The relationship between startups and brands has never been simple. Brands want startups to help them with their social media presence, but too often they view it as a way to bolt on some generic sense of “innovation.” Startups who are looking to build something big aren’t dying to do spec works for brands, even for cash. Given the gap, deals rarely work out because the two simply can’t see eye-to-eye.

At least, that’s the sense I got last week at a panel I moderated led by digital agency Edge Collective. It was designed to teach brands how to best work with startups. Four NYC startups — Bre.ad, Sonar, Venmo, and Soshio — discussed their approaches to working with brands to an audience of ad agency and marketing pros. (Notably I was ecstatic to share the stage with three ladies in tech for a panel that wasn’t about being ladies in tech.)

For anyone who spends each day entrenched in startup-land, the panel covered incredibly familiar territory. Startups are lean, cash-strapped and time-constrained. If three meetings go by and neither side of the table is ready to take some sort of action, the partnership probably isn’t going to work.

But most importantly, startups care about maintaining their user experience above all else. They don’t want to cram brands into every crevice of the app–we saw that happen in the early days of the Web, and it was horrible. Google even punishes pages which serve too many ads above the fold in its search results now. Startups are happy to talk to brands, but they’re not an extension of their creative agency.

All of this was no surprise to me. That it came as news to the brands in the audience was.

The first question from the audience was a sneering dig at their business models. “You say you don’t want money from brands, so how do you think you’re going to make money then? Do you just hope you’ll get lucky like Instagram and make a billion dollars selling to Facebook?”

“Because that’s not a scalable way to build a company!” I wanted to scream. Even though we’d just spent 40 minutes discussing the nuances of the topic, the attendee simply couldn’t understand why anyone would turn down money from a brand. The panelists’ faces dropped, as if to say “Were you even listening?”

Then I realized that even though they ride the same trains, frequent the same restaurants, and even show up at many of the same parties, the startup panelists and the agency audience members live in two different worlds.

The big agency holding companies–Publicis, IPG, WPP, and Omnicom–acquire innovation, which (in most cases) adds to their bottom line and keeps the technology out of the hands of their competitors. But they rarely integrate it in a way that truly adds value. They are massive warehouses of parts that don’t work well together; in fact they probably compete with each other at times. But they are, on the whole, profitable, sustainable businesses that will be around for a very long time.

For a minute I questioned the entire startup philosophy I’d come to know since joining PandoDaily. Why don’t we talk about business models at New York Tech Meetups? Why do we champion all these unnecessary apps that lose money? Maybe half of New York’s startups are just frivolous wastes of time, money and energy destined to implode. Maybe I liked celebrating failure because I secretly want lame startups to die.

Then I remembered the beauty of Silicon Valley irrationality. Most startups fail, and that that’s okay because the successes–when they happen–are huge, and they can change the world. Sarah said it best:

What makes the irrationality of Silicon Valley so powerful is that people in the thick of it have no concept that they’re being irrational… There’s a very fine line between delusional and confident, and it’s usually drawn with the benefit of hindsight.

This is why every city in the country, hell the world, wants to grow their own version of Silicon Valley. Innovation leads to wealth creation, which leads to a thriving community.

But the talk of fostering innovation is so common that it’s hard to tell what’s window dressing and cheerleading, and what’s real. Often the sense is that if the city talks about it enough, innovation will automatically happen like magic. Meanwhile, cities that actually have strong innovation ecosystems eye-roll and say if you have to keep talking about it, you probably don’t have it.

That sensibility, for better or for worse, has also been infecting our country’s established consumer-facing companies. It’s like half the country’s CEOs waltzed into the office last week and asked, “What’s this innovation thing I’ve been hearing so much about lately? Can we get some of that? Assistant, go find some innovation and bring it to me.”

That statement could have easily been made ten years ago, so it’s incredible to see the same attitude reflected in the “Why don’t you want our money?” question last week. A business person can’t understand why a startup would turn down money simply because they are scared of tainting their user experience.

Katie Smith-Adair, a VP at the ambient location app Sonar, broke it down clearly. The company gets approached by brands regularly and is very, very picky about the ones it works with. Sonar has agreed to a small handful of partnerships where the goals of both sides were aligned. For example, the company worked with Wired magazine to create a customized app experience for its holiday pop-up store last year. There was no money exchanged in this partnership, but Sonar benefitted from appearances in the magazine, around the store, and on the Wired website.

These success stories are rare because, as is the case with many early stage consumer Internet startups, Sonar’s main goal is user growth. Too many times, a brand comes in and implicitly expects a startup to act as an extension of the its creative agency. Some want a custom solution that’s never been done before. Others want a tried-and-true solution that has worked in the past. Some have no clue what they want, they just know they want “innovation.”

Foursquare is often held up as having the strongest brand experience within its app. Aside from specials from the local vendors listed in its system, the company allows brands of any kind to have a presence on its app. If you choose to follow a brand, their content may show up in your activity feed and you may unlock a special badge from, say, the Wall Street Journal or the History Channel. This integration is simple, easily repeatable, and therefore takes very little work on Foursquare’s part.

It’s not that startups don’t want brands’ money. It’s that they want to take it their way.

[Illustration by Hallie Bateman]