Over the past decade, corporate startup accelerator programs have gained significant popularity as a means for established companies to tap into the innovation potential of startups.
These programs promise to foster collaboration between startups and corporations, allowing both parties to benefit from each other's strengths.
However, despite the initial enthusiasm and potential benefits, many corporate startup accelerator programs fail to achieve their intended outcomes and are often costly and counterproductive failures - creating a culture of fear around innovation and doing things differently.
In this article, we will delve into the various reasons behind these failures, shedding light on the pitfalls that companies should avoid when launching accelerator initiatives.
Do you really expect the love of your life to just knock on your door one day and introduce themselves?
Of course not.
But when I speak with corporate executives about partnering them with strategically-aligned startups, I often hear that they get emails from startups all the time so they're OK in that department. And they apply a similar approach to their startup accelerator programs - sometimes casting a net as narrow as their hometown.
But here's the thing.
They're unlikely to fall in your lap or come from your city.
Like a suitable partner, the best-fit for purpose startups often need chasing too.
This is why most venture capital funds track thousands of startups annually, meet with hundreds, and only invest in five to ten.
If your organization is serious about open innovation and partnering with strategically-aligned startups to drive innovation, you need to do the same.
As you might with finding a romantic partner:
1. Cast a very wide net.
2. Make your approaches.
3. Evaluate fit.
4. Sell yourself if you're interested.
5. Finally, find a way to make it work.
In addition, a narrow net is often cast around the diversity of ideas, technologies, and industries. Some startups that could have provided valuable insights and solutions might be excluded due to overly stringent selection criteria.
Do this instead
Cast a wide net both geographically and in terms of the diversity of ideas. The best fit-for-purpose startups might be on the other side of the world. Unless you have a good reason - such as local data privacy regulations - you should work with the very best startups regardless of where they are based if you want your program to create legitimate value.
Not only that, but don’t assume that because you are a big corporate with resources that the best startups will fall over themselves to work with you. The best founders know that working with corporates is a tricky proposition and are reluctant to engage. As such, you will need to make a compelling case to the very best startups about working with you and investing time and energy to participate in your program. They need to be confident that there is likely to be some gold at the end of the rainbow and not just death by committee.
Choosing to work exclusively with idea-stage startups can also contribute to program failure. While nurturing early-stage ventures might seem appealing, these startups often lack the experience, traction, and validation required to create meaningful collaborations post-program conclusion.
Do this instead
Have a bias towards selecting startups that have at least raised a seed round and have money in the bank, a committed team, and a product of some kind - preferably with revenue and customer success stories to speak of.
Alternatively, idea-stage startups run by experienced founders with runs on the board are also preferable.
A misalignment of values and strategic goals between the corporation and the participating startups can undermine the effectiveness of the accelerator program.
Choosing the wrong service provider or partner to manage the accelerator program can be detrimental to its success.
Not only that, but some service providers have bloated teams and are capital-inefficient. As a result, many providers are charging upwards of US$1M to run an accelerator program - which means that anything short of home run success looks like a costly exercise is self flagellation.
Inadequate due diligence when selecting startups can lead to the inclusion of ventures that are ill-suited for the program.
Each factor contributes to the VCs' decision-making process, enabling them to make informed investment choices that align with their investment thesis and growth expectations.
You or your service provider need to do the same.
The curriculum and mentors provided in the accelerator program play a crucial role in shaping the startups' growth. Ineffective resources can hinder the startups' development.
Oftentimes, we see people with absolutely no experience whatsoever in startups plucked from the obscurity of some back office role at a big corporate providing ‘mentorship’ to startups. It’s a case of the blind leading the blind and it doesn’t end well.
The end of the accelerator program shouldn't mark the end of the collaboration between corporations and startups. However, this is a common pitfall.
Successfully driving mutual value after the program conclusion requires a thoughtful approach that many corporations overlook.
Without buy-in from corporate leadership and business unit heads, the accelerator program can lack the necessary resources and support to thrive.
Misaligned incentives between corporations and startups can erode the collaborative spirit that underpins successful accelerator programs.
Corporate startup accelerator programs hold tremendous potential for fostering innovation and collaboration between established companies and startups. However, these programs often stumble due to a range of challenges, from poor selection criteria to inadequate post-program support. Recognizing these pitfalls and addressing them proactively can increase the likelihood of success, ensuring that both corporations and startups can truly reap the benefits of their partnership. By casting a wider net, fostering diverse collaborations, and nurturing a culture of mutual value, corporations can unlock the full potential of their accelerator initiatives.
Want help designing and running your accelerator program? Collective Campus has been running corporate startup accelerator programs for organizations such as Microsoft, Allens Linklaters, Charter Hall, Village Roadshow and many more since 2017, incubating 98 startups along the way that are today worth more than US$1BN.
Get in touch to learn more about what an accelerator program might look like for your organization.
The WorkFlow podcast is hosted by Steve Glaveski with a mission to help you unlock your potential to do more great work in far less time, whether you're working as part of a team or flying solo, and to set you up for a richer life.
To help you avoid stepping into these all too common pitfalls, we’ve reflected on our five years as an organization working on corporate innovation programs across the globe, and have prepared 100 DOs and DON’Ts.