Is joining a corporate accelerator a good idea ?
Updated: Aug 23, 2019
"Corporate accelerators" - meaning "startup accelerator driven by corporates" is an oxymoron to me, unless this is a pure CSR operation where they provide working space for free, a bit of PR and no major program constraints. In that case, the "accelerator" wording is misused, like in so many cases.
At Ubiz startup accelerator, our definition of an accelerator is : a mentoring & coaching structure boosting & optimizing a startup's business, faster. Under such extreme conditions, startups might break or gain valuable time in this giant digital worldwide competition. Interests of both actors (startup & accelerator) must be aligned, and these must be completely clarified. Under that condition, it can be a very win-win relationship. In other cases, "deceleration program" would be more relevant - situations where you'll be just losing time. Time is a very precious commodity for barely born structures. Plenty of those exist on the market. This could lead to quite fun experience, but not efficient ones.
-1- Corporates need to be in contact with the innovation ecosystem in order to keep their top position.
An MNC ("multinational company") needs to continuously scan the world it thinks it lives in. It needs to have a business vision for the coming years. It still needs to hire top talents who are less interested in contributing to sometimes old-fashion goals opposite to the common good, to a mass bureaucratic body where prevails the vision of a rat race excluding late forties, early fifties manpower. Worldwide structures are a bit like a huge semitrailer looking for being as flexible as a bicycle since nowadays high uncertainty can anytime undermine potential major investments above a 3 years timeframe. Risks must be mitigated, especially if those investment suddenly look obsolete/ outdated. Just imagine an MNC having bet hundreds of millions € on a strategy being suddenly out of the bloom outpaced by a 10k€ app created by a bunch of teenagers with acne. That's a serious risk, and despite the previous exagerated example, such scenarios happen all the time. It's even called "competition".
On the other hand, in order to keep their position, these current "leaders of the heird" need to keep being at the center of the spotlight, of an ecosystem not only consisting of happy brainless consumers, but of "free" content or added-value services that would keep them on the tip of the surfing wave. And that's where startups are useful, and it is so cheap.
Keeping some negociation power towards suppliers is another reason why corporate accelerators exist. This is a way to control competition at your own advantage. There could be interest for early-stage startups to participate to such programs under that condition, even if further down I would contextualize this a bit.
-2- Startups want to take over, conquer this pole position. That's what a startup is up for, to become a leader, to make money and (usually) to improve the world. Its goal is to kill the competition as well, because a successful startup targets an existing market, and when there is an existing market, there is competition - you are never the first one. The primary reason of a startup is to provide extra added-value on a feature that has been looked down, and to exploit & massively build on it, no matter who is in front, behind or wherever. The goal is to scale asap and to steamroll everything daring to be on its way.
The first steps of a startup are the hardest, with the highest risks. These are the times when you are testing offers, would you be lucky enough to have a sellable product. Your first customers will be key to your success. We are talking about a period of time where you have already burnt a lot of cash with maybe a convertible note on your head. Weeks, months - is your survival timeframe.
Picking the right first clients who could allow you reaching breakeven is your first target, so you can reinforce & stabilize your team. Please note I put an "S" to "client", because being dependent on one customer is being a "de facto incorporated department". Do not get me wrong, this could lead to a nice living, but you will continously have this sword of Damocles dangling over your head, until another startup take your place with a cheaper & more efficient solution.
The first aim of a startup is to create a "scalable" product. Scalable means to offer the most "fit-for-all" product possible, a product that would require the least possible tweaks in order to respond to as many similar pains. Having one client, or developping/ adapting a product to one single client leads to the risk of offering a product that could not be adapted to someone else.
A corporate has usually a pretty clear strategic direction : sell more in order to content shareholders. The rest is literature. Whenever the cow is completely milked, you still need to find a solution to satisfy the always growing appetite from your versatile investors. Sometimes creation inside these traditonnal companies is just impossible for many structural reasons. Furthermore the running risk to create, test and deploy oneself is often considered as being too "huge", obsolescence knocking fast at the door. That's where Venturing funds come into the field. So these venturing funds buy, they acquire, they merge successful companies having shown proven traction. In order to fund these acquisitions, they might sell a previously acquired company showing some fatigue. The business of these companies become therefore the one of an operational portfolio developper. They got the market, they got the process and they increase their shareholder values. Some very famous listed companies have already been doing this very successfully for decades. And this issue is a very honourable exit for successful scaleups having already been through Series C, D and all, but not at a seed or preseed level.
Between the lines, one could read that a "corporate accelerator" is a bit like a wolf teaching a sheep on how to hunt on his turf. That would be your own interpretation. Just imagine that in one hand, you will have contracted a debt (a "convertible note" is a debt you will be required to pay back) from a lender and this lender happens to be your only potential customer who coached you on how to make business with him... One could say this is cynical, especially when you add these nice pictures of demo days with this tinder hope to meet your VC-love who would, like an angel / white knight, "save" you from this awkward situation.
As a general comment (including all types of accelerators), never forget that Startup Failures (including the ones stuck in the death valley) happen, even if you hardly hear about those. It's even the majority of such ventures. Talking about those is not good for business. But they exist. Lots of them. We never hear stories btw of startup convertible loan recovery...
A startup in order to survive needs paying clients, paying customers. These could be famous logos, but the best is when those pay the right price, not at a discount in exchange of a nice office surrounding and the visit of "Larry" who has other fish to fry than listening to stories he cannot relate to. Sales to a paying customer, not add a logo to your website. That should be the only goal of a startup - the rest being a distraction. Sales is your target, not playing ping-pong in an area where you can have fresh juice all day as well, like in a private zoo where employees of an MNC "must" (HR requirement) come and pay you a visit. You feel reassured, a bit of quietness... but that's your choice of course. Maybe is it better to directly apply for a job there, at least you'll get a salary.
Have a read to the following from a fellow independent accelerator doing a great job, and make yourself an opinion. Link enclosed;-)
At Ubiz startup accelerator, we stand for the entrepreneur, we are here to help building startups, in collaboration with the ecosystem, but always in the advantage of the entrepreneur, only and when we can help. We are more than happy to collaborate with multinationals, and try to figure out win-win deals for everyone, but never at the disadvantage of the primary startup's goal : selling. Yes, we picked up our side.