Traditional businesses have a number of options for modernizing operations and keeping up with industry peers, big tech, and scrappy startups. However, corporate accelerators are a common choice.
What is a corporate accelerator? It’s a program run by a large enterprise that offers a fixed-term, cohort-based program that includes seed capital, mentorship, connections, sales and more. The program usually ends in a formal pitch event or “demo day” where the startups pitch the corporate sponsor for further investment or partnership.
Corporate Accelerator Definition: What is a corporate accelerator? It’s a program run by a large enterprise that offers a fixed-term, cohort-based program that includes seed capital, mentorship, connections, sales and more. The program usually ends in a formal pitch event or “demo day” where the startups pitch the corporate sponsor for further investment or partnership.
With this type of accelerator, businesses foster new ventures that address their specific needs. By bringing innovation in-house, as opposed to more arms-length innovation approaches like corporate venture capital (CVC), enterprises can cultivate new products and methodologies that serve them uniquely — whether by adding automation, analytics, AI, or other intelligent tech.
The corporate accelerator route can generate a large menu of transformation options in a relatively short period of time, whether a business is just considering some worthwhile incremental innovation or looking to spin off a new, disruptive platform.
It helps to understand regular seed accelerators in order to appreciate how corporations can adopt the approach internally.
Accelerators are almost like competitive programs of study or “colleges” for nascent startups. They provide founders with seed funding in exchange for equity, and help them to get off the ground operationally. As the name implies, accelerators are fast-moving — a typical program lasts for 3 months, but some last as little as 6 weeks.
Some candidate startups are so early-stage they haven’t yet made a sale or only have a product prototype. And just like admissions at top universities, only a small percentage of startups are accepted into the best programs with the most to offer.
Upon acceptance, a startup is placed within a cohort of its peers and gets everything it needs to grow, including structured business education, some office space, and an invaluable network of peers and mentors. The program culminates in a Demo Day, where teams pitch to investors in hopes of securing their first rounds of external funding.
Y Combinator was the first pure accelerator to come onto the scene, and it has proven to be a kingmaker: success stories like Stripe, Dropbox, Airbnb, and DoorDash are all within its Top 10 list of alumni by valuation. Some investors only consider ventures that come up through Y Combinator. Other big names in the accelerator world include Techstars, Dreamit Ventures, 500 Startups, and AngelPad.
Corporate accelerators are sponsored or “hosted” by a corporation looking to innovate around its unique strategic needs. This model differs from corporate venture studios, in which a corporation partners with an outside specialist firm to develop a homegrown spinoff business, the resources of the parent company and studio being pooled together in the process.
The model has endured a bumpy evolution on the way to its current general form, though it can still look very different from one enterprise to another.
In the early 2010s, the first instances emerged from the likes of Microsoft, the B2B software conglomerate Citrix, and the Spanish telecom giant Telefónica. When these early endeavors failed, a new “outsourced corporate accelerator” format arose from enterprise alliances with independent programs.
The Microsoft Kinect Accelerator, led by Techstars, was announced in late 2011 as the first major example of this. Startups were brought in to create new apps and functionality for the popular Kinect gaming and motion-sensing hardware. Microsoft’s venture capital and startup interaction models have gone through many iterations in the years since.
In today’s corporate accelerators, large traditional businesses cast a wide net for startups that can help them achieve specific aims in digital transformation. Teams apply just like they would for regular accelerators, but with a mandate set by the sponsoring enterprise – often to design something new around proprietary tech, or within the guardrails of a certain strategic initiative. Admitted startups, in exchange, get access to executives, IP, strategy, and other assets from the corporate sponsor.
This arrangement can help a startup in important ways, even if it’s not chosen by the enterprise on Demo Day. A rejected startup, after being made stronger and smarter by the accelerator process, will have gained deep industry intelligence it can use to inform new product lines or a better business model. In many cases, such a startup is even mature enough to approach the sponsoring company’s major competitors.
Quite a few large enterprises have used the corporate accelerator model in a range of configurations and to varying degrees of success. One example, which looked promising at the start, was Nike’s effort around its FuelBand wearable fitness tracker.
The idea was to have startups build apps on top of the FuelBand, akin to a pilot program for a development platform. Nike launched the Fuel Lab accelerator in late 2013 as a follow-up to the corporate accelerator it launched with the help of Techstars a year earlier. The 10 successful applicants had the Nike Fuel API, mobile software development kit (SDK), and the beta FuelBand development kit available to them, with the requirement that products and services fully-compatible with the Nike+ ecosystem would be ready for launch in 3 months.
It was a bold move in the direction of a true platform model that Nike could dominate the wearables space with. But the FuelBand lost out to Fitbit, which had the fitness tracker market cornered and grew valuable enough for Google to take it over in late 2019.
Nike apparently failed to do what was needed to meet consumers where they were and find a durable product/market fit. But innovating on top of the FuelBand ecosystem was still a disruptive move that could have pulled the industry Nike’s way.
Conceptually, a corporate accelerator is a win-win proposition for both large enterprises and startups. Enterprises can increase agility and have their finger on the pulse of the startup ecosystem. Startups get insights they can use, whether or not they stay with their sponsor companies, to make waves of their own.
But the enterprise benefits go even further. A corporate accelerator offers exposure to a range of startups that can either add incremental value or give rise to disruptive business opportunities. There’s also a decade of established precedent. An enterprise can take some of the learnings from the early 2010s, and intelligently nurture startups in proven formats that yield real innovation.
And within a few short weeks, corporate accelerators provide an enterprise many options to pick from. If one avenue of innovation doesn’t pan out, another likely will.