Why do startups expect me to pay for a PoC?

When we started these series of articles the objective was to focus 100% on the real questions innovation managers have and that we face daily. Paying for proofs of concept is the oldest question in startup corporate collaboration and even though arguments differ, everyone agrees that budget is critical for commitment.

The traditional thinking is that the mature player is exposing itself to test a potential solution and for that reason it should not carry the risk alone of investing in the partnership. In practice, it sees the PoC as a sample of the product that does not generate value for the organization.

However, the reality against free PoCs is that “both parts must put skin in the game” to generate commitment. According to a recent study of Fintech Solutions most of the interviewed startups shared that PoCs are part of their commercial process, putting MVPs at the same level.

But startups referred that once a PoC is free the risk of “non completion” or a slow follow up increases significantly. The problem with the free trial is that it does not generate sufficient commitment even if the opportunity is there. Lastly, founders referred that no startup wants to profit from PoCs, that “would be a non-sense”, and that budget is really a matter of 1. Committing the client and 2. Cover the costs.

The issue around PoCs and paying or not for those tests resides in three causes:

1. Innovation has distorted the concept of PoC - If you are testing a new concept or new reality you should really name it proof of concept. But in most cases, you are just exploring what the startup can do for you, because you already know that the technology works and that the business drive is, to a reasonable extent, confirmed.

2. Homework should not be done in class – mature players tend to leave to the PoC execution the scope definition and the business case of what they intend to do. Doing this exercise while running the PoC tends to increase the risk of dispersion, execution period, analysis of success and, inevitably increases the costs for both parts.

3. Reluctance to advance to MVP – in the innovation process, managers tend to look to all the steps as mandatory. You ideate, you test, you pilot and then you run a MVP. The issue is, startups are way more mature and are just waiting for the corporate to realize this potential. If you do your homework correctly, your team and your board will feel comfortable advancing for a MVP and for a reasonable budget.

Fintech Solutions works with business and innovation units in small exercises that can precede a project with a startup to guarantee solid foundations for the partnership. From focus group to small surveys or interviews there plenty low budget strategies to sustain the need to invest in the partnership.

On another level, we support innovation managers to strengthen their innovation pipelines and building testing budgets to explore along the year in exploratory exercises.

In summary, avoid free PoC and work to have a budget for innovation and to guarantee that previous work sustains productive innovation. Most of all, comprehend the startup’s side and collaborate on alternative tests to validate business fit.