Why Corporate Accelerator Programs are not the best option for Startup Sourcing

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As organisations mature and expand their structures, a common trend is the gradual erosion of their entrepreneurial spirit and innovativeness. Notable instances, such as Nokia and Kodak, once equipped with ample resources and robust R&D departments during their heydays, serve as cautionary tales illustrating the repercussions of diminishing entrepreneurial capabilities. A strategy increasingly gaining attention from both managerial and scholarly circles as a means for established companies to rejuvenate innovation and retain an entrepreneurial ethos is the utilisation of corporate accelerators.

Corporate accelerators (CAs) have emerged as pivotal vehicles for innovation among established firms, with nearly 1/5 of global companies adopting various forms of this model and allocating substantial resources to these initiatives. Consequently, CAs are recognised as a significant facet of corporate entrepreneurship, offering established organisations a strategic avenue to pursue innovation objectives.

Corporate accelerators can be defined as programs of limited duration supported by the specific company, that sustain cohorts of startups during the new venture process via mentoring, education, resources, etc. Denis Bettenmann, Product Manager Mercedes-Benz, conducted a study on the subject, giving a clear overview on how they  contribute to corporate innovation.

CA programs stimulate innovation by deliberately imposing constraints on time and resources. The CA process is delineated into three key stages: sourcing and selection, acceleration, and community formation. Among these, the initial stage—sourcing and selecting the appropriate startups—is deemed crucial for the overall success of such initiatives.

Therefore, the question that the study aims to answer is: How do corporate accelerator units support the sourcing and selection process of new ventures for organisational innovation?

The examination uncovered a nuanced comprehension of how CA units aid an organisation in its sourcing and selection of startups to cultivate innovation. The subsequent section delineates the four distinctive dimensions recognised for the mechanisms of sourcing reported in the figure below (encompassing broader opportunity discovery, active opportunity generation, and coordinated opportunity seizing), along with the selection process (involving supported opportunity evaluation).

This mechanism characterises the CA unit’s role in providing organisational units access to various startups and their technologies. The CA unit makes available the resources required, such as time, budget, or network access. The CA unit identifies innovation gaps and strategic objectives through interactions with various organizational units, aligning them with startup technologies. Innovation needs and strategic goals are addressed, offering support in identifying areas where startups can contribute value alongside existing partners, such as suppliers.

The startups identified within these specified areas play a crucial role in assisting units in solving specific problems or gaining insights into technologies relevant to their domains of operation.

The CA unit additionally aids in discovering innovative solutions that extend beyond addressing current issues, delving into the realm of forward-looking innovation exploration.

In this case, the CA unit proactively formulates its search fields to support organisational units in achieving the company’s strategic goals. The attention is directed toward specific topics.

By translating corporate strategic goals, such as achieving more sustainable production, into search fields for startup sourcing, the CA unit assumes an active role in shaping the organisation’s pursuit of startups through the CA. Even before certain topics become integrated as strategic goals of the company, the CA unit functions as a radar for the market, consumer, and technology trends by observing developments in the startup ecosystem.

“Through the CA unit, we have a pretty strong look into the outside world. And through looking outside of our organisation, we can also see trends that are developing there that we should be aware of as a company.”

The final step consists in then identifying the departments in the company that could be interested in the startups they present. It’s a matchmaking process.

The CA unit serves as a point of entry for startups to the bigger company. Therefore, it coordinates all the subsequent operations that can be carried out with the organisational units.

The initial distinguishing mechanism for opportunity seizing involves inbound sourcing. Unlike opportunity discovery and opportunity generation, both of which employ an active outbound sourcing approach, the CA unit utilises inbound sourcing to identify pertinent startups. This occurs when startups directly reach out to representatives of the CA unit, whether through their website, email, or LinkedIn. Another avenue for discovering startups is through referrals from the CA unit’s network within the startup ecosystem, facilitated by intermediaries, venture capitalists, or universities.

“We receive pitch decks every day, either via email or LinkedIn directly from startups. Additionally, someone in our network might introduce them to us, such as a venture capital firm.”

All three strategies for sourcing new ventures are accompanied by an evaluation process carried out collaboratively by the CA unit and the organisational units. This comprehensive dimension is denoted as “supported opportunity evaluation.” The CA unit expedites the startup selection process through two distinctive approaches: acting as a mediator and providing advisory support in the selection decision-making process.

By adopting a more neutral stance between the startups and the organisational units, the CA unit strives to balance the needs and expectations of both parties, offering support throughout the evaluation process. Given the CA unit’s overarching goal of implementing new technologies in the company’s products or processes, it actively encourages initial and ongoing interactions with potentially accelerated ventures.

The second distinctive mechanism in the opportunity evaluation process involves assuming an advisory role toward the organisational units during the selection decisions. The CA unit maintains constant communication with units expressing interest in specific startups. Once the organisational unit finalises its decision on which startup to accelerate, the CA unit facilitates the establishment of a joint goal for the project, once again acting as a mediator between internal units and the startup.

Innovation. Accelerators seek startups that present innovative solutions or disruptive technologies, targeting those addressing unique problems or introducing fresh approaches to existing challenges. This criterion ensures that the selected startups possess the potential to make a substantial impact within their respective industries.

Market potential. Corporate accelerators carefully evaluate the market potential of selected startups. This assessment encompasses factors such as the size of the target market, its growth rate, and the competitive landscape. Startups with a sizable and expanding market, coupled with a distinctive value proposition, stand a higher chance of being chosen.

Team dynamics. The team behind a startup plays a pivotal role in the selection process. Accelerators scrutinise the experience, expertise, and track record of the founders and team members. Diverse skill sets and a strong commitment to venture success are sought after, as a capable and dedicated team is better positioned to execute their vision and surmount challenges.

Scalability. Accelerators prioritise startups with the potential for rapid scalability. The assessment includes an evaluation of the business model’s scalability and the startup’s ability to meet market demand. Accelerators are attracted to startups that can illustrate a clear path to scalability, aligning with their objective of supporting high-growth ventures.

Alignment with corporate goals. Corporate accelerators typically have specific strategic objectives they aim to fulfil through collaborations with startups. They look for startups that align with their industry focus, target markets, or areas of technological interest. Startups offering synergies or complementing the corporation’s existing offerings are more likely to be selected.

Traction. Accelerators take into account the traction achieved by startups, gauging factors such as customer acquisition, revenue generation, or product development milestones. Startups that have validated their product-market fit or demonstrated early success indicators stand a greater chance of selection. This criterion aids accelerators in identifying startups with the potential for rapid growth during the program.

Coachability. Accelerators seek startups open to feedback and capable of benefiting from the mentorship and guidance provided. They assess founders’ willingness to learn, adapt, and make necessary adjustments to their business strategy. Startups demonstrating coachability are more likely to effectively leverage the resources and support provided by the accelerator.

Research by CB Insights shows that “60% of corporate accelerators fail within two years, and partnerships result in less than 1% of the time”, usually due to misaligned goals, founders lacking the help they need, and corporates going in with misleading expectations. This leads to the question: how do CAs identify the list of startups to assess?

Startup and new technology fairs, both virtual and in-person, have proven to be key locations for discovering innovative companies. They provide entrepreneurs with a venue and a set amount of time to present their products. But is it the most efficient way to do so? The answer is no! Just like universities and colleges with innovation laboratories, conferences on pertinent issues, and social media networking platforms (LinkedIn, Twitter, etc.).

To identify companies that are in line with the corporate project, the most efficient way is to use online startup sourcing tools that are designed to do so.

Access to a comprehensive database with classified information is required for effective sourcing. The strength of a database resides in its use. Novable covers over 3 million startups globally, allowing you to instantly scan and analyse the whole innovation ecosystem. It provides an extensive shortlist of relevant solutions that matter to you, regardless of your innovation ambitions. Unlike traditional databases, Novable combines artificial and human intelligence and provides the perfect combination to discover the needle(s) in the haystack.

There is no single optimum way, and having a database does not exclude you from attending conferences, for example. Finding your unique blend remains the best recipe for success.

Sources

The Corporate Accelerator: A New Kind of Strategic Factor Market to Access Strategic Resources | Cairn.info. Retrieved January 22, 2024,

from https://www.cairn.info/revue-management-2021-3-page-56.htm

Bettenmann, D. (2023). It’s all about opportunities: Sourcing and selection of new ventures to accelerate innovation. R&D Management, 53(5), 733–744. https://doi.org/10.1111/radm.12587

What Criteria Do Corporate Startup Accelerators Use To Select Startups? FasterCapital. Retrieved January 22, 2024, from https://fastercapital.com/keyword/what-criteria-do-corporate-startup-accelerators-use-to-select-startups.html