How Corporate Accelerators Help Startups

What is a corporate accelerator?

A corporate accelerator is a form of early-stage accelerator that’s sponsored by one or more organizations. The sponsoring company benefits by getting access to promising ideas, talent, and ventures in their wheelhouse, and the founders benefit from the organization’s resources and expertise.

When you think of the lightning-fast agility of the startup versus the plodding pace and byzantine complexity of the large corporation, you don’t exactly marvel at the potential innovation that sparks from pairing the two. You think of a cheetah versus a sloth, a peregrine falcon versus an American woodcock, an English Mastiff versus a greyhound. But the number of corporate accelerators grew from just three in 2010 to nearly 50 in 2015, with likely a hundred-plus in operation today.

Why do corporations run accelerators?

Most corporations eventually hit an innovation plateau and struggle to grow beyond that point. Even with a customer-centric culture, it’s difficult for large companies to remain on top for extended periods of time. Only about half of the current S&P 500 is projected to still be in the index a decade from now.

The fight to remain relevant in a changing world is often waged through an even greater focus on innovation. According to Deloitte, 50% of corporations that have launched accelerators are within the technology, media, and telecom industry; 23% are in financial services. These numbers may reflect an awareness of the importance of partnering with outside startups to innovate, since telecom and financial services have some of the highest rates of churn among members of the S&P 500.

What does a corporate accelerator do?

Corporate accelerators are cohort-based programs that typically run from three to six months. They usually provide seed funding and office or lab space, and give founders access to executive mentorship and some company resources. Many, though not all, are run virtually.

Accelerator partnerships

An organization can either run an in-house accelerator or outsource to a partner. In a partnership model, which accounts for about half of corporate accelerators, the partner handles the operations. They do the marketing, select the startups, and recruit the mentors.

Techstars is probably the best-known example of an accelerator partner, with a track record of 83 corporate accelerators in 12 different countries. Their Corporate Innovation partnerships have included Disney, Target, Qualcomm, Sprint, and Virgin Media. Corporations can join as a sole partner or as part of an industry-focused consortium.

The STANLEY+Techstars Accelerator has a theme of AI in Advanced Manufacturing, the Techstars Starburst Space Accelerator focuses on space technology, and the Comcast NBCUniversal LIFT Labs accelerator is involved with connectivity, media, and entertainment. Many of these are run virtually. (Maybe we can expect an “AOL-Time-Warner-Pepsico-Viacom-Halliburton-Skynet-Toyota-Trader-Joe’s” Accelerator?

One example of a consortium is the Techstars Music Accelerator, which has about 300 mentors from the world’s largest music and technology companies and investors. Techstars collaborates on the selection process, and the three-month program ends with a Demo Day.

Another example of a corporate partner that has a global scale, with a presence in 18 global cities, is Collective Campus, which was started by a frustrated intrapreneur. They recruit mentors and sponsors and review applicants, send a shortlist to a two-day bootcamp or pitch event, then select the companies who will join the corporation’s 13-week accelerator. Startups receive ongoing mentorship, education, workspace, and an opportunity to meet people in the corporation’s internal and external network.

Capital Innovators works closely with corporations to define problem sets and technologies that align with the future of their industry. They select the startups and host a public or private challenge on behalf of the corporation to identify next-gen technologies.

Which organizations are most successful with corporate accelerators?

Organizations that make a smoke-and-mirrors show of innovation without actually supporting their own intrapreneurs or external startups will probably have unsuccessful, short-lived accelerators.

On the other hand, organizations that already have experience with altering processes and timelines and removing obstacles for intrapreneurs have an advantage when starting a corporate accelerator. Intuit’s Scott Cook points out that “a culture of experimentation can only work when it’s put in place by leaders. The innovators can’t do it.”

The program director and staff at a corporate accelerator should be empowered to make fast decisions and bypass the traditional modes of operation at the company, similar to an intrapreneurial venture.

What are the advantages to corporate accelerators?

Advantages to organizations

A corporate-run accelerator gives the organization a broader view of trends, threats of competitive disruption, and new opportunities. In an Innosight survey of 300+ executives at firms with $2B+ in revenues, leaders seemed to underestimate threats and opportunities. More than half expected the greatest threat to come from competitors from within their own industries.

The risk is that the organization doesn’t hire experienced entrepreneurs to manage their accelerator, or that they don’t give it enough freedom from the organization. With a partnership model, the organization still gets some insight, the potential of returns, and a pipeline of talent acquisition. They provide mentorship, and may be able to take a more active role in some partnerships.

Advantages to startups

The organization may provide an upfront investment and additional stipends. And startups can benefit from the mentorship of senior executives and the resources a corporation can provide, particularly for a specific industry.

Depending on the nature of the accelerator, the program may offer a fast track to selling the startup’s product to the sponsoring company, or an opportunity to integrate or bundle the product with the corporation’s product line to accelerate go-to-market plans. Founders may also get visibility with the organization’s customers and partners.

Simply having the big brand’s name attached to you is valuable in itself. Everyone wants to de-risk, so having an association with a well-known brand name can be useful.

Considerations for organizations and founders

Considerations for organizations

Techstars advises organizations to not prioritize the product or tech over the team. They also warn that running an accelerator requires much more agility than executives are used to.

The procurement process in most large corporations can be byzantine. Don’t subject the startups in your accelerator to the typical pace of the organization. Have a clear understanding of what forms and processes they’ll need to streamline. It helps when the leadership of an organization already has experience with intrapreneurship, which also requires significant leaps in speed.

Considerations for founders

As with independent accelerators, founders need to take a close look at the equity situation. Not every corporate accelerator takes equity. More corporate accelerators are now offering funding grants without requiring a percentage of equity, which is very compelling to a startup.

For those accelerators that take equity in the participating companies, it’s also worth considering if you’re comfortable having that organization on your cap table. For example, if you operate in a space with a small number of very large potential customers, and the corporate accelerator is run by one of those, it may reduce the willingness of their competitors to buy from you.

Program manager

The corporate accelerator’s program manager should have experience running their own startup, mentoring other startups, and contributing to a startup ecosystem. As with independent accelerators, the program manager is key.

Support

Continuing support is another factor to consider. A McKinsey survey of C-level and VP/EVP-level executives showed that traditional companies aren’t consistently giving the startups they’ve invested in the kind of support that can help those startups gain traction. For instance, a fourth of respondents said the parent company had not leveraged any aspects of its scale and reach to benefit its startup investments. And only 25 percent strongly agreed that their large enterprises had a framework to deliver benefits associated with scale, mainly owing to mismatched expectations or different work styles.

Examples of corporate and university accelerators

Airbus BizLab is a global aerospace accelerator that offers a six-month program for early-stage startups. BizLab is also open to other areas, as long as the concept has a potential use case for the aerospace industry. They offer access to Airbus coaches and experts (in technology, legal, finance, and marketing), free co-working space, learn and act sessions, access to prototyping and test facilities, support staff, free hosting, and a Demo Day with Airbus decision makers, investors, customers, and partners. They have an equity-free cash funding option.

The AT&T Aspire Accelerator is for ed-tech startups creating solutions to improve the online learning experience. Enrolled companies get an initial investment along with a stipend to cover costs during the 4-6 month program. They also get access to a dedicated Entrepreneur in Residence and AT&T’s senior executives, mentoring from leaders in education and tech entrepreneurship, UI/UX design services, and opportunities to participate in education conferences. Out of 40+ startups who have participated, 70% were women-led companies and 51% were minority-led companies.

Bayer G4A is Europe’s first accelerator run by a pharmaceutical company. Bayer has supported over 150 digital health companies, resulting in more than 30 direct collaborations. G4A is for early-stage startups that have an MVP, as well as growth companies with a product in the market. They give founders the opportunity to get their solution in front of Bayer executives, and the winning companies can collaborate with Bayer teams and present at an annual event.

The Bridge by Coca-Cola is a commercialization program for startups that acts as a bridge between the entrepreneurial community and major global markets. The program lasts seven months, which is longer than normal for accelerators. They provide the startups with in-depth marketing training, access to experienced mentors, and an opportunity to pilot and license the startup’s product to the company and its partners. The program doesn’t require any equity from the startups.

The Illumina Accelerator has qualities of an incubator and is perhaps the most hybrid-y of the hybrids. It combines the longer residency (six months) and the access to lab facilities that are common to an incubator, with the equity and curriculum typical of an accelerator. Like an accelerator, they speed the time to market and, separate from any investment, they take 8% of common stock. The curriculum is custom for each company, which is more like an incubator. And the access to Illumina sequencing systems and reagents, genomics expertise, and fully operational lab space is standard for a biotech incubator.

The Jones+Foster Accelerator Program helps early-stage, student-led companies through those decisive first six months. The most unusual eligibility criterion is that you must have participated in one of the University of Washington’s startup competitions, or have been involved in other entrepreneurship activities at UW. They do not take equity, and they assist with early-stage expenses (up to $1,000 per startup team), plus up to $25,000 in follow-on funding, as long as certain milestones are met.

Innovation opportunities for startups and corporate sponsors

As the examples above illustrate, corporate accelerators can be launched in nearly any industry and market segment. Given the benefits they provide to corporations seeking a new innovation channel, and for startups seeking funding and access to partner resources, this model of startup support is likely to continue growing in the years to come.