Corporates and Startups: Hug of Death or Smart Co-operation?

April 11, 2017

Co-operating as a startup with a large corporate: best idea or big mistake? In his graduate research, Laurens van Dort – founder of startup ‘fairf’ – stated his critique on the matter. Yet, he connected fairf with a large, traditional family company: Baril Coatings. I asked him about his choice for a co-operation. Jeroen Duijghuisen and Teun Duijghuisen – Operational and Commercial Director of Baril – also tell their side of the story.


Laurens, how would you describe fairf in one tweet?
“A paint brand of modern time: no stress at the hardware store, but paint and tools on your doormat the next day.”


Tell us about
fairf.
“Fairf is a sustainable paint brand that handles things a little differently. With us, you buy your square meters of color, without having to worry about which paint and tools you should choose. It means that you will find the usual choices of paint, but also a total package of painting tools, color advice, free paint samples and inspiration. Besides delivering a qualitative product, I mostly focus on the service around it, which should be personal, simple, and environmentally and socially conscious.”


Who are fairf’s customers?
“In general of course everyone who wants to paint a wall, but I specifically focus on two target customers. First, the design-oriented individuals who pay a lot of attention to decorating their home and are looking for quality. On the other hand, pregnant women who want to paint the nursery responsibly.”


How does fairf contribute to the environment and society?
“First, our paint is sustainable and responsible: there are no chemicals, heavy metals, parabens or chemical solvents in the paint and we use oil from recycled scrap wood. Secondly, part of the profits goes to charity and we managed to build a small color-blending factory in a favela in Rio de Janeiro.”


What does the revenue model look like?
“Customers buy fairf on the website. What’s interesting, is that qualitative, sustainable paint is simply more expensive than the chemical variant. This may be a threshold for consumers. To reduce this, I send free paint samples and deliver the tools for almost cost price. Imagine that a customer goes to Gamma to buy a cheap can of paint – for example twenty euros. He will have to pay another twenty euros for brushes, tape, trays, et cetera. I outweigh the difference in price of the paint as much as possible by sending the tools for a give-away price. I do this because the environment affects us all.”


With who are you starting a co-operation?
“With Baril Coatings, a large family business, which is active in Europe and the US. Baril delivers high quality products with a sustainable perspective. They are mostly operating in the coating industry: bridges, rails, stations, ships and large buildings. The profile of the company suits well in our vision on handling the earth with care. Most recently, they put solar panels on one of their factories, and they put a lot of effort in keeping their carbon footprint low.”


What does the co-operation mean?
“They deliver the paint that I sell on the website of fairf. Baril is investing significantly in my startup, but I find the scalability and a good co-operation more important than the invested money. For corporates, it is often hard to think outside of their business model. They have been running the same business for a long time and have traditions that are tough to break. At the same time, they are open for innovation and understand that they need to attract a different expertise to establish this. That is what makes this co-operation so interesting. They focus on the product and I offer the modern business model.”


How did you get in touch?
“The idea behind fairf was set when my team and I entered the Student Battle of Accenture. We won and were given the opportunity to set up our project in Rio de Janeiro. We executed the idea to help two Dutch artists in Brazil with a local paint production for their art projects in slums. In this way, we stimulated the local economy and complemented the art projects with a social goal: cheering up poor areas. Around that time, I called all the big paint brands in the Benelux with the question: do you want to join? From the first contact, Baril was enthusiastic and a great co-operation was born.”


Why did you start doing this?
“I was standing in the hardware store and had a lot of trouble deciding. After I finally chose a color, I had to decide on the paint and tools. Where it used to be important to have a strong technical base for your company, these days it is much more about branding, the consumer experience and design. I did not find this in the current paint brands.”


So, what did you do?
“I stepped into the paint market without a lot of knowledge about it, which gave me a new perspective. I am attracted by the customer experience and the communication, like the free color samples – made with actual paint – which customers can order on the website. I also enjoy a new project: I want to create hundred ‘fairf spots’ in the big cities in the Netherlands, where customers can come and see their color in real life. For example in a café or furniture store. In this way, I connect inspiring entrepreneurs with each other and give the customer the opportunity to experience their color offline.”


Why did you specifically choose each other?
Laurens: “Because of the shared attention to sustainability. I think – just like them – that is the future. Baril Coatings understands how I look at their market, they accept it and they stimulate innovation. Besides that, the personal co-operation with Baril is great – I don’t have to go through three management layers to get to an agreement.”

Jeroen: “Fairf has taken our attention. It gives substance to our societal ambition to contribute with our core quality – producing paint – to a higher cause: bring color to places where this is not a matter of course. We were closely involved with the development of fairf from a societal concept to a valuable brand with a societal cause. Because of this involvement, co-operation was a logical next step. We give substance to one of our societal ambitions and besides make our way into a market where we as Baril Coatings are not active yet.”


You choose for a co-operation that you first criticized?
“The nuance is that in my graduate research I criticized a co-operation between corporates and startups from the day of foundation, where corporates take over startups completely to renew their business model. In that research, I conclude that this attracts many problems at the side of the startup, because of slow decision making and a complicated management system. The startup is swallowed whole by the large company – I call this the ‘hug of death’ – where they should have been managed to work parallel to the corporate. Because of this, I made the deliberate choice with fairf to start my own business first for a year, before starting a co-operation. In this way, we can work together without losing our own identity.”


A co-operation was already planned at foundation?
“Yes, when I started fairf, I already had a co-operation with a large paint manufacturer in mind for later in the process. To accomplish a large impact on the paint market, a co-operation was needed. These kinds of ambitions are, in the traditional market, almost impossible to reach for a startup by himself. From the start, I aimed for a co-operation instead of a take-over. I adjusted my business model accordingly back then.”


Which adjustments did you make?
“I built fairf in such a way, that it would be open for a co-operation with a large paint brand. Look, I could have decided to buy four or five paint machines myself and decorate a warehouse to produce my own paint. I deliberately rented paint blenders, purchased paint and built a brand around customer experience and color. The paint is the connection to start a co-operation.”


What are your expectations of the co-operation?
Laurens: “The best side of a co-operation like this one, is that it makes fairf incredibly scalable. Scalability is an obstacle that many startups face. Where we stand today, I have the opportunity to accelerate quickly. I want to bring my brand on the market within a year, first in the Netherlands and later internationally. Baril can facilitate what I, as a startup, can’t: development, production, distribution and research.”

Teun: “Our goal is to extend fairf together to a strong brand in the consumer market. A new perspective on paint and color. Not just selling a can of paint, but let people experience color. Color has a lot of impact on people, more than we often acknowledge. By lifting the experience of color to a higher level, we want to challenge people to brighten up their lives and by doing this with fairf, also brighten up the lives of the ones that need it the most.”

 

Laurens and his team won the Student Battle of Accenture in 2015. Find more information here.

Curious about the graduate research that Laurens did about co-operation between startups and corporates? Read his thesis here.

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