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Why tech start-ups should knock on Unilever’s door

24 Mar 2014  |  Dominic Mills 
Why tech start-ups should knock on Unilever’s door

Unilever says it sees engaging with tech start-ups as the future of marketing - and is now backing seven new ventures in the UK and pairing them with its brands. Is this the start of something big? Dominic Mills finds out.

A common complaint made by UK tech start-ups is that, compared to the US, the infrastructure to get them from idea to marketplace just isn't present.

Tech City is a help - it provides the mentoring, peer-to-peer and other informal support networks that are an essential part of start-up life - but the real difficulty is finance.

In the UK, tech start-ups say, banks don't understand tech and won't lend because they have no assets to secure the money against, and the venture capitalists are neither plentiful nor knowledgeable enough. That's why so many go to the US or end up completing a trade sale early on.

But there is an alternative, and it's called The Bank of Unilever (or, hypothetically, The Bank of Just About any Multi-national with Huge Media and Marketing Budgets).

Unilever's recent announcement that it was backing seven tech start-ups, and pairing them with brands like Hellmann's, Vaseline and Surf, tells some of the story.

But to me, it looks like just a start. From what I can tell, Unilever more than any of its peers (perhaps with the exception of Coke) is all over this particular area of digital. And I don't just mean digital as in social media, viral videos on YouTube, vloggers like Zoella and stuff that's a bit out there, but in broader areas such as content and content distribution, mobile and connectivity.

My fellow columnist Ed Owen describes a Unilever mobile initiative for a detergent in India, which gives you a pretty good idea of the sorts of things it is doing.

The paradox, by the by, is that some of the most cutting-edge stuff is taking place in the least developed markets.

For companies like Unilever, product innovation is hard and expensive, and mostly achieves small incremental gains."

You can read the official details of Unilever's initiative here and more about the start-ups it is supporting with $100,000 in cash, mentoring and a marketing pilot using that company's technology.

Of these, I'm guessing that the cash is the least part of it; after all, what self-respecting start-up doesn't burn through that kind of money faster than you can say 'black-box algorithm'?

No, the real advantages for the start-up are two-fold. First is the access to Unilever's top marketing staff and their thinking. It's all too easy for tech start-ups to become obsessed with the technology and be blind to its application. Understanding how customers like Unilever think, and what they really want, can only be good for them.

Second is the chance to put a Unilever project on the corporate CV. When it comes to attracting more funding, that's like putting honey out for the bees.

So what's behind Unilever's drive into tech-led marketing? Well, as Jeremy Basset, Unilever's strategy and new ventures director, puts it: "We see engaging with tech start-ups as the future of marketing."

Another way of putting it, and I have heard people from Coca-Cola talk like this, is to say that for companies like Unilever, product innovation is hard and expensive, and mostly achieves small incremental gains.

Innovation in and around marketing, however, is very different. Not only does it offer the chance to build deeper and more lasting relationships with consumers, but also differentiates Unilever and its brands, and opens up the possibility of faster growth.

In a nutshell, in today's complex business environment, tech helps Unilever to be faster and more nimble. And, in emerging markets, where there just isn't the same traditional media infrastructure, it gets them to where the consumers are.

The trouble is that no-one, not even the VCs who specialise in tech, can really predict what will work. To pursue the tech route successfully, Unilever has to dance with a lot of start-up partners, some of whom will turn out to have the tech equivalent of two left feet.

But there's no quicker way to find out than by trying a lot of different routes and, crucially, keeping the cost of failure affordable. As Basset points out, failing with a blockbuster £10m campaign is not affordable, and there probably isn't much to learn other than not to repeat the error.

But failure with one or more $100,000 investments is of little consequence to the likes of Unilever, and the opportunities to learn and improve are manifold.

Looking at the companies Unilever has chosen to partner with, it's interesting that one is specifically Africa-oriented, and another in China - both significant growth markets for its brands. But exactly what they offer, and how Unilever will trial their technology-well, the fact that they're right on the cutting edge makes it too difficult to say. But it's not hard to imagine how, say, it can tap into African music to connect with the continent's youth cohort.

What I can be sure about, however, is that this is just the beginning. Indeed, Unilever has for some time associated itself with The Bakery, a Tech City accelerator that specialises in linking start-ups with brands - in this case the likes of Knorr and Persil.

But just as tech companies will be all over Unilever looking for the keys to the bank, its peers - whether P&G, Colgate, Mondelez or Pepsi - should be looking hard at what Unilever is doing, and then bank-rolling their own tech start-ups.

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