that many moments in human history repeat and people do remember the past.

Inexperienced entrepreneurs should know that sharing ideas with people who understand and help should not be perceived as a failure, a self-betrayal, escape or a trap. It can be viewed as a controlled mutually beneficial process instead. Smaller companies can learn a lot from the big ones.

Sometimes, especially in the beginning, negative emotions may prevail and feelings of fear, anxiety, and pride may take place. Less experienced startup founders would, in some cases, rather go broke and lose personnel than seek help especially when they are over obsessed with controlling every detail by themselves.

What's in it for the startups, entrepreneurs, academics, NGOs etc

When a startup needs help, they turn to investors, business angels, banks or government funds or family members and close friends.

Why? First, because people have trust in them. Second, because they are already there for a while. One great way to boost a business without offering equity is sponsorship. And because some of the biggest companies get involved in giving and supporting, it is often called 'corporate sponsorship'.

Imagine a situation when your bank declines your startup loan request. You turn to your family but they’re in the hole from sending your little brother to college and grandma needs help.

Parents, siblings, neighbors, and friends won’t be always there – they all have plenty on their plates. What if your own network is not enough? What would you do? Be creative.

How can you find help for your startup’s growth? Are you in need of an additional boost for some capital to finish the product prototype or this event you have been dreaming of to attract attention to your efforts? 

Look around. What do others do?

Think of getting a sponsor as an extra source of support and funding. Last year in the USA, corporate sponsors spent over 65,8 billion us dollars.  

Why are startups going to corporate resources? First, corporations do have resources fit for sharing. Second, corporations are starting to see the benefits of innovation and as it is harder for a smaller company to be flexible they seek a partner who is capable of doing it for them.

The result is beneficial for all parties involved. On one side sponsorships are helping startups reach their goals fast and on the other, it appears to be a much better return on investment than traditional advertisements.

Learning from each other and mutually improving

Cooperation is the key to success. Being on your own is hard. Trusting, delegating and partnering can be valuable skills. Big companies can provide valuable products, services, funds and expertise in areas where startup lack them.

By allowing help to be received and turned into something positive and beneficial, entrepreneurs must invest not only in research, development, and HR but in networking, analytics, and growth. For startups, bigger companies and corporate sponsorship can be a gold mine.

What about the big guys? Large corporations are searching actively for opportunities to join forces with startups.

A few years ago, IBM decided to expand its cloud business. It started sniffing around for partners and eventually decided to join forces with SoftLayer, a successful cloud infrastructure provider.

As it worked better than expected, IBM immediately decided to leverage the situation by creating the Catalyst Program, offering free tech services and mentoring for startups. As a part of the program, a startup can receive up to $120,000 in cloud services in one calendar year and save the money for hiring talented people.

What was in it for IBM? IBM started building on loyalty with these young startups and is partnering with them long term.

Startups can be valuable to corporations even if they don’t have huge customer bases or streams of revenue. Therefore as startups tend to be very loyal, corporations hope they can create lifelong relationships so these startups can grow with them.

Where to look for sponsors

Corporations often partner with accelerators, so becoming part of an accelerator will grant you access to these programs or provide you with access to their resources. The benefits may expand further — your startup could receive funding plus priceless connections in addition to products, services & exposure.

Other options are angel groups, a corporate venture capital firm as an arm of a corporation, co-working spaces, a family investment office, fund of funds, funding platform. A government office may invest in startups in their municipality, district, state, or country.

Other options are:

  • Hedge funds which are private investors for a wealthy individual or institution
  • Incubators bring in an external team to manage an idea
  • Banks
  • Micro VC
  • Private equity firms are investment management companies
  • Startup competitions
  • University programs
  • Venture capital firms invest in startups at various stages
  • Venture debt firms provide capital in exchange for a loan (plus interest)
  • A non-equity program invests in mentorship, office space and/or goods and services.

How to attract sponsors & keep them

"Call the prospective sponsors and send them a sponsor proposal with the description of your customers, demographics, marketing plan, benefits, mission statement and the sponsor fees," says Hollander. "Follow up with your prospective sponsors, finalize the agreement and collect the sponsor fees. Then repeat the process again for yearly renewals."

Are you ready to explore the idea of sponsorships? Here are eight power charged tips for success:

1. Know yourself, your team and your business
2. Focus on the needs of the Sponsor

Founders may know their business well but they often have a hard time finding common ground with a sponsor. Sponsors expect that by inviting them, the startup is already familiar with their mission, purpose, and goals. Wrong. Understanding someone's campaign, goal & vision is not always easy.  

Start conversing with the sponsor. First of all, it could be on social media channels or on their website. In addition, is your prospective sponsor a private or public company? Furthermore, what their efforts have been related to in the past. What do the press and customers say about them? Read reviews and all sort of material that you can find. Try to find an annual report. Finally, check your network on LinkedIn – a contact could possibly link you to a current or former employee of the company.

When building your concept through communication ideas, remember to narrow things down slowly. Ask about their goals soon enough, then offer a pitch and focus on how your little startup can help them accomplish their goals. Ever seen this little bird cleaning the teeth of a crocodile? This is what you should try as well – help.

3. Know Your Market & Key Demographics

Knowing your target audience is priceless. Look for possible crossing demographic points with your sponsor. If your key customer segment are kids and he is an elderly man with a heart problem – it can be challenging. You need to be creative.

The best way to find what you have in common is through research. Start with recent statistics and demographic research. Do an internet search for statistics on both target demographics. Start with exploring what your focus audience needs and hopes for. What they use or read, where they go, when, why, how often, etc.

4. Find a way for your message to be heard – build a strong Platform

Sponsors like to see that you have done your best in developing strong communication channels. In addition, the more extended reach you can offer to people, the better. How do you reach out to people – is it with a blog, press, video, email, social media post, etc?  

Sponsors also want to know about your team and their background. Therefore, the best performing startups have good group dynamics within the company. It is all about how people beat the odds and turn cultural differences into a source of inspiration and shared efforts.

If all that you have is a newborn startup, without any developed communication channels reaching tons of people, then turn to those who have them. Borrow credibility by writing about them – guest posting is a good start, borrow media posts by appearing in the comments and joint ventures.

According to the bestseller 'The 7 day' there is a modified version of the Pareto principle when instead of being 80/20 it becomes a new 30/70 rule which appears to be especially relevant. As a result, when you are too small, start with putting 70% of your efforts into expansion through external communication and networking, and 30% through your own platform. When you become bigger, do the opposite – twist the numbers and focus 70% on your platform and only 30% on external channels.

5. Tap on Value-Driven Marketing

Companies have a mission, vision, and values as humans do, they are just bigger organisms. If we imagine for a second that companies are corporate citizens, big and small, all uniting efforts while having a common noble goal, it can do magic. When a startup and a sponsor join efforts in a promotional partnership helping the community, they can make a bigger impact.

As a result, it ignites us all with purpose and passion. Therefore, people tend to buy from big or small companies if they give back and act as a part of the community.

In conclusion, align your brand with some positive work. Consequently, here comes the 'halo effect' which can be a beneficial long-term result for all sides involved.

6. Make a proposal no one can say "NO" to

The sponsor proposal is a vital element when it comes to sharing your vision. Before pitching your idea, you need a compelling business proposal. It is a mini business plan explaining briefly why your ideas deserve attention.

Focus on the value proposition and on what is possible. Especially relevant can be adding snapshots of your mission, vision, and values, demographics, marketing strategy, goals and media channels. Furthermore, for validation add something about your partners and advisors.

Consequently, finish with sponsor benefits, fees and the impact on the community expected.

7. What is missing can be borrowed

It is all about customer experience. If you want your message to be heard try to leave a positive trace behind you. All sponsors want is a good experience.

Therefore, if you don't have it, look around to see who does. Storytelling is powerful. Therefore, explain your past experiences and share how you met an influencer or you read this bestselling book.

Help the sponsor understand how you generate your ideas and who your sources of inspiration are. As a result, you are helping people around you to relate, if not to you, to your role models. It is called 'transference'.

If you surround yourself with wise and influential people, you will be perceived as the one who has lots in common with them on a subconscious level.

Do you remember when your mom used to tell you to choose your friends wisely because whatever they do will be judged on your own doing? This is the same. You should focus on sending the proper signals where you belong.

8. Integrity is not just a word

Most of all your brand will be well perceived when it projects integrity & credibility. Therefore, if you make constant changes it sends out the message – ‘’I am like a teenager - developing, still looking for myself’’.

First of all, know who you are what your brand stands for. Sponsors can try testing you to find out how you will react in a new situation. Furthermore, follow the etiquette. Deliver on time. Be there on time. In addition, stand your ground. And finally, all your future partners need to know is if you can be trusted to handle their brand image long term.

Here is a list of big companies that are doing the most to lend a helping hand to startups and new businesses:

No. 1: TOMS Marketplace

TOMS Social Entrepreneurship Fund is investing in up-and-coming startups that can make a difference. This big brand is doing a tremendous amount to help social entrepreneurs succeed.  TOMS has given 30 startups a ton of exposure to its audience. Among them are LSTN, Lxmi, Cotopaxi, Thrivemarket, Andela, Kairoshq, Artlifting, Change, Ava, Owletcare, Rubiconglobal.

To go in depth, check out this material by Bridget Hilton of LSTN Headphones Opens a New Window.

No. 2: Amazon Web Services

Amazon Web Services (AWS) has changed the game for many startups.

Startups like Airbnb (& Partners), Netflix, Slack and Spotify run their infrastructure in the Amazon Web Services (AWS) Cloud.

Mor success stories are Olioex, Getonce, Monzo, Crowdcube, Yoyo, Unmade, Starlingbank.

To go in depth, check out this material by Wade Foster of Zapier.

No. 3: American Express

American Express is a brand that truly cares about the success of startups and small business owners. OPEN Forum was among the small business owners with valuable content.

To go in depth, check out this material by John Hall of Influence & Co.

No. 4: L'Oreal

L'Oreal has been great to tech startups during the past few years through the phenomenal Women in Digital NEXT Generation program. Poshly was honored with the award for advancing personalization technology for the beauty industry, and through the program, we have been able to pitch decision-makers and work with executives to craft a roadmap.

To go in depth, check out this material by Doreen Bloch of Poshly Inc.

No. 5: Dell Center for Entrepreneurs

Dell Center for Entrepreneurs supports and sponsors startups. Ingrid Vanderveldt (Dell's EIR) and her team go above and beyond to help startups succeed. We have received help in the form of a credit line, a Dell concierge, a marketplace listing, pitches to enterprise buyers, infrastructure, scalability and even a trip to the Hamptons.

To go in depth, check out this material.

No. 6: Coca-Cola

Coca-Cola sponsors Startup Weekend, and it provides information and expertise to help startups get off the ground.  If you aim to start succeeding in a short period of time, it also offers a variety of assets in the realms of sponsorship opportunities.

To go in depth, check out this material by Andrew Schrage of Money Crashers Personal Finance.

No. 7: Tory Burch Foundation

Tory Burch has leveraged her own brand experiences and network to help up-and-coming female entrepreneurs gain access to influential advisors and resources that can help businesses get off the ground and scale.

To go in depth, check out this material by Lauren Perkins of Perks Consulting.

No. 8: American Airlines

American Airlines does a phenomenal job of providing resources to startups that typically don't have the cash flow to fly or have a marketing budget. Sometimes going to that face-to-face meeting or conference can be the difference between success and failure.

To go in depth, check out this material by Brent Beshore of Adventur.es.

No. 9: Indiegogo

Indiegogo makes every effort to help startups reach a huge audience, raise money through pre-orders and receive instant validation for their ideas and target markets. These are the three most important things to a startup, and they are three of the many benefits of a successful Indiegogo campaign. Indiegogo's open policies allow for maximum creativity.

To go in depth, check out this material by Andrew Thomas of SkyBell.

No. 10: Office Depot

Office Depot created a portal specifically geared toward educating and supporting small business owners and entrepreneurs. Small Biz Club provides tips and tools to help companies grow. They are also supporting two entrepreneurs by sponsoring our work to get them published.

Start your business with Office Depot (ODP - Get Report)  launched the service to help startups and small businesses get off the ground, get advice, mentorship and sponsorship.

To go in depth, check out this material by Kelsey Meyer of Influence & Co.

No. 11: Twitter

Twitter released its bootstrap design framework a few years ago, and it changed the way startups build websites. Rather than struggling to make their first sites pretty and automatically respond to smaller screens, startups can download free software from Twitter that makes a website look decent very quickly. They saved startups countless hours of work.

To go in depth, check out this material by Ryan Buckley of Scripted, Inc.

No. 12: Kaplan

Most recently, Kaplan launched the EdTech Accelerator in partnership with TechStars.  Kaplan gave entrepreneurs access to education technology, industry mentors, resources, sponsors and investment opportunities.

To go in depth, check out this material by Andrew Fayad of eLearning Mind.

No. 13: AFI

American Family Insurance has made a huge push to aid the startup community through the DreamBank program. It also provides workshops, networking events, mentorship and sponsorship for startups that are looking for guidance.

To go in depth, check out this material by  Heidi Allstop of Spill.

Check Valuer's Video

 
  • Sponsorship can be a powerful way to skyrocket a new business.
  • Corporations are looking for startups too. A little startup could be just what they need.
  • Take the next step.

Look into the future. Valuer is here to help investors and startups create relationships and build a vast network of established and newly hatched companies. 

First of all, if you group your efforts wisely, startup sponsorship can deliver results far beyond your expectations. Consequently, many find this to be an absolutely essential move for generating positive brand recognition.  

If you are not ready for the sponsor yet, at Valuer we can always offer professional guidance, support and help you put your best foot first.

In conclusion: Create value. Build networks. Build trust. Join efforts with others creating value. Learn and improve constantly. Choose your partners wisely. Association is perception. Perception is a reality.

 

 

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