It seems that EVERY corporate is now exploring, starting or investing in their own startup accelerator. For the last few months I’ve had too many ‘groundhog day’ conversations with corporates who ‘are thinking of opening a coworking space / startup accelerator’ and wondering ‘have you any advice?’
I politely smile and say “Yes – but first can you can give me some convincing answers as to ‘why’ your company is doing this and ‘how’ you plan to tangibly help startups”
When I ask ‘why’ I have heard actual answers like;
- We want to hire entrepreneurial talent, this will help us get to know some great innovators in our space
- We want to be around exciting startups and new business models so that our company becomes more innovative (innovation by proximity)
- Our CEO is friends with another CEO who is starting an accelerator
- Our CxO was at a startup conference and decided that we now need to work closer with startups
Clever! Founders love job offers. Startup teams also have loads of spare consulting time to help your company re-create their innovation culture :)
When I ask ‘how’ I hear answers like;
- We will give them desks in our office / new shiny coworking space / innovation lab
- We will connect them to our internal management team for mentorship and to explore business development opportunities
- We will bring in speakers and host meetups
Wow. Desks are a big differentiator. In fairness, Invoices are pretty attractive though.
I then ask about their companies internal experience of working with early stage companies;
- In the last 5 years how many startups has your company acquired?
- In the last 5 years how many startups has your company invested in?
- In the last 5 years how many startups has your company bought services from?
- Do you have any special / fast track procurement processes that allow your teams to easily buy from startups without killing them with legals & your procurement process
None? Really? Let’s move on.
Tell me about the network and resources you will provide with your accelerator;
- How much are you planning to invest per startup? And at what terms?
- What external mentors, with real startup experience, have you on board?
- What VC’s and Angel investors do you know well and are interested in this space?
- Who have you co-invested with in the past?
- Do you know any of the Startup / Tech journalists in this space?
Oh! You have not allocated any funds? You only have internal mentors who are managers from your various business units? You know a few bankers? Super.
Now tell me how you are going to attract the best startups?
- Why is a great founding team going to pack up their lives and move to your city?
- Tell me about your deal flow? What are the top 20-30 very early stage companies in this space that you are already tracking and engaging with?
- Are you already organising meetups & conferences for startups in this space?
- Do you have a team of ex founders / mentors / operators in this area who are respected and known within the startup community?
No? Oh ok.
More questions might include;
- How does this fit with your company’s long term strategy and internal culture? Are you really ready to commit to this and do it right? Who is the C-Level executive behind this?
- Do you run a company builder / internal lab too? How are you going to handle the potential conflicts of interest (or at the very least, the external perception of it)? Why would any smart founder risk sharing their business plan with you knowing that you also might compete with them via your innovation lab?
- If you invest as a strategic investor are you aware how this could affect the company’s ability to raise future finance or work with your competitors?
- If you are public how will you report any investments? Can you take equity in these startups?
What? You want me to shut up? Ok :)
If I was still wearing my Strategy Consulting hat (& tie) I’d probably call this something ‘expensive sounding’ like a Corporate Startup Maturity Matrix audit :) My main goal here is to help corporates understand that their ‘accelerator idea’ might not be as fun, easy or viable as they originally thought. I’m not trying to discourage corporations from getting more involved with startups, but rather give them some insights into the realities and challenges they will face both internally and externally if they want to do this right.
I usually end the conversation with the suggestion that they should reach out to the excellent team at Techstars who have been helping corporates like Barclays, Nike, Metro, In-Bev and several others get this right both internally and externally. Techstars built the playbook for corporate accelerators, have a quality global mentor network, a proven deal flow, and most importantly, have the trust and respect of startup communities around the world by always trying to put the needs of the startups first.
Yes it will probably involve making a multi-year, multi-million commitment to work with Techstars. But if you are serious, and are in this for the long term, it could be your smartest move to ‘accelerating’ your company’s entrance into the startup world :)
[Disclosure – I don’t work for Techstars. I am however a happy mentor with the Berlin Techstars program and have experienced first hand how much effort and thought they have put into making Corporate Accelerators succeed]