5 Reasons You May Not Want to Apply to That Corporate Startup Accelerator
In the beginning, there was Y Combinator.
For those that don’t know, this fabled startup accelerator grew into a household name by investing in mega-successful companies like Airbnb, Quora, and Reddit. From there, other accelerator programs soon sprung up behind it. Names like Techstars, AngelPad, and Capital Innovators have become familiar among eager startup founders, many of whom see these programs as a crucial step toward success.
But as they grew in popularity, some of the accelerator programs saw another opportunity to leverage a thirst for innovation and “startup-y-ness” from enterprises like Disney, Target, and Sony, just to name a few.
These massive companies have started launching or sponsoring their own accelerator programs, often in partnership with others, offering knowledge and mentoring in exchange for equity.
Now, founders are applying to these corporate programs with sky-high expectations, and forking over a share in their company — potentially for all the wrong reasons.
So, let’s pump the brakes. Here are 5 reasons you may want to reconsider that corporate accelerator application.
1. The “added value” offered by a corporate accelerator is a purple squirrel.
One reason these corporate programs are popular is that they offer an implied added benefit: startups that go through the accelerator will gain an “in” with the headlining corporation. They’ll have a chance at fast-tracking their brand-new product to market, backed by a massive enterprise.
To be honest, this is rarely the case. It’s the purple squirrel of startups.
The primary incentive for enterprises to run accelerator programs is not necessarily to find their next major investment or product to deploy. Instead, it’s often to learn how startups operate and capture some of that “startup-y-ness” for their own internal innovation efforts. To an executive enterprise team, this world is cool and hip — and they find it fascinating.
There’s a bit of a marketing angle for the enterprise, too. By getting involved in the startup scene, the corporation stands to gain the favorable image of a modern, innovative company that hasn’t lost sight of the hunger and drive of a younger organization.
The enterprise has all this to gain and a nice share in the startup to boot.
In reality, very few large enterprises can buy and deploy a Minimum Viable Product to their customers. So those deals that the startup founder is dreaming about when they join the program, rarely materialize. For that reason, founders may want to temper their expectations before participating.
2. If you’re in it for the insight, consider some cheaper alternatives.
There’s no big, breakthrough-promising secret bestowed upon startups in corporate accelerators.
While it often seems like the logical step for a founder desperately searching for the next move, seeking knowledge from someone who’s where you want to be doesn’t have to mean forking over a bunch of money. If you are going to part with 6% of your company equity — that’s what most accelerators take — don’t do it in exchange for knowledge or curriculum.
In an early stage startup accelerator, the curriculum is 90% the same regardless of who is sponsoring. And that content is not hard to find.
If you’re willing to put in some time and creativity, Google searches will yield virtually all the information that you’d get in a startup accelerator curriculum — everything from how to structure your business, to how to market your product. For free.
The key benefit for any accelerator program is in the human network you are building and mentors you meet. But, like most things in life, there be dragons…
3. Connections made with enterprises often evaporate post-accelerator.
Founders who apply to a corporate startup accelerator usually presume they’ll gain access to a robust network of decision-makers within the headlining enterprise — Sony, GE, or Disney, for example.
That may be the case, and sometimes, that’s enough to warrant a startup’s participation. But once an enterprise is done with an accelerator program, that network may eventually disappear. It may be after six months, or a year, but programs like these rarely result in a lasting relationship between a founder and an enterprise.
One reason is executives frequently get promoted, transferred, fired, or moved outside of the applicable realm for the startup. Another is that most corporate-backed accelerators last only about 18 months, as opposed to traditional ones that go on year after year and create stronger ties among their alumni network.
There are countless ways in which ties can be cut, so don’t get too attached to the idea of a long-term relationship with an enterprise mentor.
4. If you’re in it for the networking, consider traditional methods as an alternative.
If you choose to put your startup through a corporate-backed accelerator, do it with the intent to network aggressively — as I mentioned above, that’s where the real value is.
But even if networking is your primary driver, there may be other ways to make those contacts without giving up a percentage of your company. That coveted insight you’ve been trying to get your hands on, whether that’s insider knowledge of your industry or info on how a product was developed, may not be as out of reach as you think.
Just imagine, for example, that NASA had a startup accelerator program. It may be that you could only get some piece of data by going through that program. But if you could get that data by scheduling a couple of meetings, or networking your way into a conversation with a leader at that massive organization, then you should do that instead.
Give yourself a shot at getting some ins the old-fashioned way before “investing” in connections that could be made through traditional networking. You may not only be able to keep that 6% equity in your company, but you could save time as well.
5. Get this: a startup can succeed without accelerator programs or venture backing.
Don’t let the numbers fool you. Startup accelerators grade their success on the number of participating companies that get funded and the amount of funding they receive. The things that really matter — longevity, commercial deals, revenue, traction within the industry — don’t always factor into those impressive statistics.
That’s like celebrating crossing the finish line as soon as the starting gun goes off.
The promise of funding might be reason enough to enter an accelerator program for some founders. But even then, a traditional accelerator will probably make more sense, especially if your product isn’t yet readily available or well-defined.
In fact, although corporate accelerators may seem tempting — and there are some great ones out there — founders should know what they are trying to accomplish over those 3 months, and identify something specific they can get out of them.
At the end of the day, if you can build your startup with little dilution, and allocate your equity in ways that are likely to return the most value, you will always be ahead of the game. Startup accelerators are a key part of the innovation landscape, and they are a valuable stepping stone for many founders. And while there are many amazing programs, backed by great companies, it is critical for founders to go into a deal with their eyes wide open.
