Similar to seed accelerators, corporate accelerators provide a structured programme and financial support for startups to build their businesses. The corporate accelerator count is growing rapidly. In my recent study, I tracked corporate accelerators worldwide to understand this trend more deeply. Since 2010, I have tracked 69 companies launching accelerators. More than 50 of those launches took place in just the past three years.
The threat of disruption from startups is the main motivator behind these launches. Large multinationals are increasingly convinced an accelerator is the answer to innovation. Companies in digitally vulnerable sectors have been most active in setting up these programmes. In fact, the financial services, telecoms, technology and media sectors account for nearly half of all corporate accelerator launches.
While the majority of corporations locate their accelerators at their headquarters, usually a US or European city, some which chosen to go abroad. Cross-border plays are becoming popular. This strategy has the benefit of providing exposure to developing markets for a relatively low capital investment compared with western markets. For example, a closer look at Asia shows that 13 corporate accelerators have been launched in Hong Kong, Singapore, Bangalore, Kuala Lumpur and Sydney. Seven of the 13 have been launched outside the company’s home country.
In other cases, an accelerator is a smart and efficient way to increase brand recognition among clients and talent in a new market. An otherwise staid and conservative company can suddenly look appealing to technologists and millennials once the accelerator banner goes up.
There is no doubt that a corporate accelerator acts as a strong node in the overall start up ecosystem. Corporations can encourage entrepreneurship and risk-taking through a supportive community of mentors and pilot programmes. They also serve as a filter and testing ground to select viable and promising new ideas in their sector, providing investors with a pipeline of opportunities for follow-on funding.
On the face of it, launching an accelerator is a good and reasonable attempt to explore disruptive business models that might one day go mainstream. But these are still early days for corporate accelerators and certain questions linger. Many venture capitalists (VCs) have been critical of accelerators, citing them as a coddling enabler of “wantrepreneurs” or pointing out that very few of these programmes have carved out a strong enough reputation to warrant consistent following.
The entrepreneurs themselves are sometimes weary of associating with a single company in their chosen sector, for fear they may lose opportunities to do business with others in the same arena. In some cases, accelerators present a very real dilemma for entrepreneurs who take financing from a prospective client corporation.
There is also the question of sustainability and whether corporate accelerators will continue to inject capital into batches of startups, when the exit cycle can be seven to 10 years or longer. While VCs exist for the sole purpose of making such risky investments, corporations may not have the capital, expertise or patience to maintain this level of investment activity. Can corporations warrant the accounting and reporting requirements that come, quarter after quarter, with minority investments?
Perhaps the most vexing question of all is whether the accelerator is the most appropriate model for innovation. Corporations must align their resources with their broader corporate strategy, and those wanting disruptive ideas and innovation should certainly take action. It is good to see large companies taking some risk and experimenting with new ideas. This is a long overdue trend for the blue chips.
But, I suspect the next three years will bring a more thoughtful and sophisticated approach to innovation. We are in the midst of a me-too herd mentality driven partially by fear of disruption and partially by media hype about the rare unicorn start up success stories. The first movers in the accelerator launches have a great opportunity to pause at the two or three-year mark and self-assess. Does the programme have a clear mission? Have we defined what success looks like? Have there been any concrete success stories or contributions to the overall corporate business? For those considering an accelerator launch, understanding a company’s risk appetite, competitive pressures and internal capabilities is a sensible way to approach the project. This does not have to be a drawn-out exercise, but it can make the difference between a fruitful innovation programme and flavour-of-the-year expenditure. An accelerator might be the best model for one company, while a lab or hackathon might be better for another.
When it comes to innovation, one size does not fit all.
Our report – Corporate accelerators: a growing force – relied on interviews with more than 25 corporate accelerator programmes and VCs. Participants included firms and companies based in Australia, Germany, Hong Kong, India, Israel, Italy, Singapore, the UK and the US. The report is available at www.futureasiaventures.com