Written by Ron Yerkes:
Entrepreneurial ecosystems around the world are experiencing a rise in demand for accelerators that provide resources to promising startups, and corporations are embracing this new model for sparking innovation. The reason why is self-evident: accelerators make it possible for large, otherwise slow-moving organizations to discover new technologies that can help bring new initiatives to market faster. This capability is especially important in industries like aeronautics, food and agriculture, telecommunications, and transportation that are otherwise resistant to change.
Experts have written over the last few years that we may be in the midst of an accelerator bubble. The reason? With more than 230 independent accelerators around the world, it can be challenging for a single one to offer a value proposition that is unique and compelling enough to founders—especially for the best of the best players who may be hesitant to give up equity in their companies in exchange for a short-term boost in resources.
That’s why, in the immediate term, we’re going to see some big changes to the way that large companies are running their accelerator programs. And driving these challenges will be a stronger demand for more efficient accelerator models that tackle the following three pitfalls.
As you could imagine, we could talk about this topic for hours—so we’ve divided our insights into two parts. Part I focuses on details that often fall through the cracks: accidental resource drains, pitfalls from average startup applicants, and disruptions to organic company workflows. In Part II, we’ll focus on program management pitfalls.
Here’s why corporate accelerators fail (and what to do about it):
Failure Point #1: The Accidental Resource Drain
Solution: Replace Your Internal Program with Open Innovation Model
Corporate accelerators, internally run programs that provide seed funding and other resources (such as educational opportunities) in exchange for equity can be a resource drain on otherwise well-oiled corporations. On the one hand, these programs connect corporations with new technologies, potential partners, and even acquisition targets. But from a logistics point of view, they’re both expensive and challenging to maintain: Big companies aren’t exactly a fast-paced environment that attracts startup partners. Not to mention, corporations are often detached from the level of high-touch, ongoing support that young companies need to succeed.
For these reasons, internal accelerators take a lot in terms of resources and person-power to manage. They require heavy R&D, extensive prep work, and a high-touch approach to program administration. And if any detail falls through the cracks? You risk the longevity and success of your entire corporate innovation efforts: You may not be able to attract the right startups to your accelerator–even worse, you may waste time looking in the wrong places for the right early stage companies.
“Why take the risk?” asks Xoán Martínez, CEO at Kaleido Ideas & Logistics, a global logistics operator with offices in Spain, Portugal, Angola, South Africa, China and India that’s been in business since 1976.
For the past seven years, the company has invested in R&D around global towards sustainability and emissions reductions in its logistics operations. In addition, Kaleido is aiming to reduce the costs of offshore energy generation, improve security around the international traffic of goods, and apply robotic solutions to warehouse logistics. The launch of a corporate accelerator was a natural next step for the corporate innovation leader. But rather than building a program in-house, Kaleido sought to work with a partner with expertise in the transportation and logistics market, access to a pipeline of industry-leading startups, and a network of corporate partners with a commitment to pooling resources and running an accelerator program, together. This coopetition model is what corporations and leaders in the startup ecosystem refer to as a true “open innovation model.”
“We are highly specialized around our own R&D and have no idea about how to manage or run an accelerator properly,” explains Xoán. “We knew that trying to launch a program on our own would potentially involve a steep learning curve, wasted resources, and failure as a result. We identified RocketSpace as an ideal partner that could help us save a lot of time, avoid potential waste, and ensure that our efforts remain focused.”
Failure Point #2: Applicant Pools of Average Talent and Companies
Solution: Actively Approach First-Choice Startups with Win-Win Partnership Ideas
As Xoán points out, Kaleido’s decision to pursue an open innovation accelerator model was about more than simply saving time. Above all else, the company wanted a mechanism to partner with cutting-edge startups.
“We are not just waiting for startups to participate in the program,” says Xoán. “We’re not just waiting for them to apply. We’re looking for candidates that we can actively invite, so that we can get to the testing and implementation phase—to start generating results—much faster.”
Kaleido’s decision is the result of a larger industry trend that corporate accelerators are witnessing—the fact that it is much harder to attract corporate innovation partners than initially meets the eye. That’s because the best startups aren’t necessarily looking for corporate accelerators; they’d rather focus on building great products and attracting customers — get traction in their market. The idea of potentially giving up equity in their companies is often unappealing. Plus, if you have a great idea, funding isn’t typically the primary hurdle for a startup — it’s proving product-market fit. The most promising startups are ones that would rather work with multiple enterprise leaders than just one.
“It’s not about a press release, and it’s not about providing funding or even taking equity,” says Xoán. “What we need and what RocketSpace gives us is the ability to stay close to our market, so we can find the most cutting-edge tech solutions related to transportation and logistics.”
Failure Point #3: Too Much Distance from Entrepreneurial Ecosystems
Solution: Keep Startups Plugged into Their Existing Support Systems
Targeting startups in key entrepreneurial hubs in Silicon Valley and elsewhere, Xoán and his team knew that it wouldn’t make sense to take these young companies out of the environments in which they are already thriving.
“For us to approach the startup ecosystem worldwide would be too much of a complex process, as we are outsiders,” says Xoán. “And why aim to remove startups from their existing communities, in which they are already thriving?”
At the end of the day, what startups truly value is the ability to stay plugged into an ecosystem. If you ask startup leaders about their biggest success drives, you’ll hear a common answer over and over: “It’s the relationships.” So why take startups away? Sure, you’ll keep these young, promising companies within the walls of your organization for 3-4 months.
But what comes next? That’s where typical accelerator models experience some major continuity gaps.
“It’s critical that we work together, alongside our startup partners,” says Xoán. “At the end of the day, our intention is to generate real tests and advancements to our core business. We think about it in terms of working with, and alongside, startups rather than making them work for us.”
Originally posted by Ron Yerkes on RocketSpace