Corporate accelerators are hot business. Every self-respecting enterprise seems to have initiated a creative hotbed where starting entrepreneurs are coached in making their young businesses a success. Google and Microsoft are obvious candidates to step into startup acceleration, but what about corporations such as Telefónica, Volkswagen and Barclays? Is there a real business case behind these endeavors or is it just a short-lived hype that will be over in a few years?
Three advantages of accelerators for corporates
Basically, there are three main reasons why companies would choose to invest in helping startups in the first place:
- Return on Reputation: with the right exposure, an accelerator program can convince stakeholders of the company’s commitment to stimulate the local economy, help young entrepreneurs and spur innovation both within ánd outside the company.
- Return on Culture: startup accelerators are usually characterized by an extremely inspirational atmosphere. By involving the company’s employees in projects with startups, and appointing them as mentors or by organizing events such as innovation workshop or pitch nights, elements of this atmosphere transfers onto the corporate culture which inspires employees in terms of innovation and entrepreneurship.
- Return on Investment: in accelerators, companies usually provide startups with a pre-seed investment in exchange for a minority stake (5-15%) in the company. When the startups grow into flourishing businesses, this equity may provide a nice financial return for their early investors. However, companies should be hesitant to see financial ROI as the core motivation for venturing in startup accelerators. While success cases of startups making it into hugely successful businesses with big IPO’s certainly exist, they are very, very scarce.
These three types of “profits” compose the base of a solid business case in favor of corporate accelerators. But there are clear prerequisites for success to bear in mind before engaging with startups. The key to achieving return on reputation, culture, and investment lies in a strict and transparent selection process, high-quality execution of the program, generous crosspollination and involvement of the company’s employees, and effective marketing and communications.
Considering engaging in an accelerator?
Here’s where to start:
An accelerator may not be viable (or even relevant) for every business and in every market. Based on our experience, companies interested in starting an accelerator had best start with:
- Conducting a feasibility quick scan to see if there is a viable opportunity for an accelerator. Explore the local market, describe the startup landscape and check the pulse for internal support of the idea.
- Putting together a business plan in order to determine if there is a clear business case for the company to engage in an accelerator by exploring the three areas of potential return. By considering the needs of customers, thinking about and talking to marketing in order to take the return on reputation into account, and by picturing how the company would organize a venture like this to realize return on culture. And incorporate a financial chapter that includes an overview of costs, potential risks ánd returns.
Telenet Idealabs: time to stop talking & start building
Leading Belgian telecommunications company Telenet launched its accelerator Telenet Idealabs earlier this year, based on a positive outcome of our preliminary study. The final selection of 10 eager startups recently took off. An entrepreneurial journey of four months lies ahead of them, and by the end of the year they will pitch for follow-up funding and a place in the growth program.
Chosen out of 450 applications, the startups are focused on the innovation domains apps & games, e-commerce, media & entertainment, networks & systems, and social innovations. The majority has a positive environmental and/or social influence such as unlocking local value and improve neighborhood ties with mobile and web applications, or paper saving through clever digital solutions. Check out Telenet Idealabs' infographic: The 2014 Accelerator Batch.
Finch & Beak was closely involved in the business plan design of Telenet's accelerator program and is part of the team of advisors that guides Telenet Idealabs on a tactical level. If you want to know more about starting a corporate accelerator, please contact Jan van der Kaaij, managing partner, at email@example.com or call +31 6 28 02 18 80.