Similar to seed accelerators, corporate accelerators provide a structured program and financial support for start-ups to build their businesses. The corporate accelerator count is growing rapidly, worldwide. Since 2010, 69 companies have launched accelerators around the world. More than 50 of those launches took place in just the last three years. In looking at the data, 2013 is the clear start of a “gold rush” with double digit accelerator launches.
The threat of disruption from start-ups is the main motivator behind these launches. Large, multinational corporations, especially those in digitally vulnerable sectors, have been most active in setting up these programs. Fin-tech, media, technology and telecom stand out as the most popular sectors.
Regionally, the U.S. dominates in this space, accounting for half of all corporate accelerators. It’s not surprising given the combination of ample capital sources, an entrepreneur-friendly culture and lots of blue chip companies who want to push their innovation agendas. Europe and Asia rank 2nd and 3rd in the corporate accelerator game, but the accelerators in these regions play a very special role. For the entrepreneurs and venture capital firms, corporate accelerators provide a strong node in the overall start-up ecosystem. Corporations can encourage entrepreneurship and innovation through a community and also serve as a filter that selects the most viable and promising new ideas. This is especially true outside the U.S., where start-up ecosystems are still forming.
However, many venture capitalists have been vocally critical of accelerators, citing them as too lenient in their selection criteria or pointing out that very few of these programs has carved out a strong enough reputation to create any type of following. Yet, these programs remain a key element in the landscape.
One of the major questions is about long term feasibility and whether corporations will continue to inject capital into batches of startups for the years to come, when the exit cycle can be seven to 10 years or longer. While venture capital firms exist for the sole purpose of making such investments, corporations may not have the capital, expertise or patience to maintain this level of investment activity.
The main issue is about clarifying what companies hope to achieve through an accelerator. Corporations should be aligning their innovation efforts with their broader corporate strategy. An accelerator may be the right answer for some companies, while hackathons, labs and other engagement models might make sense for others. A lot of factors come into play, including the availability of capital, competitive pressures, overall risk tolerance and the local market trends. At the end of the day, there is no easy answer; no one size fits all. Companies need to pick the format that’s right for them.
This article is Part 1 of a 3 part series on corporate accelerators.
