Do you remember the last time someone disrupted the VC industry? As far as I can recall the “ah-ha” moment happened when Paul Graham started YCombinator, the first accelerator, and created a new investment model for funding early stage startups.
Ten years later, another industry is already being disrupted in a similar way based on the accelerator model – but for completely different reasons. Corporates are starting to adopt the accelerator model in new ways to help them stay innovative and quick in an ever-changing market.
In a time where a new $1 billion startup is born every month, challenging whole industries, corporates struggle to stay relevant. They understand the need for disruption, they just don’t really know where this disruption will come from. The widespread model for innovation in corporates, where you hire a startup scout that goes to industry events and speaks to a few startups that are doing something in the same field your company is in, isn’t enough anymore. It’s not the same as keeping your figure on the world’s pulse. These days change is happening so fast, that corporates just can’t afford to show up late to the party.
The solution that has been getting quite popular among big industry players who are getting involved in the startup ecosystem, through the accelerator model. According to the latest research by Future Asia Ventures, in the last three years more than 50 accelerators were launched. Companies like Intel, Qualcomm, Deutsche Telekom, IBM and even Coca-Cola and Target are jumping on the accelerator wagon. It’s a clever and non-traditional approach for big companies to stay ahead of the curve, which makes it in turns a growth hacking solution. The original accelerator model was meant to be an investment tool, but corporates are utilizing this unique approach to support multiple business goals from innovation and growth to marketing and sales.
Not all corporate accelerators are the same. There are actually a few models of operation that vary by the level of involvement of the corporate and by the value the program brings to the company.
The Directed Development Model
When a corporate houses startups who are relevant to their industry, and these startups do development work for them. The corporate gives them guidelines as to what they need, and the startups find innovative ways to get the job done with their fresh outlook on the development process. It’s a beneficial model for achieving incremental innovation.
A good example for this type of accelerator is the one Nike opened in order to encourage app development for their Nike+ platform.
The Business Development Model
Much like with the directed development accelerator model, the corporate usually hosts a group of startups from their respective industry or a complimentary field, and enables them to develop new solutions that might fit the corporate. Often the corporate ends up buying the companies so they can use their technology as their own. You can see this model in action at the Orange Fab accelerator and Citi accelerator.
The “Powerd By” and Plug and Play Models
With both of these accelerator models, the program is sponsored by the corporate companies and the management is outsourced to an expert. The ‘powered by’ model refers to one company that wants to stay close to innovation without investing in their own infrastructure and personnel. The Plug and Play model usually includes several companies that choose to unite and sponsor a program in their field. This collaborative model poses a challenge to maintain hands on involvement and an ongoing engagement with the startups. The ‘operated by TechStars’ examples include the Disney and Barclays accelerators, and the Plug and Play examples include the Media & Mobile program featuring companies like Samsung and Baidu as well as the Axel Springer digital accelerator.
The Pure Corporate Run Model
When a corporate company runs and operates an accelerator program on their own, to gain maximum unfiltered learnings and hands on engagement with the startups. The realization that empowering startup from various industries to grow and scale will ultimately help the corporate grow is the basis for this synergetic relationship. The model is based on the unique value the corporate can provide to the startups. The program can be targeting a wide spectrum of startups from different areas or it can be vertical and focus on a specific field or market. The Microsoft Ventures accelerator is a good example for a pure corporate run program.
All of these accelerator models are meant to support similar goals – to encourage innovation and growth, and allow big corporates to stay relevant and compete with young challengers. Some of the benefits from running an accelerator program are immediate, but the biggest payoff will probably be measured in the long run, as the program and the startup mojo that comes with it transform the whole company, not just the R&D department.
One of the biggest benefits is the affect an accelerator program has on the deal flow process. It pretty much takes everything a scout can do and multiplies it. The selection process for a new batch is an amazing deal flow enhancer, especially in entrepreneurial hubs. Instead of actively trying to find startups and identifying potential innovation or disruption, the startups come to the corporate as they apply to join the program. By keeping tabs on up and coming startups corporates get to experience innovation and out of the box thinking on an ongoing basis.
This exposure to hundreds and thousands of startups have a huge potential to influence more than biz dev and M&A teams, product teams can benefit from this exposure as well. Learning how to be more agile, adopting lean methodologies and improving the customer development process using startups as beta testers. The combination of engineers and startups can be fruitful for both parties.
If that wasn’t convincing enough, the corporate accelerator is also a booster for sales and marketing.
Having a selection of new technologies and services close to home, especially if they are complimentary to a corporate’s line of business, means they can offer their customers a more holistic solution. Being at the forefront of innovation has its benefits for reputation as well, it reassures customers that the corporate company is still relevant in an ever changing industry. This understanding improves trust which ultimately pushes out more deals.
The corporate accelerator phenomenon is at its infancy, companies are still trying to crack the model. Use cases range from a philanthropic PR stunt to gain positive exposure all the way to seeing the accelerator as a main strategic tool that can drive innovation and provide a competitive advantage.
The question remains: did enterprise companies crack the code for survival? Are corporate accelerators the new growth hacking for enterprise companies? We’ll have to wait and see.
This article was written by My Say from Forbes and was legally licensed through the NewsCred publisher network.