Y Combinator launched the modern startup accelerator in 2005, and the “corporate accelerator” came into existence shortly after in 2010, basically replicating the same model within a corporate environment. A decade later there are hundreds of corporate accelerators around the world, with more launching each year.
A few have seen noteworthy successes, but many programs struggle to produce meaningful returns for either the corporate or the startups involved. As a result, 60% of corporate accelerators fail within two years, and partnerships result less than 1% of the time (Source: CB Insights).
However, corporate accelerators have the potential to be powerful tools that jumpstart growth, increase efficiencies and open new revenue channels for everyone involved. For startups, the benefits include a boost in credibility, referenceable brand-name customers, tapping into established sales channels, access to corporate assets, and mentoring. For corporations, it’s PR-worthy external innovation, market intelligence, cultural transformation, reviving sales channels, and new revenue streams.
As part of the research for Designing the Successful Corporate Accelerator, Jules Miller, Partner at Mindset Ventures and KF Class 22, interviewed dozens of experts in the space and had the good fortune to tap into the incredible Kauffman Fellows network. Here is a small sample of their practical insight:
1. Make Corporate Accelerators Part of an Innovation Portfolio
“Don’t just say I want an accelerator,” says Jenny Fielding, managing director of Techstars – New York City and The Fund (Class 23). “Say I want to infuse a culture of innovation at our organization and we’re going to do a few different things. We’re going to try an accelerator, we’re going to start a small venture fund, we’re going to do some intrapreneurship, or spin out some companies. Really just challenge yourself to try a few different types of programs.”
The only certainty in investing, especially in high-risk areas, is that it’s nearly impossible to accurately predict winners and losers on a consistent basis. So, just like a financial investor, the best way to reduce risk and improve performance is to diversify your innovation portfolio. There are many possible corporate innovation tools, and selecting only one format puts enormous pressure on very high risk activities to succeed, when they should be failing regularly.
In addition, what works at your particular company may surprise you, and having a mindset open to experimentation is critical. “There is no blueprint,” says Fielding. “Every company is going to react in a slightly different way, and you’ve got to figure out what works for your company. You may find that an accelerator is actually not the right thing, but wow, internal entrepreneurship is blossoming.” You’re not going to know what works at your organization until you try a portfolio of innovation initiatives.
2. Activate Sales Channels with Specialists
Though there are many reasons for running or participating in an accelerator, one major driver for both corporations and startups is sales. Even if more mission-oriented motivations are stated, it’s important to remember that both startups and big companies are for-profit organizations with a fiduciary responsibility to increase shareholder value. One of the best possible outcomes from an accelerator – for both parties – is sales.
In fact, startups usually select corporate accelerators over other options due to the potential to partner with that corporate and/or go-to-market together. However, activating incumbent sales channels with disruptive technology products can be a challenge, particularly when the sales skillset and process is very different. One solution is a new role on innovation teams: the commercialization lead. The advocacy for this role comes from Andrew Goldner, co-founder and CEO of GrowthX (Class 21).
“A classic mistake that we see corporations make, which seems like a very logical decision, is to assign top salespeople from inside the company to take new things that result from innovation initiatives to market themselves,” says Goldner. “But top salespeople at big companies are used to doing business in a certain way, utilizing the brand halo that’s been established over decades and sometimes centuries to sell in the same way that they’ve always sold with a product that already has a market and a track record,” he explains. “They know how to sell a commodity, and they have systems and processes in place to grow incremental revenue, not introduce something that’s disruptive and new to a market where learning precedes revenue. And their KPIs are misaligned with the process of taking something disruptive and new to market.”
Having a dedicated person on the accelerator team who understands how to sell disruptive technologies can lead to stronger commercial results. “We now advocate for corporates to hire the role of commercialization lead,” said Goldner. “This is what we would refer to in the startup world as the market developer, or what Mark Leslie refers to as the Renaissance Rep.” This is an emerging trend that can have a big impact on the results from an accelerator or other innovation program.
3. Make it Personal
Founding a startup is usually an all-in way of life, and most independent accelerators do a good job of cultivating community, personal development and real relationships in their programs to align with this culture. The corporate world is typically more formal and less personal, which often permeates the culture of their accelerator programs and is a missed opportunity.
“This might be unusual, but the personal component is something that we added after a few cohorts because the startups wanted it,” says Cristina Ventura, founder of VenturaXVentures and chief catalyst officer at luxury fashion and retail brand The Lane Crawford Joyce Group (Class 25). She runs The Cage accelerator, which works with just two startups per cohort with the goal of securing a commercial contract by the end.
“For example, we have a yoga studio in our building, so we offer a yoga session or meditation every morning. Our startups said please do this to every cohort because it has been one of the best parts of the program. We put a bit more holistic and personal growth experience into the program so it wasn’t only about professional growth, with a volunteer trip to SiliconBali.io.”
“For a corporate to work with start-ups there are always potential challenges and opportunities to learn from,” says Ventura. “But if everybody works with the same purpose, which for us is to enhance the customer experience and get a commercial agreement, then we can work together toward the same goal. It’s important to have a common understanding from the very beginning with very clear KPIs of what we intend to achieve and what they want to achieve as well at a personal and professional level.”
For executives in big corporations, innovation is usually part of their job. For startups, it’s their entire life. The best accelerator programs incorporate a human touch with intentional professional and personal development opportunities.
4. Manage the Portfolio like a Professional Investor
It is common for corporate accelerators to stop their efforts after the program is over, and based on our research for the book, the number one reason that corporate accelerators fail to meet their strategic and financial goals is this lack of follow through. Setting up a post-program support infrastructure, similar to the function of a platform team at a traditional VC fund, is highly recommended.
The formal platform role became more popular over the past 10 years, and now there are 800+ people in these roles at VC funds. Many are part of a growing community at VCPlatform.com. “If you think about an early stage company, the things that they want help with as soon as they close a funding round are primarily talent and customers,” says Lindsay Knight, partner at Chicago Ventures (Class 23) who manages their platform. “The other major areas that I spend time on are marketing, PR, and branding – or helping companies sell their story.”
“And then the last part that is a little bit softer, but actually has an important long-term impact, is network and community…Venture has been a network driven business, so the more touchpoints we have, and the more relationships we build, the more successful we (and our portfolio companies) will be over time.” This is a thoughtful and effective portfolio management approach in the form of a VC platform model. Many venture funds are doing this, but most accelerators are not…and should.
There are several ways to bridge the worlds of big companies and startups, but the corporate accelerator remains a constant…and only seems to be growing more and more popular. It’s easy to fall into the common traps that cause corporate accelerators to fail. By sharing data, insights and case studies from innovation leaders around the world in this book, I hope to demystify the world of corporate accelerators and demonstrate a path to success. Corporate innovation is hard, but the potential reward is worth the effort!
Interested in learning more? Add Designing a Successful Corporate Accelerator to your reading list.