Answered: All your burning questions about corporate accelerator

(That you were too afraid to ask your boss)

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There is a bubble. I am not talking about valuation of startups but about corporate accelerators. There seems to be one popping up every other day. It reminds me of the days when corporates were in a spree to appoint digital officers.

Following is a database of corporate accelerators. It shows 71 active accelerators as of August, 2016.

This is a not comprehensive list and miss some of the well known accelerators out there.

What is driving the gold rush for corporate accelerators?

The key reasons are:

1.Fear of Missing Out (FOMO): This is a major reason driving the rush to setup corporate accelerators. History is littered with companies that failed to be ahead of the innovation curve. No company wants to be next ‘Kodak” or “Nokia” in their industry.

They do not want to be a victim of the tidal waves of innovations happening in their space.

An accelerator program offers a front row seat to some of these innovations in their industry. A successful accelerator brings in the startups that are developing category-defining products. Corporates get to understand how the innovation landscape is evolving.

2.Culture: A major cultural challenge for large corporates is to make employee behave like an entrepreneur. To take ownership and risk. To create and execute. Create entrepreneur within a large organization.

Corporate accelerator exposes the employee to the culture of startups.

This exposure may rub off some of the entrepreneur spirit in the employees and start a cultural shift. The hope is to spur a sense of “entrepreneurship” within the company.

3.Partnerships: It may open up opportunity of future strategic partnerships. Most of the startups fail. The statistics is not different for corporate accelerators. But startups do become a success once in a while. The corporates then will be in a good position to develop strategic partnerships.

4.Corporate Venture Capital: Accelerator fits in well with a long term venture ambition. Corporates can invest follow on funding at successful startups. Creating a venture capital tied up with an accelerator creates a “signaling” risk.

What is Signaling? It means if a startup can not raise the corporate funding, it may have problem raising funds from other investors. Despite the downside, accelerators provides an early glimpse of successful startups. This can act as a good deal flow generator for venture funding.

Many corporates are sitting on excess cash reserve. Some of these reserve are invested at startups through an accelerator programs.

So, with all these good intentions, backing of corporate resources, what can go wrong?

Actually, quite a few:

1.Quality of Startups: It is difficult to attract the best of the startups from the eco system. Not all startups join accelerator programme. Those who do, may prefer to join prestigious accelerator like Y combinator, techstars, 500 startups etc.. The advantages of these accelerators is the independent nature of the program.

Startup joining a corporate accelerator may end up aligning themselves with a particular corporate. This may alienate other large players in the the industry.

2.Leadership: Corporate Accelerator may tun out to be a side project of a veteran in the company. A person who has worked in the corporate for a long time. Managing the accelerator is just an extra responsibility. Quite often, corporates do not put their A player in charge of the program. This results to poor management of the program.

3.Eco system connection: To be a success, accelerator has to be in close connection with the startup eco system. But corporate accelerator may not be embedded in the eco system. This creates a gap in the quality and understanding of the motive of other players in the system.

The good news is the above challenges are internal in nature. Organizational changes can help address them. Some corporates also run the accelerator with independent operators (like techstars, Nest etc.) to make the program independent and aligned with startup eco system. Barclays accelerator program with Techstar is a good example.

This brings us to the future of Corporate Accelerators. I see three major trends going forward:

1.Vertical: Accelerators will be more vertical focused. Generally, all purpose accelerators, are a serious drain on the resources of the corporate. I foresee more vertical focused accelerators. Banks running accelerators focused on fintech. Automobile companies running accelerators focused on transportation technology etc..

2.Funding: More corporates will launch venture capital as part of the accelerator program. They will start leading the initial funding round of the startups. This is a natural evolution of the journey. It also fits in with the purpose of investing time and resources behind accelerators.

3.Marginal Accelerators: Small, marginal accelerator programs run by corporates will shut down. Accelerator needs to be a central part of the strategy. It can not add value to the corporate culture or learning unless it is at the core. So, an accelerator program, managed as an aside will die.

Corporate innovation is a controversial topic. And there is a lot of sarcasm about corporate’s attempt to follow the route of startups. Here is an interesting one:

But, corporates must crack the code for innovation despite the bureaucracy inherent in such organization. Without a culture that fosters risk taking and the “fail” mindset, corporates will not be able to pivot to entrepreneurship. Accelerator program provides a tool to make those changes.

Anand from CB Insight commented that:

If you think of yourself as Godzilla, it is likely that King Kong is not going to kill you. It is actually a death by a thousand cuts.

Unless a corporate learns the agility of nimbleness of startups, it will die of thousand cuts. Most corporates take too long to realize this fact. But those they do, find accelerator program to be helpful.

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