Are Corporate Accelerators Better for Startups than Traditional Ones?
In 2014, Sphero made the critical decision to take three crucial members of their team to California for a four-month commitment to a corporate accelerator with Techstars and Disney. It didn’t quite sit well because they had already made this commitment in 2010 when they had gone through the regular Techstars accelerator. Additionally, they were netting $20 million in sales, which, in their own words, did not qualify much as a “start-up”. So why did Sphero make this decision?
Sphero had been building round robot toys for a while. While they were not aware what was in store for them with the Disney accelerator (the BB-8 character was still a sketch in Disney’s books at this time), there was already a synergy with the robots Sphero were building and what Disney was able to provide—mentorship and help with the characterization for the toys. So, Sphero made the call, packed their bags and prepared for the biggest turning point in their start-up journey.
A year post the accelerator, Sphero managed to raise $45 million from Mercato partners and a subsidiary of The Walt Disney Company. They used the money to ramp up sales for the BB-8 droid and for product research, IP development, and global expansion.
Difference between a regular accelerator and a corporate accelerator
The concept of accelerators was introduced by Y Combinator in 2005, while the corporate accelerator model came about in 2012 when Techstars partnered with Microsoft to manage their corporate accelerator.
The most obvious difference between the two is the objective. The regular accelerator was built to help start-ups with the right resources and guidance to drive growth. The corporate accelerator was built to plug corporates with new and upcoming technologies via cherry-picked startups. Conversely, at least in theory, the model helps startups find a welcoming client or distribution partner in a rather supportive environment.
Corporate accelerators are committed to mentor companies through about 30 corporate representatives (two-three per startup). They also pony up relevant workshops and AMAs like any other accelerator.
What you get on top of a regular program is the opportunity to participate in corporate meet and greets. Like the ability to fly to the company headquarters in different countries and have the chance to immerse yourself in the company culture—a chance that is usually hard to get. You also get a committed corporate team of two persons championing the startups by pushing for pilots, making introductions, creating visibility internally and by maintaining accountability from both the parties.
Corporations can act in two capacities that should be considered on why your startup might pick a corporate accelerator instead of a regular one.
Corporate as a client: Accelerators like the Brandery provide startups with the opportunity to work on pilots with big brands such as P&G. For a startup, this can be invaluable, especially since attempts to access the right people in big corporations such as these usually fall on deaf ears.
Corporations such as P&G are keen on implementing new technologies and innovations to gain the first mover advantage. They have the budget and the market share and hence, an opportunity to do a pilot with them can be the holy grail for a startup.
Corporate as a distributor: This is where large corporations outsource to well-known accelerators. The objective of the corporate is to find technologies that they can potentially leverage and integrate into their current solutions portfolio. Techstars is a big player in these types of accelerators.
Let’s take one of the recent one, the Rakuten Techstars accelerator in Singapore. Rakuten interests ranges from online marketing and e-commerce, to securities all the way to sponsoring sports teams like FC Barcelona. This is why, the 10 teams that were picked in the program ranged from advertising to gaming. There was an opportunity available for any of these startups to become a part of the Rakuten ecosystem.
Which type of accelerator should a startup pick?
To answer this question, you have to be clear about what your goal is and what you want to achieve at the end of the accelerator.
If you choose to pick the corporate accelerator, ensure that you are picking the right one. As mentioned earlier, accelerators like Brandery give you the opportunity to work with large corporations in the capacity of a client helping you understand how corporate entities work and how your solution could fit into their business model. This type of insight could be valuable when you are trying to obtain the bigger ticket clients.
With the Techstars and Rakuten accelerator model, the corporate is looking to implement and, possibly, adopt the technologies that are part of the startup. This might mean having access to the network that the corporate has established, especially if you are new to a market all the way to, possibly, white-labelling the service and, possibly, selling your technology to the corporate.
Understanding the commitment that can come with a corporate accelerator is important. While there are success stories, if your technology does not align with the corporate goals, the pilot fails or there is little motivation among the corporate teams that are involved in the pilot, then having a plan B is critical.
The teams have to be ready to explain to investors, with a straight face, why the corporate gave a cold shoulder to the pilot or why it was unsuccessful or delayed.
Plus and minus
Normal accelerators and corporate accelerators come with their respective pros and cons. While picking one seems like an overwhelming decision, understanding your objective from an accelerator is critical to make the experience a valuable one for you and your team. However, since it’s not always in your hands, having a plan B and being able to explain your investors on why the results from the accelerator were not per the expectations is always a good idea.