Written by Justice Kelly, Corporate Innovation Manager at Chinaccelerator & MOX
Welcome to the era of corporate accelerators. Before 2010, the “corporate accelerator” did not exist; and yet, eight years later, over 120 corporate accelerators have stepped out onto the world stage. Many entrepreneurs look to corporate programs as dream opportunities, whether or not the programs have actually found any success. Some corporate accelerators have been very successful, like the Disney Accelerator, whose 2014 batch of startups were all able to either raise additional funding (to a total of USD 104 million) or were acquired post-program. However, as we discussed in our last article, the land of corporate accelerators is not all sunshine and rainbows; many of these programs contain flaws that promise inevitable failure, both for the corporate and the startups involved.
When corporates engage with startups without a properly-run corporate accelerator, chaos erupts. A company cannot simply throw millions of dollars at their accelerator and expect success: PWC’s Global Innovation 1000 data demonstrates that there is no statistical relationship between the amount of dollars spent and any metric of success. Money in the bank is not going to guarantee victory, but a corporate accelerator that employs these five tactics can immensely boost its chances of success.
Tactic #1: Alignment of Goals
For corporate accelerators to succeed, they need to have a unified set of goals that are aligned with the goals of their startups. A 2015 report from the World Economic forum on corporate innovation stated that the most critical decision for corporate accelerators is the selection of goals for the program. Every other component of the program is then guided by these goals, including models, strategies, vertical preferences, and more.
If the goals between the two entities are not aligned, failure is inevitable. If a corporate’s objective is to run a self-sustaining, profitable accelerator, but the startups are many years away from turning a profit, both parties will fail. If a corporate purely wants PR exposure and events, but the startups need rapid experimentation cycles, expert leadership, and high-tech facilities, then both parties will fail. It is vital to ensure that the goals selected for the accelerator align with the goals of the startups involved. They do not both need to have the same goal, ie, media exposure or revenue growth; but, their goals need to be compatible.
Tactic #2: Buy-In from the Business Units
In the fictional series, Billions, finance-wizard Bobby Axelrod said it best: “Whenever you can, put a company in your mouth.” A hands-off, negligent approach is not going to make a corporate accelerator, or any business, successful. There has to be a buy-in to the accelerator’s success from many of the corporation’s business units, in terms of both money and time. If none of the other business units are vaguely interested in what the accelerator is doing, the accelerator will be hard-pressed to drive any worth-while change.
These various business units can help to create better goals, models, and strategies for the accelerator, as they are the groups who truly know what directions the corporation needs to drive growth and change in. They can also pile more accountability onto more decision-makers, thus ensuring that the accelerator will not be a lost cause. A corporate accelerator, just like any accelerator, takes a few years to develop best practices; if it is fully-backed by the business units who are creating value for the corporation, the accelerator will have a fantastic chance to thrive.
Tactic #3: Selection of Accelerator Model
Corporate accelerators can be very helpful for startups, as they act as a guide for startups to navigate the internal corporate landscape. However, when many corporate companies first tried setting up their accelerators, they copied the models of traditional accelerators. This was a disaster, as a 2015 MIT study concluded that most corporate accelerators cannot be self-sustaining, profit-generating models like traditional stand-alone accelerators. It’s also important to note that many traditional startup accelerators fail as well, regardless of their connections with corporates. In order to be successful, corporate accelerator models must be unique to their company, industry, and their strategic objectives. Perhaps their models are premised on having startups come into their ecosystem to experiment with and test the corporates products and services. Or, perhaps their models are premised on bringing in promising startups who, after acceleration and optimization, could be acquired to improve and enlarge the corporate’s offerings.
Take, for example, companies like Microsoft, whose accelerator model is set up to battle-test and improve Microsoft products. Microsoft’s startups engage with, break, and find flaws in Microsoft products and services, acting as rounds of massive-scale testing and experimentation. Microsoft believes that if their tech can be used flawlessly by the creative forces behind tech startups, then their products and solutions are ready to be used at a grand scale by corporations. Barclays, on the other hand, utilized their corporate accelerator to indirectly increase market size and influence adoption rates for their products and services. The Barclay’s accelerator would invest in fintech startups in developing markets, like DoPay in Egypt (who offers digital banking services to consumers without bank accounts) to break into markets that were previously inaccessible. Other corporate accelerators, like SAP’s IoT Accelerator, offer their customer base and platforms to their startups, giving the startups an instant marketplace to validate ideas, while expanding and improving SAP’s services at the same time. These companies selected models that are radically different to the financially-driven models of traditional accelerators; they chose models that would directly support their startups while enhancing certain aspects of their own businesses.
Tactic #4: Sourcing and Vetting Procedures
The next vital step in the process is to actually fill the accelerator with startups — and not just any startups — the right startups. Many corporations believe that the best way to source for startups is to put up an application online. There’s only one problem with that: the best entrepreneurs and startups don’t have the time to scour the web for calls for innovation, or are unable to adequately pitch their ideas online. At Chinaccelerator, for example, only 1 out of 400 companies who apply online to join the accelerator are accepted — an acceptance rate lower than that of Harvard’s. You don’t want four college kids with an idea scribbled on a napkin; you want a world-class startup.
The best way to source and vet startups for corporate accelerators is to partner with experts who know what they’re doing. Renowned VCs and traditional accelerators are fantastic at this. Chinaccelerator, for example, goes through hundreds of applications a year, and once the startups have been selected, continues to vet and scrutinize their startups both during and after the program. Partnering with vetting experts, who have seen hundreds of startups succeed and fail, is the best way to ensure that the majority of startups who join the corporate accelerator are high-caliber and can meet the corporate’s goals.
Tactic #5: Localization
Now that the corporate has selected its goals, involved its BU’s, forged a befitting model, and sourced its startups, it must partner with local experts. It is essential for corporates to have global goals, yes, but corporate accelerators must think and act locally. They must find the balance between what they can do internally, and what they need to outsource to the true regional experts and industry leaders. China, Southeast Asia, and many other developing markets are brutal to companies who don’t know what they’re doing. Many startups are only able to become successful because they are able to localize and fit the needs of their chosen markets — corporate accelerators are no different. If a corporate accelerator can find that magic balance between internal competencies and external partnerships, they immeasurably strengthen their chances of success.
Some programs are successful in the West, where they have developed identities and a number of successful portfolio companies. But when these one-size-fits-all programs are picked up and dropped into foreign and unique markets like China, they fail. They don’t adapt their programs or strategies for new markets, don’t outsource to others what they lack expertise in, and thus fail to thrive.
This is where local partners and experts become so invaluable, both for the corporate, and for the startups involved. These companies are able to bring in their knowledge of and experience with the local business environment, governmental policies, and more. By partnering with local experts, and by adhering to these four other tactics, a corporate accelerator can give its core business the edge it needs to innovate and succeed.
Thank you for reading, and stay tuned for the next Chinaccelerator corporate innovation article!