This article was published on April 10, 2014

Accelerator as a service: Should established companies hire accelerators to run their programs?

Accelerator as a service: Should established companies hire accelerators to run their programs?
Sergio Romo
Story by

Sergio Romo

Sergio Romo is the co-founder and managing partner at Investomex. He also works with accelerators (including Telefonicas Wayra) for the last Sergio Romo is the co-founder and managing partner at Investomex. He also works with accelerators (including Telefonicas Wayra) for the last three years as mentor and investor, and implemented an acceleration program of Naranya labs a corporate accelerator.

Sergio Romo is the co-founder and manager partner at Investomex.

In the midst of what seems like a golden age for entrepreneurship and venture capital, accelerators are all over the place and corporations are eagerly looking to run their own acceleration programs, too. It is great for PR, innovation and business development purposes and in some cases, for tax benefits as well.

But who should run these programs? Should established companies run their acceleration programs in-house or should they hire a professional and renowned accelerator to manage them? [1]

Startup acceleration should not become a zero-sum game where established companies and accelerators fight against each other for deal flow, especially now that corporate-run accelerators start to outnumber privately-run accelerators.

Established companies can benefit from joining forces with professional accelerators managed by experienced entrepreneurs as some companies are already doing with TechStars whitelabel model (i.e. Nike, Microsoft, Sprint and Disney).

An alliance between these two types of players can help to effectively foster corporate innovation in established companies whose capabilities and managerial decisions are not suitable to explore innovation opportunities.

This is due to the corporate managers’ tendencies to have short-term incentives (such as yearly bonuses) as most of their decisions are focused on maximizing profits and increasing revenues. Although these are correct managerial decisions, they can also be wrong because they prevent established companies from innovating. [2]

On the other hand, accelerators can find a more sustainable business model based on a mix of services fees and long-term returns so it is not dependant on the latter only. This way accelerators can lower the percentage they cut today from the fund’s resources to cover their operation expenses and use them to invest in more startups. [3]

Conditions and exceptions

If corporations were to hire a renowned accelerator to execute their acceleration program it is important to avoid a collision of cultures. A big company culture is too strong and it is engrained in their employees’ daily lives. This is something that can kill a startup whose culture is not defined yet.

Even though it is counter-intuitive to established companies, startups need the freedom to create, try, fail and innovate in an agile environment. The focus of a manager running an acceleration program should be to boost the startup’s growth, not its fit in the culture of a company or its corporate agenda.

The capabilities of an established company, although highly valuable and important, are not essential for a startup whose product has not reached acceptance in a market yet.

Likewise, physical space and program-content independence is essential. Corporations should allow programs to be created around the needs of the founders, not theirs. This way, established companies will be one step ahead of the competition and will have preferred access to markets that might turn out to be huge after some years and could replace theirs.

Nevertheless, there are cases where corporate acceleration programs are simply not good for founders because the network and distribution channels of an established company could kill their startup. Where would Airbnb be right now had it participated in a Hilton’s accelerator?

[1] There is a recent article “Corporate-Run Startup Accelerators: The Good, The Bad And The Plain Ugly” by Jon Bradford, co-founder of and managing director at TechStars London. It’s worth a read.

[2] This is the Innovator’s Dilemma that Clayton Christensen talks about in his book under the same title and can be applicable to corporate acceleration programs.

[3] Y Combinator is the black swan in the accelerators game since their returns apparently will be huge and they have quite a lean structure.

Thanks to Camila Lecaros, Anna Heim and Fernando Rivera for reading drafts of this essay.

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